Deutsch plots succession: What to do when your CEO's a star

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With two high-profile clients going into review at the same time as its CEO moves into full-time TV stardom, Deutsch has its own image issue to tackle.

In the past three weeks Revlon and Mitsubishi have put their accounts held by Deutsch into review, just as the CEO and part-time celebrity, Donny Deutsch, announced the doubling of his on-air time as host of CNBC's "The Big Idea With Donny Deutsch." (The show will run five times every week, starting Jan. 24.) Rivals and pundits pounced on the confluence of events to ponder whether the losses related to a bigger problem-Mr. Deutsch's at least partial absence from the agency that he sold to Interpublic four years ago.


Though there is little or no connection between the events, Deutsch executives privately acknowledge that they may have to deal with the perception that there's a leadership vacuum, which they will likely do by naming a CEO. Executives suggest that the obvious choice is Linda Sawyer, now chief operating officer.

According to the staff, clients and consultants that have worked with Deutsch, Ms. Sawyer and the agency's other managing partners, have, in effect, been running the agency for some time now, with occasional guidance from Mr. Deutsch. So his burgeoning TV career should have limited impact on the business. But even Mr. Deutsch has accepted that clarification of roles might help. "I have pulled back dramatically and let other people step up," he said. "That's always been my management style. You don't give titles-titles are earned. I will make the proper designations across the board to really signify all the contribution these folks have been making."

Clear demarcation of roles is important because of the statement to clients and potential clients, and because Mr. Deutsch's double life has drawn critical scrutiny. "The code of ethics for agencies is to be an unbiased broker" in advising clients on how to spend their media dollars, said Jeffrey Sonnenfeld, associate dean, Yale School of Management, who also heads the school's Chief Executive Leadership Institute. As a TV host employed by CNBC, Mr. Deutsch is key to programming that brings in advertising-generated revenues. "Those roles are in conflict. He should resign completely from the agency if he wants to be a talk-show host," Mr. Sonnenfeld said.

mind the gap

But, the perceived leadership gap aside, Deutsch insists it's in a strong position despite the two account losses. The assertion is borne out by Advertising Age estimates of the agency's performance suggesting agency revenues were up more than 10%.

"Deutsch is a great organization that consistently delivers strong results," said Michael Roth, chairman of Interpublic Group of Cos. "Donny's still very much involved in the business and the agency has an outstanding management team that works very well together. We're confident that in the future, they'll continue to perform at the high level they've established since becoming part of Interpublic."

incentive dependence

Numerous factors beyond the control of Deutsch contributed to Mitsubishi putting its account in review, not least the fact that the carmaker developed an unhealthy dependence on incentives in the `90s, then endured a sales slump as it tried to wean itself off them in the past two years. Executives at its parent company have been arrested for allegedly hiding defects to prevent recalls, and it recently reported $1.32 billion in net losses for the six months ended Sept. 30. Additionally its marketing leader, and Deutsch defender, Ian Beavis recently left the company.

Deutsch has been asked to participate in the review, but was noncommittal about its plans. Executives at the agency said they may be able to pick up another car account-and the implication is that it could be for a healthier, more lucrative, marketer. Mike Sheldon, managing partner- general manager of Deutsch's West Coast operations, which handled Mitsubishi, said he's already had two inquiries from car marketers. He declined to give details.

Deutsch will defend Revlon, which began its review in late November and invited the incumbent to participate. This spring Deutsch launched a global-image campaign for Revlon's signature brand which, though credited by CMO Stephanie Klein Peponis with "increasing purchase intent and brand imagery," does not appear to have built market share. Revlon has not performed well of late; in this year's third quarter its sales fell 7% to $294.4 million. The company's market share in its largest category, color cosmetics for both Revlon and its Almay brand, fell 1.2% in the quarter, versus a decline of 0.8% in the second quarter. "What we are good at is looking in the mirror and assessing the strength of a relationship. We feel confident we can demonstrate that we're still the right partner for them," said Ms. Sawyer.

If Deutsch does not replace Mitsubishi in the next six months, and loses Revlon, it will certainly take some sheen off the jewel in Interpublic's crown, and could even force the agency to make cuts in its L.A. office. But the agency has international expansion plans, an expanded relationship with Novartis, and a bullish leader who, at the very least, is a useful marketing weapon for the shop. "I have a tremendous team," Mr. Deutsch said. "My role at the agency today is what it's been for the last four years, and their track record speaks for itself."

contributing: alice z. cuneo, jean halliday

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