The Behemoth

This is a long one, so here’s the three line summary:

Good PR is people.
People with relationships.
People and relationships don’t scale.

Over the past 10 years or so, the agency world has seen wave after wave of consolidation, with most of the tier one PR firms getting rolled into one or other of the three main marketing conglomerates – IPG, WPP and Omnicom.

These three already owned most of the advertising companies in the world – now they’ve added the upper echelons of the PR market to their portfolios. The agencies within the WPP Group alone include Blanc & Otus, Burson-Marsteller, Cohn & Wolfe, Hill & Knowlton, and Ogilvy PR – plus 22 other PR and public affairs firms listed on their website. That's a lot of flacks.

Even at the level below the holding companies, some of these agencies are, in themselves, huge – with hundreds of billable staff in offices all around the world.

A key part of the value proposition these behemoths offer to clients is the apparent advantage of homogenous, fully integrated PR representation in every region you might want to target. The promise is that you’ll be able to get the same quality of service, the same methods, the same reporting tools, and complete coordination of all activity wherever you need PR.

But how well does this model work in practice?

Let’s look at some scenarios from a couple of different perspectives. Again, as with all examples in this series, not all behemoths are necessarily bad. YMMV.

Let’s say you’re a mid-sized company, headquartered somewhere like the UK or Canada, with aspirations to grow into other international markets. Maybe you’re one of the many Canadian companies doing eighty per cent of its business south of the border, but struggling to get even a sniff of recognition in US media. Or you could be an offshore outsourcing firm, headquartered in Hyderabad, with the same dilemma – your best target customers thousands of miles away. Again, perhaps you’re a thriving Israeli business, with a world-changing product you want to introduce to continental Europe, the US and beyond.

In seeking a PR partner in any of these cases, it seems to make sense to go with one of the bigger, multinational agencies; especially when they come in and sell you on their "global reach" and ability to help you into markets wherever your target customers are.

So you go with one of the major firms. The team they bring in for the closing pitch knocks your socks off – you love their energy, their ideas, their reputation and credentials. It helps that they’re the local outlet of one of the behemoths – with a network of offices stretching into every city you expect to find customers. They convince you they can deliver on your objectives. They even bring in someone from one of their key regional offices to reassure you they can deliver at the local level. You award them the account.

Now, here’s the rub.

You have finite marketing resources. If you’re like most companies, your PR dollars probably represent a relatively small portion of your marketing budget. And your marketing budget these days is, no doubt, considerably lower than it might have been in the crazy days of the mid 90s.

Your mid-sized budget for agency services now has to be split somehow between two or more different offices – each office bearing the same brand identity, but each of them running on their own individual P&L and productivity targets. What might have been a decent size of retainer for one firm, suddenly becomes a lot less attractive when it’s chopped up.

If, like most clients in this situation, you opt for something like a 70/30 or 80/20 split – one of the offices is going to find it tough to justify hauling themselves out of bed to service your account for the fractional budget portion they’re getting. For the good of the firm, they’ll probably agree internally to handle you as an investment account – hoping the budget will grow as they deliver great results for you. The reality is, you’re still going to get short shrift.

Your pint-sized portional budget is competing for attention in among all the other, bigger, local clients the regional office is already representing. They won’t actually want to underservice you, but the billing economics of a big firm make it almost inevitable that you’ll come in far down their list of priorities.

Throw in currency exchange, and the differences in staff billing rates between, say, Vancouver and London, or New York and Milan – and your PR purchasing power just got even further diluted. What might buy six hours of a senior account exec’s time in Canada, only gets you around three hours of the equivalent level of work in the UK, for example. You get a way better deal going the other way, of course.

I’m sure there must be agencies out there who’ve figured out how to manage this issue, but I’m yet to find one that has. Managing the billing between offices is far from being the only concern, however. To explore some of the other trouble spots, let’s look at things from the perspective of a much bigger client.

It’s entirely natural that big clients are gravitationally attracted to big PR firms. In a trend that has paralleled the ongoing consolidation in the agency world, many Global 1000 organizations have been moving to centralize their agency relationships. For a multi-billion dollar company, with operations in fifteen or so countries – appointing a single global agency of record just seems to make good business sense. Certainly, the alternative approach – individual agencies selected on merit in each region or for each business unit – can tend to look messy.

I know of one Fortune 50 company where they launched a global review of agency services; uncovering in the process no less than 43 different PR firms on contract in various locations around the world. If you’re looking at this scenario through bean counter goggles, it just looks inefficient – but don’t be so sure.

