Several executives within McCann and its holding company outlined the problems that led to sweeping management changes at FutureBrand, McCann's brand identity specialist, and Momentum Worldwide, the agency's event marketing and promotion firm.
McCann CEO Jim Heekin confirmed that both companies suffered revenue losses this year. Mr. Heekin characterized the problems as "forecasting issues," and said FutureBrand and Momentum are in good shape. Other insiders said FutureBrand recently cut back staff.
"Both of these are project-based businesses, where your visibility into the revenue pipeline is three to four months at best," Mr. Heekin said. "There's no question we were slow this year to recognize the reality of that pipeline. We definitely had a very difficult revenue forecasting issue with FutureBrand. But it's still a viable company and we like to think we have addressed the problems."
Mr. Heekin said the revenue shortfalls and management changes were not related. But one insider said that because revenue goals were not met, "heads were going to roll." Richard O'Leary was named to the new position of FutureBrand's CEO-North America in August. Earlier, Bob Madore was named chief financial officer, replacing Bob Bibel, who left. Mr. Madore was also named to the newly created position of chief operating officer.
John Elkins remains FutureBrand's Worldwide CEO but has ceded day-to-day control to Mr. O'Leary. One Interpublic executive described Mr. Elkins' situation as "tenuous," which Mr. Heekin denied. Mr. Heekin did say that he and Mr. Elkins made a joint decision to have Mr. O'Leary oversee daily operations of FutureBrand out of New York. Mr. Elkins was traveling and unavailable to comment.
"It's far worse at FutureBrand than at Momentum," said one insider. "They have in fact done a bad job of anticipating what revenue numbers would be, and their staffing was way disproportionate to the business they had. They are missing their numbers in a big way."
However, the Interpublic executive said, "[Interpublic] and McCann are moving and doing what they have to do."
At Momentum, Harlan Stone resigned in August to take a position with Velocity Sports and Entertainment, a smaller company based in Wilton, Conn. William Kolb was named Momentum's chief operating officer. He did not return calls for comment.
According to executives with knowledge of the situation, the problems at Momentum stemmed from its in-store, point-of-sale specialist, Transworld Marketing Corp., Detroit. Transworld was acquired by Interpublic in 2001. The holding company paid $14 million for both Transworld and DeVries Public Relations, New York. Transworld has since changed its name to WorldGroup's In-Store Marketing Services Group.
"Transworld's biggest client was Kmart, and they took a huge hit," Mr. Heekin said. "We downsized the company and addressed the situation. Transworld now has 50% of their budget for next year already in signed contracts, so we think they have viability."
Momentum Detroit office chief Joseph Caponigro resigned late last month. Mr. Caponigro did not return calls, but Momentum North American CEO Mark Shapiro confirmed his resignation. Mr. Shapiro said it was unrelated to Transworld.
"The changes in our Detroit office are a result of incremental growth and a change in the programming priorities, not anything to do with a decision to eliminate a title or position," Mr. Shapiro said.
Mr. Shapiro also denied a claim by two executives who said various other office presidents would be let go. "There is no purge going on in Momentum," he said.
contributing: jean halliday