How R/GA layoffs and leadership changes are impacting the agency—behind the issues and what's next

In the past year, four of nine R/GA senior executives have left or are in the process of leaving, including Sean Lyons, its global CEO. The agency has undergone at least five rounds of layoffs in the last three years and several executives who spoke to Ad Age claimed R/GA lost between $30 to $50 million in revenue last year. The agency and parent Interpublic Group of Cos. declined to comment on that figure. The story of what happened at R/GA—historically reputed as the digital industry standard—points to upheaval in an agency sector faced with keener competition from new entrants and legacy creative shops that have found their digital footing. Said Greg Paull, co-founder of consultancy R3: “The uniqueness of an R/GA offering is coming under more pressure.” Read also: Inside agencies' AI practices Check out the latest Ad Age events and award programs But R/GA’s story is also one of operational issues, leadership changes and missteps, according to 11 current and former agency executives interviewed for this story. They said R/GA has struggled to adjust its staffing in a world where project work is the norm, and that it placed a big bet on Web3 just as the crypto market crashed and the economy started to slide. R/GA confirmed in October that the agency lost between $7 million and $10 million in crypto and NFT-related work last year. Read more: How brands are using NFTs “Every three to five years, [digital] agencies need to kind of reinvent and reconfigure because they are … at the leading edge,” Interpublic Group of Cos. CEO Philippe Krakowsky said during a February investor call. Currently, half of R/GA’s business is advertising communications and the other half consists of areas such as product and experience design and brand design, according to Tom Morton, R/GA’s global chief strategy officer. Financial performance During that call, Krakowsky said a “soft performance” by R/GA and sibling digital agency Huge “weighed significantly” on IPG’s Media, Data & Engagement Solutions segment and weighed down its overall U.S. growth by 160 basis points. The softness comes despite a strong new business year for R/GA in 2022, in which the agency picked up more than $59 million in new business, according to a report by consultancy R3. Read more: 'The AOR is over,' R3 declares There has been “client attrition and lower growth” in the tech space for both Huge and R/GA, Krakowsky said during the earnings call, which he called “premium providers” in a project-based business. “R/GA is a terrific brand,” said Krakowsky in an interview. “It's an agency that’s always been focused on the leading edge of innovation across the industry. And that's what it's known for and that's what clients look to it for. And at a time when you have a challenging and volatile macro environment, especially in tech, that can lead to greater volatility.” Client budgets have been seesawing industry-wide, and like others, R/GA is feeling the pinch. According to multiple people close to the situation, Samsung and Verizon alone trimmed their spend with R/GA last year by nearly $10 million each—an amount R/GA denied, but declined to clarify, citing client confidentiality. Executives close to R/GA also said that Nike, Ally and Siemens also pared back some spending with the agency last year. Ally confirmed it had cut some of its scope with the agency as it brought its digital in-house. Nike and Siemens declined to comment. R/GA declined to comment on specific clients or cuts. “We continue to highly value our relationships with tech clients and our ability to have an impact in that sector, like we do in other sectors that are actively digitizing and modernizing,” the agency said in a statement. Paull, of R3, said “the [industry’s] problem is too many clients are still buying digital by the yard, not by the year,” he said. “They're buying it based on a tactical approach and not on a highly strategic approach.” ‘Spreadsheet’ culture Inconsistency in budgets led to staffing issues at R/GA, said current and former executives at the agency, putting pressure on Lyons, who spent four years in his post as CEO, the first person to assume that position other than founder Bob Greenberg. Last month, Accenture Song announced that Lyons would be joining as global capabilities lead, a new position. Lyons declined to comment for this story. IPG and R/GA spokespeople declined to comment on Lyons’ tenure and departure. Read more: R/GA CEO Sean Lyons departs for Accenture Song Some former R/GA executives said this pressure led to a growth of a “spreadsheet” culture led by Lyons and R/GA Chief Operating Officer Wesley Harris. “They basically would look at an employee and how billable that person was,” one former employee said. “If you are working mostly on pitches, you're not billable. If you're working on internal projects, you're not billable to the client. If your billability was low, then you would be a candidate for layoffs.” Tracking layoffs and budget cuts How brands and agencies are bracing for a recession Click here Robin Forbes, who is succeeding Lyons as CEO on an interim basis, did not comment on whether employees with low billable hours were candidates for layoffs. He also didn’t directly address whether there has been an increased emphasis on tracking billable hours. “Our methods for operating as it relates again to assigning and allocating and