Heck, I’ll confess personal culpability in this kind of situation. Not so long ago, I was hired at the head office level of a multinational firm, with five subsidiaries and eighteen offices in eleven countries. As overall head of corporate marketing, part of my remit was to find opportunities to rationalise marketing spending. Within my first quarter on the job, I’d carved a multiplicity of agency relationships back to a single, centralised contract with one firm. Great team of people, who did solid work for us in North America. On reflection, though, I know what I did was a big mistake – for some of the reasons I’ll try to elucidate here.

One of the simplest ways I can think to explain this is that the practice of public relations is a contact sport – and one that operates best at the local level. One of the critical measures of the effectiveness of any PR agency is, of course, the strength of the individual people. More particularly, it’s the reputation and the relationships those individuals have with the specific media and other stakeholders you’re hoping to engage. Relationships and local market knowledge don’t scale.

What works on a local level, with local relationships, cannot be globalized. There’s absolutely no guarantee that you’ll find the same strength, market knowledge, passion, and creativity you’re looking for in every office of a large agency, just because they all happen to bear the same corporate name.

Good PR is people. A good PR fit is a people fit. You’re never going to find all of the best people in one firm – and the team that rocks your world in San Francisco might have a completely dysfunctional branch office in Singapore.

Economic factors also come into play again. Small satellite offices, far removed from the mothership, may not be able to afford the big agency billing rates of the firm they’re required to use. The way around this, of course, is that the big agencies typically cut blended discount rate deals for their top clients. They’ll agree to normalise rate scales across each office for that specific client contract – charging the same reduced hourly fee in Buenos Aires as they do on Madison Avenue.

So now you’ve got a local office looking at your tiny PR budget and thinking: "great – and we can’t even charge full rate for this pain in the neck". I’ve seen an extreme example of this, where the annual US PR budget of a large scientific company was touching US$5 million, but their Canadian subsidiary had a mere $60,000 to spend – in local snow pesos (and that had to include both fees and expenses).

Here’s another problem: what happens if the local office of the firm you’re supposed to use has a conflict? How are they going to feel when the HODs in New York tell them they have to resign one of their long-standing, loyal accounts so they can handle your business? Been there.

Big global clients may think they’re being smart by signing a single contract with one of the top tier shops, but I’ve seen many, many examples where a head office mandate to use the same agency everywhere in the world has ended up causing horrendous problems for individual regional offices.

And please, don’t tell me your award-winning global intranet solves the inter-office communication problems. Even with the most sophisticated networked communications infrastructure, how much of your budget do you really want to see chewed up by staff keeping up to date with what everyone else on the account has been doing for you lately. There’s better ways to skin that cat.

I have friends on the client side who are handcuffed to completely ineffective local agency offices; forced to work with people they have no respect for, under terms they didn’t negotiate, headlocked by a global contract signed thousands of miles away.

I’ve worked for Big PR and I’ve had Big PR working for me when I was client side. I could easily rattle on about this for pages, getting into some of the other reasons why I think some of the monster, consolidated agencies are just a big, big mistake. Or you could just go and read what Jeneane has to say on the topic of Big PR, here and elsewhere in her inimitable, delicious style.

As markets become more and more connected, as big media continues to shift, reinvent, fall apart and morph into some future of personalized, many-to-one-to-one-to-many news distribution; Big PR will also have to change, dramatically. And there’s a ton of inertia to overcome. But enough ranting; let’s turn instead to some tips.

Unlike The Sweatshop and The One Trick Pony, I don’t really need to give you clues to identify a Behemoth. They’re pretty easy to spot – soon as they bring up a PowerPoint slide showing a map of the world with loads of little dots to represent their “global reach”, you’ll know you’re dancing with an elephant.

But just because they’re gimungous, does that mean you should run a mile? Not necessarily. Just don’t let their size sway you.

Make your decision based on the specific individuals you’re going to be working with – in every office. Check their references. And don’t automatically assume that a firm that works well in your home town will be as effective on the other side of the world, simply because they all have the same business cards. PR doesn’t scale.

Find the best people you can, with the best experience and reputations in each market you go into. It’s harder work that way, but you’ll save money and get much better results.

Part One: The Classic Sweatshop
Part Two: The One Trick Pony
Part Four: The Flack of All Trades
Coming soon - Part Five: If It Moves, Bill It!