On Dec. 15, Interpublic Group of Cos. Chairman-CEO Philip Geier announced he would turn over both of those titles to President John Dooner, ending Mr. Geier's chairmanship months ahead of the previously announced transition schedule. As he prepared to cap a 42-year career in advertising that began at McCann-Erickson, the soft-spoken, cigar-chomping executive sat for an exclusive interview with Ad Age Editor at Large Randall Rothenberg. Mr. Geier - named by Advertising Age as one of the 100 most influential people in advertising in the 20th Centurzy - talked about the lessons he's learned along the way, and the legacy he leaves behind.
Advertising Age: I want you to play advertising philosopher. You really were the first true head of an advertising holding company. Your predecessors were only here for a brief time. You, coming in in 1979 and lasting for 21 years, are the first long-term, stable, growth-oriented head of an advertising holding company. You invented the mold that others had to follow or to deviate from. The big question is what did you learn? What does it take to run a diversified company like this one?
Mr. Geier: Part of it is that my predecessor set up codes for the business which then had to be implemented, tightened up. We believe in the basic concept of competitive agencies, we believe in trying to find ways and means to grow on a global basis, we believe we were really the first to push for globalization. And also finding ways and means to build, particularly our strength with people. We had to find the ability to keep them and look at long-term incentives and programs that never were there before.
The only area I can say honestly that we sort of missed on a timing basis was the diversified service society, integrated service. We had to spend the time and effort and money to build it, primarily at Interpublic, and we're trying to build it through the two agency systems that we have.
AA: Clearly one of your major responsibilities is picking future leaders of the businesses and making sure they're up to the task.
Mr. Geier: We have not lost anybody that we really wanted to keep. Part of that is philosophically going back to the idea of managing people. The best you can do in looking at leadership is to be careful that you don't go into what we call the Peter Principle.
AA: I'm sorry, the Peter Principle?
Mr. Geier: They look good, they feel good, they look like they can drive your business, but for some reason [when] they go into that final step up to the top it's tough for them to handle. Some of it has nothing to do with their professional ability, some of it has to do with their own personal situation, the travel. I remember when I was running around, for six years I was 80 percent of the time on a plane and that's not easy. We've had some situations in which we've wanted to put some people in certain jobs. In today's world, it's harder to get them to make that move with their families. It's a whole different thing than it was 10 years ago.
AA: When you came into this job, you were known as a tough manager, and I think you're probably still a tough manager but I think you've probably also changed over time. I'm not sure if mellowed out is the word for it.
Mr. Geier: I've softened up a lot. I always drove off of a basic principle of performance. If you had performance, you were rewarded. If you didn't have performance, you had to make adjustments. Maybe there were a few times when the Irish part of me came out (laughs).
. . . Shareholders always did very well on that [performance] basis. Simple fact: Our annual compound growth of revenue is approximately 14 percent over the last 20 years, and our compounded growth share increases 24 percent over the last 20 years.
AA: Those are like GE-level returns and that's important because that means you were growing margins every year. And I was looking back at some old statistics. Back in the early '90s when revenue growth basically stopped in the advertising industry, barely keeping up with inflation, you were still growing.
Mr. Geier: We averaged 14 percent over 20 years, so that means we must have been doing something right. And then our share price averaged 24 percent compounded.
AA: Even if you factor out the multiples increasing, you get this really significant margin growth at the same time as the revenue growth. The margin growth is probably the hardest thing to do over the long term. I can imagine a lot of senior managers trying to say, 'I've got all the efficiencies I can get,' but you keep trying to squeeze it out year after year.
Mr. Geier: We also did acquisitions, so the acquisitions helped us grow at a faster rate than normal. We had a very clear understanding of what we were doing and where we were going. And another thing - we adjusted ourselves last year so we had to build internal growth as our No. 1 area, to build our business, because the acquisitions are not going to be there. Most importantly is to gear our entire incentive program against internal growth. To not let acquisitions be our priority, but a part of it. They'll be a part of it, but a smaller part. What we're after is share. Every single unit now bases their success on beating the growth rate in their categories.
AA: Interpublic was pretty aggressive pretty early on in the Internet, specifically with the CKS investment, which I think really paid off in spades.
Mr. Geier: It was a shame because I could tell you examples of where I was five years too early and there's one of them. We just thought it was right, we invested in it. Part of the reason was that we couldn't get the agencies to get involved - they wouldn't do it. Then they started getting involved when they saw us doing it. What happened in that case was that [CKS] made a mistake and started to go outside their core business. They bought an agency [McKinney & Silver] and did some other things we disagreed with so we said let's figure out how to work our way through it and disengage.
AA: When you bought Hill Holliday, one of the things you wanted to do was to lessen the total exposure to the international marketplace.
