What's Ailing McCann Erickson's U.S. Operation

Consultants Say Shop Suffers Lack of Vision, Slowness to Modernize

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NEW YORK (AdAge.com) -- Here's one person's truth well told: "At its core, McCann [in the U.S.] is a very, very powerful, consistent organization whose style has fallen out of favor," an agency consultant said. "All big agencies are suffering, but McCann is perhaps suffering worse than most."

Interpublic Chairman-CEO Michael Roth
Interpublic Chairman-CEO Michael Roth
That's a pretty big statement given the travails of many of the leading global agency networks. Even premier players such as BBDO are enduring tough years in their home markets. But with the erosion of major client relationships and a sense among some consultants that McCann's strength is its global footprint, rather than its domestic creative output, questions are being asked about the U.S. arm of the machine.

McCann is the flagship agency of McCann Worldgroup -- ranked the largest agency network in the world by Ad Age's DataCenter, along with Omnicom Group's DDB Worldwide Communications Group -- and its roster includes all five of Interpublic Group of Cos.' largest and most powerful clients, which in 2008 were (alphabetically) General Motors Co., Johnson & Johnson, Microsoft Corp., Unilever and Verizon Communications. And here's another important truth: McCann managed to post healthy 8.2% U.S. growth in 2008.

But in 2009 key client GM is in disarray, and McCann's new-business department has been landing minnows rather than whales. Leadership is shifting, and chunks of one very important account, Microsoft, are being hived away to agencies such as Crispin Porter & Bogusky and JWT, which have earned roster spots for the marketer's Zune, Windows Mobile Phone, People Ready and Office brands.

In an earnings call last month, Interpublic Chairman-CEO Michael Roth said: "We continue to do great work with respect to particularly the media side of Microsoft as well as their regular business. We think the relationship is not at risk." That Interpublic chief said McCann's "great work" lies on the media side of the business is an interesting insight.

"Clients view [McCann] as solid and smart, great for complex global business but not as modern as the other networks," said a second industry consultant, who added that that Microsoft beneficiary JWT is better at convincing clients it is digitally integrated and has fresh creative cases on upstart brands such as JetBlue. "A lot of [McCann's] work, such as the [MasterCard] 'Priceless' campaign, is legacy work instead of great, new, rocking campaigns."

Losing leaders
And now, when it needs to inspire most, it's losing leadership. Last week, New York-office president Lori Senecal left to hang her shingle at another agency in town, MDC Partners' Kirshenbaum Bond (and now Senecal) & Partners. McCann scrambled to name a replacement, tapping Thom Gruhler, who was most recently the lead on McCann's enormous and lucrative Verizon account. He is described by colleagues as "personable" and "smart," but he has a steep learning curve ahead of him in running an agency.

Other top-level changes in the U.S. include McCann Worldgroup San Francisco President Matt Ross moving to head up Worldgroup's low-cost global production entity, EXP. Former TBWA executive Robert LePlae was brought in to stabilize the San Francisco office, which continues to handle XBox and Windows Mobile work, but has seen huge chunks of its Microsoft business exit and lost the Hitachi account this month to sibling Gotham.

Observers blame such losses, in part, on a lack of vision. "Most agencies succeed because they've got leaders that inspire internally and can be the Kool-Aid that clients want to drink from," the first industry consultant said. "One of the issues McCann is trying to solve is next generation and charisma."

McCann declined to comment for this story, except regarding management changes. A spokeswoman said recent moves in the executive ranks are a positive thing for the agency going forward: "The management changes are giving the agency a great momentum."

That will need to be proved in reviews, where McCann has been coming up short, managing to make it to the final rounds for Expedia, PNC Bank and cruise-line operator Carnival but not to seal the deal. "When you have a new-business record like that, it's a health indicator," the second consultant said, adding: "Losing in the finals just rips out the heart of an agency and makes it that much harder to get up and go the next time."

Small wins
So far in 2009, McCann's new-business pull has included a raft of small accounts, by McCann standards, such as Aldi grocery stores at the Detroit outpost; a $10 million Major League Baseball account in New York; a $20 million Newell Rubbermaid account out of Salt Lake City; and some confidential pharmaceutical assignments.

McCann has exhibited its biggest strengths in its work for challenging clients such as Verizon and the U.S. Army. As hard as landing new clients is, keeping those is most critical. Also to its credit, McCann is trying to add top digital talent such as Faris Yakob, who was recruited away from Naked, New York, and Alessandra Lariu and Qian Qian, both from AKQA.

At a hulking beast like McCann, the changes may come, but not quickly. "When you are that big, it's really hard to change," a third consultant said. "McCann may have to lose even more Microsoft and other clients in order for them to get to the size where it allows them to change."

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Bradley Johnson contributed to this report.

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