Holmes Report 16 Jul 2011 // 10:00PM GMT
Given the amount of change that has taken place in the marketing, branding and communications realm over the past few years, it is perhaps surprising how little “disruption” there has been in the upper reaches of the public relations agency business.
While the emergence of social media has forced clients to rethink the way they engage with their customers and other stakeholders, it does not seem to have caused any of the major agencies to rethink their fundamental business model; nor have these firms been challenged by any new competitors offering a radically different approach.
There are some smaller, newer firms, clearly designed from the ground up for the social media age. There are some midsize firms that have outpaced the market in terms of growth because they embraced social media early. But today’s list of the firms top 10 PR agencies looks a lot like the list of five or 10 years ago.
Perhaps the explanation is this simple: the large, global agencies have very little incentive to change—the risk of a transformative new strategy outweighs the perceived benefits, and it is far easier to simply add new practices to the existing structure, train people in the new media, and continue with business-as-usual; smaller firms have the incentive to change, but even with a new structure tailored to the social media landscape, lack the critical mass to compete for multimillion dollar global accounts.
So perhaps it was only a firm like GolinHarris—big enough and global enough to be a credible competitor to the giant multinationals; small enough in comparison to the industry leaders to see more opportunity than risk in disruption—that could challenge the status quo with a dramatically different business model.
GH is not necessarily known as an agency that loves to take risks. For most of its 55-year existence, the Chicago-based firm has been managed with a conservatism that reflects its Midwestern roots, celebrated primarily for a collegial culture and client work that was consistently creative but rarely unconventional.
But under the leadership of Fred Cook, who took over as chief executive in 2003, the firm has been a little less content with its status as one of the smallest of the big multinationals, respected and admired but rarely feared. There has been a new emphasis on competitiveness, on “winning” the battle for talent, for clients, and for a central role in the brand marketing and corporate reputation management process.
The Interpublic-owned agency now appears hellbent on blowing up an agency model that has served it so well during its 55 years of existence. Last month, the agency unveiled a new structure which it hopes will help it capitalise on the dramatic changes that are affecting the PR industry, and become the most compelling agency force of the next decade.
The firm’s co-managing director for Europe, Jon Hughes says that the agency has chosen to make these changes from a “position of strength.” This is not mere hyperbole, given GH’s impressive performance over the past five years, and in particular its reputation as an employer of choice (the firm was our Best Large Agency to Work For in North America this year).
But GolinHarris also wants to grow. According to the Holmes Report 2010 Global Rankings, the firm earned around $125 million in 2009, putting it some way below the $400 million-plus giants, but a fair distance ahead of the myriad small consultancies that dot every map of every major PR market.
“Being midsize is both a blessing and a curse,” says Hughes. This may be particularly true in the sectors where GH is traditionally strongest—especially consumer products—where clients tend to prefer either a full-service global solution, or a local-market specific strategy.
Hughes admits that the reinvention will aim to make GH more competitive with the creative boutiques that dominate consumer and digital PR. “We have to reinvent what we are doing in this space in order for people not to think of us as a traditional player.”
Ultimately, GH’s new strategy will live and die by its execution. What exactly will success look like? “We want more multimillion dollar accounts and to increase our revenue to $250 million,” says Hughes. “This takes us into territories we don’t play in right now, and it will help us attract different types of people.”
The radical restructuring was motivated, Cook says, by “fear and opportunity” in more or less equal parts.
One particularly compelling motivator was a Forrester survey, which asked marketers what kind of agencies they turned to for various kinds of counsel. PR firms were felt to have “significant ability” at communications planning and channel planning; “limited ability” when it came to creative; and “no ability” when It came to brand strategy and planning.
“Like everyone else, we are seeing increased competition from a wide range of disciplines,” says Cook. “We wanted to stay relevant in a world where we were faced with bigger or more specialized competitors. One of [agency founder] Al Golin’s favorite sayings is ‘fix it before it breaks,’ and so we wanted to make sure we could change on our own terms, not because we had to. We wanted to take advantage of a shift in the marketing landscape.”
Cook describes the change as a “PRevolution,” which the Urban Dictionary describes as “intentional change” designed to anticipate the future environment.
The New Model
According to Cook: “Now more than ever, clients value smart people who can provide actionable insights into the business. They are desperate for holistic ideas that can be communicated across multiple platforms. They are searching for new, innovative ways to engage employees and customers.”
There’s nothing particularly controversial or even distinctive about that notion. It’s an analysis that could have been delivered by any serious PR firm; actually, from any relatively self-aware agency in any sector of the marketing arena, from advertising to digital. What sets GolinHarris apart is the extent to which it has embraced the obvious implication of that analysis: the need for a radical restructuring to align people, processes, technology and training in a way that delivers the kind of solutions clients are looking for.
Golin’s new G4 model seeks to eliminate the traditional PR agency model—with its emphasis on practice areas and its hierarchical structure—and replace it with something more flexible and better suited to a holistic approach and complex communications assignments.
Under the new structure, the firm will eliminate the traditional, seniority-based titles that are more or less universal within the PR industry, and will organize its people into four “communities”:
• Insight Strategists, a group that includes “big-picture thinkers” and practice leaders, people who are data-driven, business-minded, and committed to driving return-on-investment;
• Idea Creators, a group that includes writers, designers, producers, the firm’s idea generators and content creators;
• Engagement Connectors, a group that includes traditional media and social media experts; and
• Integration Catalysts, a group of multidisciplinary collaborators committed to flawless execution, who will sit at the center of the new organization and will serve as client relationship managers.
