Will Eide Individual Case Submission Charlotte Beers Leadership and Organizational Change July 7, 2011 Word Count: 1,499 Executive Summary Despite progress in driving operating margins up from a low in 1991 of 4. 1% to 7. 6% in 1993 (see Appendix) and achieving major wins with new clients and lost clients, Ogilvy & Mather (“O&M”) still had confidence issues. The company was a bit like an abused foster child, pawned off to new parent WPP and in need of tender loving care and firm direction.
CEO Charlotte Beers instilled confidence in the executive suite by focusing them on their core strengths in direct marketing and creative advertising and encouraging them to embrace their terrific client roster. Finally, she instituted discipline by demanding leaner operating budgets given macro pressures on clients advertising budgets. However, Beers did not attain full support of the company in her vision. In order for her to complete O&M’s turnaround in 1994, Beers should adopt a matrix organizational structure and institutionalize the philosophy of Brand Stewardship with emotional symbols to make it accessible to every O&Mer.
Finally, she should create an incentive system to attract her international agencies away from their local clients to further multinational brand initiatives. Analysis When Beers became CEO, her goal was to restore O&M’s “beleaguered” image with its clients and to repair the confidence of O&M’s employees. In effect, she had to re-brand an agency whose job it was to define brands for their clients. She accomplished her goal by creating an open environment where passionate leaders were welcome to voice their opinions and take part in shaping the turnaround.
She focused on vivid imagery such as “thirsty for change” and symbols like Ogilvy red to create emotional links to the goal rather than financial targets or organizational charts. She crafted an internal corporate philosophy or vision known as Brand Stewardship. And she rallied her executive team around three simple business strategies: (1) retain existing clients; (2) improve the quality of their work; and (3) stay disciplined financially.
However, Beers and her management team failed to win full buy-in from the O&M rank and file employees and to align the local international offices with the new World Client Services (“WCS”) organization. Going into 1994, Beers’ two key challenges were to identify and correct these two principal issues. Challenge 1: The Problem with the Proletariat The O&M lower level staff did not participate in Beers’ effort to reformulate the new strategy. They were not allowed to be “thirsty for change. Rather they were forced to accept the consequences of the meetings in Vienna, Chewton Glen and Doral Arrowood just the same as they had accepted the merger with WPP. While it appeared that Beers was running a very collaborative process with her off-site meetings, allowing for dissenting opinions and consensus, she effectively excluded a large percentage of the company. And even amongst the thirty executives that did make the cut at Doral Arrowood, Beers’s unilaterally bypassed the 22 issues that they wanted to address in favor of crafting a more simplistic three-point business strategy.
While she needed to make decisions in order to move forward, Beers’ actions in forming O&M’s business strategy seemed autocratic. This led to a certain level of disenfranchisement amongst the below the line staff. And for a group facing confidence issues, what they needed most was affirmation of their skills and inclusion of their ideas. As Beers noted herself, “it did not sound like anything new. ” One particularly resistant group was creative, who felt that the philosophy of Brand Stewardship was limiting their ability to be creative and artistic.
Since their entire livelihood centers around their ideas, it would seem natural that they would be threatened by a new ethos handed down from the executive suite. Why weren’t they included in the process of trade marking BrandPrint? The executive team did not effectively communicate or institutionalize the mantras of Brand Stewardship. This was a new language to learn for staff that had been working at one of the leading ad agencies in the world. They needed more than a pamphlet and an occasional inter-office memo.
O&M needed to see, hear and feel Brand Stewardship in action. Shelly Lazarus, eventually Beers’ successor as CEO, noted that employees truly understood the new concepts when they saw her present to a client in real time. Challenge 2: Trouble with the Locals Despite owning controlling stakes in eighty percent of its international offices (see Appendix), O&M discovered that it was hard to communicate its Brand Stewardship philosophy to these offices. Furthermore, O&M found difficulty getting them to focus on its large multinational clients.