Mr. Geier: We had at that time almost 62 percent or 65 percent of our business overseas. And we could see there was going to be an adjustment that would take place, and there should be an adjustment anyway. We made a strategic decision to strengthen our U.S. base. It took us about three years to get it more towards the direction of 50-50, which is where we've kept it.
AA: Another thing I remember reading with Draft Direct, which was the biggest single step you'd taken in below- the-line services in one fell swoop: You were hoping at that time that 30 percent of your revenues would come from below-the-line services by the end of the decade. Did it happen?
Mr. Geier: We're at 50 percent.
AA: Let me ask you about Coca-Cola, because the change in the relationship there that happened over a long period of time, it must have been painful, some of the things that happened, all that stuff with Creative Artists Agency. How significant was that to you personally?
Mr. Geier: It was very tough. Because you've spent 25 years on that business. I have real respect for [former Coca-Cola Co. President] Don Keough. He was unbelievable, a great client. But like anything else, things change, people change, they made the decision to do things differently. I'm happy to see Interpublic still has a significant amount of their business right now and what's happening now is an opportunity to use all these resources on a bigger plane.
AA: What did they want that you weren't giving in their mind-set, or was it just a change in global economics?
Mr. Geier: In those days they were trying to find breakthrough advertising which everybody wants to do, and what we were doing wasn't acceptable, wasn't good enough. And that happens in this world. Now with the localization thing, we still want to add strategically the ability to utilize the resource, to go on top and work with them, on a counseling basis. What will happen in the future depends on how well everybody works together. But there's a very big openness down there, they want to have our involvement, and that's a very big plus.
AA: What were some of the other rough points along the way, if you go back over, like Nixon, your six crises, what would they be?
Mr. Geier: Well a lot of them I don't want to talk about (laughs). We had a crisis at the time when I had just become president [of Interpublic]. They announced some changes that were going to take place in the chairmanship, and we lost some people, Carl Spielvogel [then vice chairman of Interpublic] and Bill Backer [then McCann's creative chief]. And certain things happened at McCann, miscommunications and so forth. Because [Backer] said to me five times, 'Why don't you and I start an agency?' I said, 'Bill, it would be a great idea but I've got too many commitments to these people. I can't do it. I don't see how you can.' I guess I was wrong (laughs).
AA: Let's talk about successes. Looking at McCann and thinking of McCann's capture of the Microsoft account. It was almost like a ratification of the changes that John Dooner had been putting in place, a creative agency capable of doing global marketing. It just struck me as a turning point. Was it one?
Mr. Geier: We had a lot of turning points, and great success with a lot of clients, Nestle and Unilever and L'Oreal and General Motors. John has been [at Interpublic] for I think eight months as the COO. He's learned a lot from the experience, and I feel very confident that he'll continue to drive the strategy forward. How we're going about it is the right way to do it. It's not the same as running McCann-Erickson, he found that out pretty quick. And he admits it. McCann was like the New York Giants. The other side of the business is much more like a basketball team, they got a lot of stars.
AA: Go back to the idea of identifying leaders.
Mr. Geier: What I've gleaned philosophically is: There's no excuse for not communicating problems. That's sort of like a cardinal rule that's been around this company.
AA: Give me an example of how that works, how you take that principle and how it works in practice.
Mr. Geier: Let's say I'm in charge of an account. A client indicated I've got some problems in my business that I think I can solve myself. In listening to the problem it becomes obvious that there's not enough coverage being done at the top of the company. The work's pretty good, but they're having problems with people. I see the problem, I don't report it, and I think I got it in hand and then all of the sudden they're in review and they're concerned they don't have the right creative people or research people. And this guy in charge of the account didn't tell them ahead of time but he knew that was the problem and he tried to solve it himself. Now there's bigger cases, bigger problems that come out. It's far better, even if it's going to hurt you - I've taken myself off the company businesses in my day because I could tell my relationships were not going to last that long. I went to the battlefield and got killed, so somebody else now has to come in and start fighting. You've got to communicate whatever the problems are, and that's a rule in this company. [The same goes for] risks. Take risks as long as the management knows.
AA: That is the essence of leadership, not only taking risk but allowing the guy beneath you . . .
Mr. Geier: But also when you do that, you can't just dump it [on someone else]. You've got to say, 'Look I agreed, we took the risk, we went down the tubes together.' Once you do that a few times, then everybody's willing to say, 'These guys are with me and I'm willing to look at something that maybe I wouldn't have.' I want our people to always do that.
AA: Is it fair to say the worst thing you can do is to induce overcaution?
Mr. Geier: Caution, period, is a concern if it's going to take away a real opportunity of doing something that would make a real breakthrough. That's why I always look at the risk-reward ratio. If the risk is high and the reward is high, then do it.
