BIG AGENCIES STILL GRIPPED BY CONTRACTIONS

BURNETT SLASHES 12% TO DIP BELOW 2,000; OGILVY, DESPITE WINNING IBM PLUM, TRIMS 7%

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Advertising spending may be on the rebound, but Madison Avenue agency goliaths are experiencing the deepest cuts since pink-slipping picked up in 1991.

Through Oct. 1, the nation's 16 largest ad agencies, trying to slim down from the 1980s hiring glut, reported 5.2% fewer full-time employees than a year ago, according to Advertising Age's annual employment survey.

As part of the cuts, no core agencies can now claim as many as 2,000 employees. Staffing at Leo Burnett Co., Chicago, long the largest-staffed core agency, dipped 12.4% from October 1993, to 1,983 this October.

Comparatively, Burnett is down 17.5% from its headcount two years ago.

The latest and largest staff cuts occurred at New York-based shops Saatchi & Saatchi Advertising and Young & Rubicam. Among the last to restructure, both weathered top-level management transfusions this year.

The Saatchi cuts, a 16.4% decline that winnowed 208 from the core U.S. agency-and 18% from the New York office alone-have "obviously been to do with getting the place more efficient," says Saatchi & Saatchi Advertising Worldwide CEO Bill Muirhead.

He says the agency's resignation of Helene Curtis Industries' $80 million account late last year resulted in a number of layoffs while "technological efficiencies" induced other cuts.

Y&R, meanwhile, culled almost 300, or 15.4%, from its core agency ranks in layoffs that followed a tough, yearlong restructuring under former Chief Operating Officer Steve Heyer, who left the agency early this year. Y&R Advertising President Ed Vick, who was named to that post earlier this year, has pushed also for better efficiencies.

Despite the big cuts, several oversized agencies are still struggling to find their ideal fighting size.

The newly merged Ammirati & Puris/Lintas, New York, citing redundancies, terminated more than 40 staffers after these survey results were tallied. Industry observers expect more cuts at the agency in coming months as it becomes further assimilated.

Before its merger, Lintas-ranked 11th in the survey for both years-was one of the agencies struck by the loss of IBM Corp. business after Big Blue consolidated its worldwide account.

Interestingly, Ogilvy & Mather Worldwide, New York, was the beneficiary of the consolidated $500 million IBM trophy, but the agency still reported a 7.4% reduction in its ranks.

Generally, there was a let-up in staff cuts in 1993, when top agencies pared core staff by just 2.6%, following a reduction of 4.7% the prior year.

Last year's lull led several industry observers to proclaim the end of downsizing and of the recession.

"I'm somewhat surprised that agency employment is still declining," says O. Burtch Drake, president of American Association of Advertising Agencies. He believes downsizing has leveled off among the largest 100 ad agencies, buoyed by account wins at more mid-sized agencies.

Indeed, an employment slide at the core level of these 16 leading mega-agencies-which comprise about 20% of the nation's total agency employment-went counter to the national trend.

Overall, the U.S. ad agency community has grown steadily since the third quarter of 1993-from 155,100 workers employed nationally to 163,200 during the third quarter this year-according to the U.S. Bureau of Labor Statistics. It's the largest reading in several years.

Among the top 16, four agencies reported staff increases, led by BBDO Worldwide's double-digit growth of 14.1%.

Tom Carey, chief operating officer of BBDO's New York office, credited the increase to account wins the past year, including General Electric Co.'s agency-of-record media account and increased support from Campbell Soup Co., as well as increased ad spending planned by several clients for 1995.

Bozell Worldwide, which posted the second-largest gain in the survey, says its 9.4% increase was due to growth and acquisitions, including its takeover of Campbell Mithun Esty's Detroit office late last year.

The survey covers the same agencies whose primary shops employed more than 1,000 in 1993. Campbell Mithun Esty, Minneapolis, fell below the 1,000 level when Bozell took over its Detroit shop and Chrysler account.

Ketchum Communications, Pittsburgh, slipped to 725, largely because of a technicality. It moved its strong public relations unit from the core side to the consolidated for uniform conformity (of PR shops) throughout the agency lineup. Despite this, the advertising side of Ketchum declined 11.8%, even with the merger of its New York shop with Jerry Della Femina's Jerry Inc. in 1994.

The core shop essentially is the primary agency apart from its specialty divisions and agency subsidiaries. For example, core D'Arcy Masius Benton & Bowles includes just the D'Arcy-named shops, but not subsidiaries Medicus Intercon; Clarion Marketing & Communications; Manning, Selvage & Lee; Noble & Asociados; Sosa, Bromley, Aguilar & Associates; Advance Technologies; TeleVest; and newly acquired Einstein & Sandom.

On the consolidated side, total employment at the 16 agencies surveyed was down 3.1%, same as a year ago. The difference in this last reporting period is that there were greater swings in both growth and decline.

Again, Saatchi & Saatchi, with a 15.1% reduction, posted the largest drop in consolidated employment. Its total operations include Cliff Freeman & Partners, Hudson Street Partners, Team One Advertising, Conill Advertising, Klemtner Advertising, Rumrill-Hoyt, S&S CMS and Saatchi & Saatchi Direct. Cadwell Davis Partners is not in the numbers, having bought the majority of its equity from Saatchi in 1994.

Core Saatchi just includes the New York and San Francisco S&S offices and S&S DFS in Torrance, Calif.

Last year, Y&R's consolidated group of shops paced the downsizing efforts with a 6% decrease.

In some instances, the core and consolidated numbers swing in opposite directions.

D'Arcy Masius Benton & Bowles, New York, for instance, reported a 12.7% drop in the core agency for this survey period, while the consolidated U.S. organization grew by 8.3%. The core group's spinoff of media group TeleVest, which currently employs about 80 people, coupled with some downsizing, reduced the core.

D'Arcy consolidated was bolstered by gaining TeleVest and Einstein & Sandom, but the figure largely reflects growth in the highly specialized subsidiary lineup (direct response, sales promotion, medical advertising, etc.).

Ad Age treats figures on a pro forma basis. Under this procedure, acquisitions and divestitures, including spinoffs, require adjustment for two consecutive years.

Now DMB&B's St. Louis office faces more layoffs following the loss of one of its oldest and more labor-intensive accounts, Anheuser-Busch's Budweiser beer account, which moved last month to DDB Needham Worldwide, Chicago.

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