Beers created a client-focused group called World Client Services (“WCS”) to service clients across disciplines and across geographies. However, WCS had two major credibility issues. First, WCS’s predecessor, Worldwide Management Supervisors, had never established itself as an authoritative strategy group. Rather, it was an administrative support group to help traffic resources to local managers. Although the WCS had teeth in terms of responsibility and mission, the local agencies had grown accustomed to treating the cross-functional O&M staff as a support team and not true executives.
Second, the local managers did not have proper incentives to divert resources to WCS projects in order to lend more credence to the new WCS effort. Local managers were accustomed to making steady income from local clients. These clients were keys to attracting larger multinational clients, but they were not integral to the Beers’ vision. But for the local managers, these clients represented present income and important relationships. Solution and Action Plan Charlotte Beers and her team should spend 1994 focused on achieving wholesale corporate buy-in and resolving tensions between the local managers and her global client teams.
She should press ahead indoctrinating the firm in Brand Stewardship with a few adjustments. 1) Institutionalize Brand Stewardship: develop an internal culture of pride and ownership in Brand Stewardship with the appointment of a Brand Stewardship Officer and the symbolization of key successes with a Brand Hall of Fame. The Brand Stewardship Officer (“BSO”) can create a cross-regional and cross-service group to organize education seminars and training across the company. The BSO will be a strong signal that O&M is directionally focused on integrating this new philosophy.
Furthermore, the creation of a Hall of Fame will create public recognition of successes such as Jaguar and American Express, which will allow employees to see the fruits of their labors. It also provides concrete examples to countervail doubters and detractors. 2) Create a Matrix Structure for the WCS: align functional departments, particularly finance, and disciplines with geographical regions, to ensure best practices with revenue and cost allocation and deploy available technology such as ERP software.
From a managerial perspective, regional finance directors should help smooth over revenue and cost allocation disputes amongst WCS line managers and regional line managers. The ERP system will enable better information flow on client project work, calls, and new services that arise from innovations. Transferring knowledge quickly around the agencies across disciplines will be crucial to developing each client’s BrandPrint and applying unique strategies across clients. ) New Incentives: deploy non-monetary incentives for low level staff to reward brand specific thinking and monetary incentives for local international managers who advance projects for multinational clients. Everyday staffers will want public recognition for advancing the cause. Local managers, on the other hand, will be more focused on replacement of revenues they believe they would be earning from their local client base. Therefore, it will be necessary to offer cash or stock bonuses to them as a reward for contributing resources and ideas that advance multinational brand initiatives.
She should announce the matrix structure at the beginning of the year along with the newly appointed BSO. The staff has undergone a lot of change since the WPP merger and they need clear and concise direction. Resistance will continue from the creative staff as they may not see the benefit of top-down directives on their client-focused campaigns. This will take time to solve. Beers should set up quarterly meetings with this group in town-hall fashion within all regions to solicit feedback. The local managers may denounce the matrix structure and new incentive system as an extra layer of unnecessary management.
However, once actual managers begin cashing checks from actual incentive pay-outs due to cooperation, this issue will abate. Also, it will be imperative to post neutral people in the regional finance positions (i. e. those without loyalty either to US headquarters or to any specific world region) to ensure that revenue and cost allocation policies are seen as fair. Beers and her team should solicit employee feedback every 6 months via survey and reconvene the Doral Arrowhead executive team in the middle and end of 1994 to assess progress.
But they should be able to tell if the plan is working based on (a) if the firm is adding new clients and existing clients re-up; (b) if competitors are continuing to copy O&M’s philosophy; (c) local manager complaints dissipate; (d) regular staff begin conversing informally with the language of Brand Stewardship; and (e) if turnover is low. APPENDIX Financial Snapshot: 1991-1993 Shows Improvement in Margin International Offices Expressed as Percentages and Number of Offices * 57% + 23% = 80% of offices are majority owned Pro Forma Organizational Chart