The structure will be flattened, too, with five levels of seniority in each group (as opposed to the traditional model that can include 10 or 20 different titles from assistant account executive to account supervisor to senior vice president to managing director).
The firm has devoted considerable energy, pre-restructuring, to identifying the right employees for each community. Using the Lominger Competency Model, which assesses people based on 67 competencies judged critical to success (strategists are future-focused, business-minded, data-obsessed; creators are innovative, inspiring, curious, risk-oriented; connectors are media savvy news junkies; catalysts are collaborative problem-solvers, detail-oriented), the firm has assigned people to the groups to which they are best-suited.
The goal is for each account team to include individuals from each of these communities, although Hughes admits that “not every single client will have every single one of the four. We have some clients who are media-focused; in that case it will be a connector heavy team. But if you look at some of the work we do for Unilever—running the global Facebook strategy for Magnum—they pay for strategy.”
Cook, meanwhile, emphasizes that the reorganization goes beyond a one-off restructuring. Indeed, the reorganization announced in June is just the first step on a longer journey. The firm is aiming to revolutionize its recruitment practices to ensure that it brings in people with the right mix of skills and passions; its training to focus on building deeper expertise; and its technology to develop proprietary skills.
Each community will have its own proprietary tools: strategists can draw on the analysis tool Brandgauge; idea creators will be guided by Brand Story, which uses that analysis to craft compelling narrative; connectors will use Brand Channel, which determines the most effective media for sharing that narrative.
What Does It All Mean?
One typical criticism of existing agency models is that people who are exceptional in one area—great writers, client service fanatics, media mavens—are inevitably asked to take on broader responsibility, often in areas for which they lack both passion and aptitude. The new model is designed to enable specialists to flourish by focusing on what they do best.
The emphasis on strategy and content creation—long formalized in the ad agency world in planning and creative departments—acknowledges the fact that clients are much more open-minded when it comes to content, willing to consider brand platform ideas from a wide range of external suppliers, including public relations firms.
But GH management recognizes that the majority of traditional public relations people fall into the “connector” category, a reflection of the reality that the majority of clients still come to PR firms—first and foremost—for media relations expertise and execution. One challenge will be better balancing its personnel portfolio without getting too far ahead of clients, some of whom may need convincing that a PR firm can deliver such a breadth of strategy, expertise and service.
“We have to re-engineer the kinds of people we employ in this business, and at the same time keep existing people because they still do things that clients want,” explains Tim Sutton, who oversees GolinHarris in Asia-Pacific (in addition to playing a broader role at parent company Interpublic and sister firm Weber Shandwick). “It’s a nightmare. It’s tough trying to re-engineer that and I’m not sure you can say: I understand exactly what this market needs.”
It also seems likely that an element of value pricing is at play here. By hiving off ‘connectors’ into one unit, GH can attempt to price higher-margin services - such as planning - more accurately, rather than expecting one person to do four things well.
Adds vice chairman Ellen Ryan Mardiks: “There may be some clients where we have a great balance of these four community, and if we do that’s great. If we don’t, there will be change over time. It may come through evolution, as we develop and demonstrate our capabilities in other areas; it may come via new business; or it may come from attrition.”
Some competitors, not surprisingly, are skeptical. “It seems to make more sense to me for bigger clients in bigger offices,” says Edelman Asia-Pacific CEO David Brain. “Size matters: the smaller the agency, the more generalist people become.
“For bigger ticket clients, the model could absolutely exist. For planning and long-term campaign management, this sort of structure is fantastic, because one of the things the PR industry has been bad at is doing everything on instinct. But who is responsible when an issue or a crisis hits? We’ll all be watching it with a high degree of interest.”
Sutton concedes that initially, at least, the change will be more profound for the firm’s largest offices and largest clients. “It can work really well for big offices with big international clients. For smaller offices, I’m not sure how it works.”
The initial response from clients has been favorable, perhaps reflecting the thorough preparation GH has undertaken by briefing them extensively in advance.
“In principle, this new model makes sense; the challenges brands face in communicating to consumers in this digital age are dramatically different to those we faced just five years ago,” says William Grant & Sons head of brand communication David Hume. “With that in mind, having specialists with specific skills we can call upon feels like something we would clearly benefit from.
“It will be interesting to see how the model works in practice from a cost and personnel point of view—we’ve invested several years developing relationships with particular agency personnel and don’t want to lose that—but, given we’re developing pioneering marketing activity for our brands... it may well be time to work with a pioneering new model.”
The Strategic Imperative
In the January issue of McKinsey Quarterly, authors Chris Bradley, Martin Hirt, and Sven Smit wrote about strategy, suggesting a series of 10 tests that companies could apply to evaluate whether their strategy was truly a source of competitive advantage. Questions included: Does your strategy tap a true source of advantage? Does your strategy put you ahead of trends? Does your strategy rest on privileged insights? Is there conviction to act on your strategy? And have you translated your strategy into an action plan?
A thorough reading of these tests leads us to the conclusion that only a couple of the largest PR agencies have a strategy that is truly differentiated, a real source of competitive advantage. If GolinHarris can execute against the plan it has developed over the past 18 months, and if it results in substantive—rather than cosmetic—change, there will be a third.
Whether that happens will depend on execution. It’s not exactly unheard of for public relations firms to announce grand, sweeping change that turn out to be more cosmetic than substantive. The early evidence is that Cook and his team at GolinHarris have made a major commitment to transforming their agency, their business practices and their entire model, but that commitment will require dedication and quite possibly sacrifice (a willingness to turn away clients and people who prefer a more traditional, familiar model) if it is to translate into meaningful differentiation.