tracking time have not changed,” said Forbes. R/GA agency leaders are “just looking literally week to week and going, ‘Well this person's only on this-much paid work, or this many paid hours, I'll cut them,’ which means you're literally going through a staff cut every quarter,” another current employee said. In November 2022, the agency laid off 60 people in the U.S., according to R/GA, but some former executives say the number is higher—a contention the IPG agency strongly denies. This followed a 5% cut of its New York staff in June and a 10% cut of U.S. staff in 2020, according to earlier Ad Age reporting. Overworked staff A second former executive who left last year characterized the layoffs since 2020 as “constant” and said it led to an overworked staff, in what another executive described as a “vicious cycle.” “People start getting overworked and burned out and then great talent starts to leave,” the executive said. The third executive said that R/GA’s automated system of project planning, called Reporter, led to employee dissatisfaction. “In an attempt to drive efficiencies, [Reporter would tell you] when people weren't on paid work,” the former executive said. “It would tell you, ‘These people over here, their projects on Samsung or Reddit were finished. They are free now and should be put on something over here or over there.’ And so there was this constant battle of people being moved around and I think that it hurt the ability for people to feel real ownership of specific clients or do the type of work that unlocks growth and new business.” Paull says agency staff feeling overworked is part of a larger growing trend across the industry. “I think it's just a challenge of the industry moving to a project-based approach generally,” Paull said. “The pressure [is] on agencies to turn work around faster.” Management miscommunication Several employees who spoke with Ad Age said the way layoffs were communicated was handled poorly. One employee who was laid off last year described a scheduled 15-minute Zoom call by Lyons with the U.S. staff in which Lyons relayed the layoff news. It lasted only four minutes. “There was no chat function enabled, just Sean on a screen in his office and he delivered the news to everyone in the U.S. that a number of the people on the call—a number of their colleagues—were going to be laid off. He more or less thanked everyone for their service and signed off,” said one employee who was let go. Others corroborated the story. According to several executives, miscommunication about the call also existed at the manager and senior executive level. “It was a guessing game of who has been fired or not,” one executive said. Forbes and Lyons declined to comment on how the layoffs were communicated. However, it is becoming increasingly common in a remote and hybrid working world for layoffs to be relayed by Zoom, particularly in tech—Better.com, Carvana and Klarna are recent examples. Another former longtime R/GA employee said they heard the criticisms of how Lyons handled layoffs and felt they were exaggerated. “There's no easy way to communicate that to an agency,” the former employee said. “[Lyons] seemed emotionally affected by it.” Currently, the agency has 1,300 employees globally. R/GA had 1,600 employees globally before it was restructured in October. The agency declined to give a specific U.S. headcount. Read more: R/GA restructures as digital market softens Check out the latest Ad Age events and award programs Executive exodus A number of high-level executives are also exiting the agency. The latest is Margo Lowry, VP managing director, and head of the agency’s content studio, who is preparing to leave the agency, but will remain at R/GA until August. “We are integrating a number of our services to operate in a more simple fashion,” Forbes said when discussing Lowry’s departure. “Margo led our content studio and that studio's going to take a new form as a more tightly integrated part of our communications practice and we've reassessed what the right structure is for that.” Other recent high-profile exits from R/GA include Chief Financial Officer Tania Secor; Global Chief Marketing Officer Ashish Prashar, who left in January; and Global Media Lead Ellie Bamford, who is set to officially start a new role at Wunderman Thompson in April. Read more: Wunderman Thompson hires Ellie Bamford The shop is now being led by Forbes and Global Chief Creative Officer Tiffany Rolfe, who added the role of chair to her remit after Lyons’ departure was announced. All of the executives Ad Age interviewed for this story agreed that the new leadership in place is strong. People specifically expressed confidence in Rolfe, Forbes, the agency’s recently promoted U.S. Chief Creative Officer Shannon Washington, and Chief Strategy Officer Tom Morton as capable of driving R/GA’s success moving forward. Most executives also noted R/GA's creative as being particularly strong as well. Known for more than traditional advertising, R/GA has created some of the more notable campaigns over the past few years, including its 5-second “Superb Owl” ad for Reddit and creating a Super Bowl stadium within Fortnite as part of a Verizon campaign. Last year, the agency also designed the XFL's new brand identity. Lyons’ departure “gives an opportunity for people like Robin and Tiff to define the next chapter and what these jobs are,” a former longtime R/GA executive said. “The last thing R/GA should be is the