Interpublic’s Coughlin Came Up Short

NEW YORK A month before former Pharmacia CFO Chris Coughlin joined Interpubic Group in June 2003, CEO David Bell hailed the executive as just the man to “streamline” IPG and restore the troubled holding company to health.

Too much streamlining, as it turned out.

Two weeks ago, the 51-year old Coughlin, IPG’s COO/CFO, said he would retire at the end of the year, citing the rigors of travel and a desire to spend more time with his family. Yet IPG insiders and agency executives said Coughlin came up on the short end of an internal power play that pitted him against Bell, IPG’s agency CEOs, and a board that refused to back his plan to carve up the company. “It was difficult for him to operate in a world where the pills fought back,” said one source.

Pivotal to the internal struggle were forceful complaints by operating heads, who pushed Bell to discontinue IPG’s relationship with consulting firm McKinsey & Co., which was brought on board last year by Coughlin to identify cost-cutting opportunities and gather financial data for the board, but which also advanced structural recommendations that one executive described as “naive beyond belief.”

Although sources said Coughlin managed to convince at least one board member to support him and his ideas, his lobbying ultimately failed to produce its backing for his recommendations, and plans were made for what one source described as a “frustrated” Coughlin to leave.

McKinsey’s report, said one executive, concluded that IPG was vastly inefficient in its organizational operating structure, that historic fixes were about combining weaker companies such as Lowe and Lintas, and that strong companies should be combined instead.

Coughlin supported some of McKinsey’s other recommendations, such as severing Lowe’s ties with direct response specialist Draft, a scenario that one executive said is still on the table. Another idea that arose out of the McKinsey process was to fold Lowe clients into McCann. McKinsey has yet to present its final report.

IPG’s working strategic plan for Lowe, sources said, predates McKinsey’s involvement and abandons previous ideas to turn it into a global network. Instead, the plan calls for stripping the agency down to 10 solid offices around the world and, within three years, position it as a creative resource and alternative to the mega-shops, which would put Lowe at least conceptually in the same competitive set as competitors like Publicis Groupe’s Fallon.

Meanwhile, other, sometimes fanciful notions have arisen, including the implausible idea of breaking off McCann WorldGroup from IPG, sources said.

Executives at McCann, Lowe and IPG were unavailable or declined comment. Calls to three board members were not returned and a fourth referred all questions to IPG, which declined comment.

IPG’s next scheduled board meeting is Aug. 2, the same week the holding company is expected to report its second-quarter results. By then, sources said, the company needs to reassure analysts that the post-Coughlin executive lineup, including board member Michael Roth, who was named chairman, and Robert Thompson, an ex-Pharmacia recruit of Coughlin’s who inherits the CFO title, will not be lightning rods for more controversy or sudden shifts.

The stock bounced a little when Coughlin’s plans to leave were revealed, up from $13.90 at the June 24 close to $14.05 on June 25, the day the news of his pending departure broke. IPG stock followed the general market in a downward trend last week, finishing at $13.25.

IPG needs to be quick to “manage the sensitive issue of Michael Roth’s new role,” said one insider, as some analysts have wondered what Roth’s ascension means for Bell’s leadership. “David needs to let everyone know that this is because he needs a strong financial guy at the top so he can focus on clients.”

As for Thompson, sources said there’s already concern that he might view the ad business from the viewpoint of Pharmacia.