Troubled Times at McCann

Even if McCann Erickson’s loss of Verizon Wireless last week was not ultimately preventable, sources said it was foreseeable, given the encroachment of fellow roster shop mcgarrybowen, which thrives at turning client assignments into bigger relationships. But perhaps more troublesome for McCann is that the loss fits a larger pattern of erosion among major clients at the Interpublic Group shop.

In the past four years, Microsoft, Intel, Johnson & Johnson and Unilever have stripped the agency of significant business, with McCann losing lead creative agency status on both Microsoft and Intel, and becoming a lesser player on the rosters of J&J and Unilever. In addition, the shop lost international duties on UPS and now finds itself under pressure on global client L’Oreal, prompting new worldwide CEO Nick Brien to meet with client executives in Paris even before taking office this month, said sources. A McCann representative had no comment, and a L’Oreal rep said, “We have had a long relationship with McCann and it remains strong today.”

Sources attributed the souring of once-solid relationships to a combination of factors, including client dissatisfaction with the caliber and range of the agency’s work, the shop’s failure to recognize and respond to signs of client problems, and hubris — some called it arrogance — among top managers.

So, less than two weeks into his new job as CEO of the agency — as well as the larger McCann Worldgroup — Brien has a full plate as he sizes up top execs and assesses the health of all client relationships. And because Worldgroup supplies about $1.8 billion of IPG’s $6.03 billion in worldwide revenue, righting McCann is a top priority at the holding company.

“He’s going to have to shake that agency up,” said a source. Said another: “McCann desperately needs to be overhauled … particularly in the U.S. and clearly Dooner wasn’t going to do it.”

In January, IPG named Brien, then CEO of its Mediabrands unit, to succeed John Dooner, a 26-year veteran of McCann who had two tours as CEO. The second began in 2003, after David Bell replaced him as CEO of IPG-a role that Dooner held for just 26 months.

Historically, McCann has had a macho, clubby culture that groomed promising executives to assume progressively bigger roles. Top execs tended to stay in hopes of rising up the ranks as Dooner did, and perhaps one day getting a shot at the top job.

The notion of an insider taking the reins was shattered with the appointment of Brien, a Briton who joined IPG in 2005 as president and CEO of Universal McCann. In a February call with analysts, IPG CEO Michael Roth cited Brien’s “multi-disciplinary experience” and “culture of collaboration.” Last week, Roth declined to comment on the client erosion trend at McCann, and Brien and Dooner did not respond to interview requests.

McCann, like many big global networks, is trying and, at times, failing, to keep pace with changes brought on by the digital age. That perception led clients like Intel and Microsoft to conclude that they weren’t getting leading-edge creative ideas, prompting them to hire other agencies, according to sources.

“Everybody is looking for great creative. But [that] might be the best social [media] idea,” said a source. “It’s not executional. It’s more how you communicate in various channels.”

With Microsoft, the shop had four opportunities to add or keep business in a series of pitches in 2008 and 2009, but won just one, for the launch of a new mobile device, via its T.A.G. unit in San Francisco. Oddly, said a source, amid all the pitching, McCann’s San Francisco office, which had been the lead agency for Microsoft’s global efforts, “continued to treat it as business as usual.”

(In July 2009, the San Francisco office added former TBWA regional leader Robert LePlae as N.A. president. Since then, the shop has recruited talent and won accounts such as LifeLock, which last year spent about $50 million in major media, according to Nielsen.)

Sources also noticed an overabundance of confidence concerning the Verizon account at McCann New York, despite mcgarrybowen’s arrival on the roster in August 2009. At the time, mcgarrybowen had landed a key assignment: creative duties on the launch of a new Google system-powered phone that became Droid. Yet when McCann New York president Lori Senecal abruptly resigned that month to become CEO of Kirshenbaum Bond + Partners, Dooner made Verizon account leader Thom Gruhler New York president, thereby dividing Gruhler’s attention, said sources.

Based in part on positive results from the Droid launch, Verizon Wireless CMO John Stratton subsequently shifted to a “jump-ball” system under which the client considered ideas from both McCann and mcgarrybowen on assignments, eliminating any lines of demarcation between the shops, sources said.

Even with the newfound competition, as recently as three weeks ago some McCann execs thought they had turned the corner with the office’s top client, said sources. The wireless business supplied an estimated $25 million in revenue, or roughly 14 percent of the office’s total revenue of about $180 million last year, according to sources. A Verizon rep confirmed the shift, but declined to comment further.

McCann is now defending its last piece of Verizon: creative duties on the non-wireless communications business, including FiOS TV. Sister shop The Martin Agency in Richmond, Va., and the New York office of mcgarrybowen are said to be among the other contenders in the review, which is at an early stage. Revenue on that account is estimated at $15 million.

McCann may not retain the remaining business, but with a new CEO on board, sources anticipate a concerted effort. It’s an early test for Brien that, if nothing else, will help him gauge the talent of his shop.