R/GA from five years ago … that's what Bob [Greenberg] did so well for so many years. He redefined the definition of the company every nine years and then it sped up from there.” Losing sleep Some say the problem for R/GA isn’t winning clients, but servicing them after they are won. “We're too top-heavy and we promise [the client] people that can't actually work on [a new account] because they're already overloaded with work,” said an R/GA executive who has since left the agency. The clearest example might be Mattress Firm. In late December, Ad Age obtained an internal memo from R/GA that indicated there was trouble with its new client. The memo, from Washington, said that Mattress Firm decided to “change directions” after some “massive cracks” in the agency’s “scaffolding process, communication, and our organizational readiness to move at the speed of retail.” Read more: Mattress Firm drops R/GA as creative AOR Multiple former and current employees claim the communication error was about who should be handling the account. “We were awarded the work and the senior people that were meant to be on the business just didn’t show up. So you had a junior account person and a couple of junior creatives attempting to stand up and deliver work for a brand-new client, and no one was paying attention,” said another former agency executive. Rolfe declined to comment on staffing the account, but said, “We were adapting to some changes in what the work was going to be for Mattress Firm. We are good at adapting to changes in the work.” The client ultimately left the agency, she said, not because of staffing issues, but because of Ad Age’s publication of the memo. In response to the criticisms from former and current employees on staffing and servicing clients, R/GA responded with the following statement: “Like all professional service companies in an increasingly project-based industry, we plan and allocate staff based on demand and skillset. This includes continuously matching the talent to the client work as projects complete and new ones begin. “Most importantly, we stand by our commitments to our clients by operating with transparency and integrity. Our long-term client relationships, many of which extend beyond 10 years, reflect our client-centricity, responsiveness to changing client needs, and dedication to delivering the best creative output. Our people are at the heart of the work, and we can proudly point out that we are currently experiencing client engagement scores above industry average and our highest retention rates since 2020.” Prominent in the industry R3’s Paull said that R/GA’s reputation remains strong among clients, who want the shop to participate in reviews because of its storied reputation. “A lot of clients will shortlist them for a review to see what [R/GA] can provide as an alternative to a typical full-service agency,” said Paull. “I think they're probably pitching more than most agencies, so that helps. And obviously, they've still got some talented people within the company that are driving out good work, but their challenge is existing clients are not growing the way that other existing clients are growing in other agencies.” Forbes said the agency is currently seeing momentum in its brand design and consulting practice and products and experiences practice, as well as its brand relationship design practice, which focuses on loyalty membership and CRM. In terms of sector, the agency is seeing growth opportunities in health and finance. Globally the agency has seen “significant growth” across Latin America and the Middle East, according to R/GA. The agency recently picked up business with KFC in Singapore and Bacardi in China. Some attribute the staffing issues to R/GA’s switch to a “distributed” working model in October. The new model shifts from an office-based executive structure, with managing directors for different city offices, to one that is more centered around practices within a region. Forbes said that the new model is “working great” for the agency even though it is still a work in progress. “The major intent of the new strategy for the new model was to move away from silo geographic pockets of talent, and focus on capabilities that allowed us to create deeper pools of talent,” he said. “We went through that transition at the back half of last year and are now in the first quarter of running that as a fully-fledged model.” “When you are a leader of change I think it can be easy to be criticized for that, but we firmly believe that there is a much higher consequence if you just sit idly by,” said Rolfe. “It's about being really proactive in defining this new way of working, which we think will really help us get to better work … and build teams in more productive ways. And we think that's going to be the model that will work for us for the future, will be better for our clients so we can really adapt to the demands that they have and also better for our talent.” “If you’re as prominent in the industry as R/GA—and you have moments where things are evolving, whether at the agency or in the sector—people will probably be more minded to focus or pay attention. It's a longer-term story and they've navigated it pretty successfully in the past,” Krakowsky said. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here

How R/GA layoffs and leadership changes are impacting the agency—behind the issues and what's next

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