AA: What was the biggest risk you took if you look back over 20 years?
Mr. Geier: I think the biggest one at that time was [buying] Lintas in . At that time, under those conditions, in that situation, it was a matter of trust.
AA: There really was this risk that a couple of weeks later, Unilever could have just said, you know, thanks for taking [our house agency], hasta la vista baby?
Mr. Geier: Well, they could do it and change the terms. The southern part of Europe didn't like the agency, the northern part did. I'll tell you what it is, the international clients in my experience take longer to have confidence in you. They appreciate much more the European way of doing business where you know and respect the people you do business with, you work with them over time, and there's a trust that builds up.
AA: Lintas has been over the years - I'm not sure whether to call it, a problem - it's been an interesting challenge. It's gone through several stages of integration and several strategies. Can you kind of walk us through "
Mr. Geier: I think that they were fine for a long period of time, then the adjustment of management took place back in the '80s relying on the people in place and their recommendations, and maybe a mistake was made. And once some of those mistakes are made, it's harder to fix them. Then when the [Ammirati] Puris operation came in, I thought that was a very good way to go. And again somehow it didn't stick as well at it should have for philosophical reasons. You can't blame it only on one thing or two things, it's a matter of certain elements in the marketplace changing, but that's the only area I would say that for whatever reasons didn't grow as fast as it should have. We're seeing much less problem putting [ Lowe and Lintas] together. We really believe once we get through this year that operation will be very successful. It's working. Clients are very happy now. All they have to do now is build revenue.
AA: We talked a lot about Lintas, but we didn't talk a lot about McCann. And McCann has gone through itself enormous changes. From the resistance to the idea of integrated marketing to a wholesale embrace, to the complete organization that Dooner's put in place. There's also been a new embrace of creativity, after years when it was not focused on so much.
Mr. Geier: John [Dooner] developed a very good position for the agency. I remember he came to me and talked to me. I said, 'You want to be another Interpublic' and he said, 'No, no, I want to drive this into the integrated marketing area because I know as we go forward I've got to grow it at a rate, and the only way I can do this is through integrated marketing.' So he moved in that direction and he put together a very strong worldwide team. And because of that they've been very successful. In the last year they did very well. This year they're still doing well but they're consolidating all of what they've taken on. Now you have the transition of [McCann Chairman-CEO] Jim Heekin coming up, taking it over. There should be an easy transition on that. The process and the approach and the philosophy of McCann is instilled in that organization very deeply.
AA: Is the nature of the relationship side of the business changing? The caricature is that it used to be all about relationships, and now there's a harder edge, certainly a harder financial edge to expectations.
Mr. Geier: We're all in the effectiveness business. We have to find ways to get together and effectively sell product, it's really pushing demand, that's what you're trying to do and that's what our role is, to push demand. We talk about great creativity, which is terrific - I can have the biggest impact in the world, everyone can talk about my commercials - but unless I've got somehow somebody convinced there's a difference, the product is better, they won't buy. Great creativity has got to be relevant, maybe more relevant today than it's been in the past.
AA: So the idea of creative as an end in itself is diminishing over time.
Mr. Geier: That's why integrated communication is much more effective, the ability to take a creative idea, a strategic idea, and move it through all these pipes right down to point of sale. All that stuff is in one package pushing one overall message but in different ways to reach out to consumers. That's the big change that has taken place so that's why you're seeing all these agencies make the move in that direction.
Some say you keep it separate, as Omnicom has done. Some say you put it closer in, that's the way McCann has done it. Interpublic has also got the resources over here. We have an Allied [Communications Group], it has public relations in it, Octagon is sort of in that area, which is sports, we've got some health-care companies, which are more pushed towards Lowe Lintas and McCann. Now you're seeing the Lowe side develop the same kind of approach the McCann side is doing.
AA: Another turning point within the industry just occurred with WPP buying Y&R, basically hastening the concentration of the industry. Two networks may not be enough. I won't ask whether you've got a third network acquisition planned because you can't tell me. But I can ask, does that ratchet up the game? Are we in a new storm of consolidation?
Mr. Geier: We found out now as we go through this year that we don't need it. If the right thing comes along and it makes sense for us to do it, we'll consider it. But we really don't need it the way we're structured and the way we're operating.
AA: You're not feeling growth pressure?
Mr. Geier: Even when we were No. 1 - and I always believed it doesn't matter - you just have to be the best at whatever you're developing. We care about clients first. It doesn't mean that you have to be the biggest. You certainly want to be the best in your areas of competence. We're either No. 1, 2 or 3 in all these capabilities, whether it's media-buying or direct-response or health- care or sports marketing. If we can keep growing those it's important to do so because that demonstrates that you can make a very good return for our shareholders in the growth categories of the business.
Copyright December 2000, Crain Communications Inc.