True North Is Laid Bare in Report

CEO Search Document Details Stock, Culture, Client Woes
CHICAGO-Whoever replaces Bruce Mason as chief executive officer of True North Communications has quite a challenge ahead of him or her.
The company’s global reach is limited, its culture is splintered, growth is lagging and its subsidiaries, which include Foote, Cone & Belding and Bozell, Jacobs, Kenyon & Eckhardt, don’t get on all that well with TN’s board.
That’s the initial appraisal of the executive search firm TN’s board hired to find a new CEO for the Chicago-based holding company.
One point in the brutally honest, three-page report obtained by Adweek is that TN’s deal with BJK&E-which added Bozell Worldwide’s network to the company’s stable-has yet to gel corporately. “True North is a company with two and perhaps three different cultures,” states the document prepared by executive recruiter Heidrick & Struggles. H&S is evaluating “internal and potential external candidates” to replace Mason, according to the report.
In the section outlining desirable leadership qualities, the report states that the new CEO will “need to improve relationships with the subsidiaries and the board which (it is fair to say) are not currently as good as they should be.”
David Joys at Heidrick and Struggles is spearheading the search. An H&S executive said the document is a preliminary draft subject to internal review and there are inaccuracies that will be corrected.
A TN representative confirmed that H&S is conducting the search, but declined to comment further.
Mason, 59, announced in January he would resign at the end of March, nine months earlier than anticipated and without an anointed successor.
The resignation and the lack of an heir did little to instill confidence in TN stock, analysts said.
“The general sense is that the incumbent resigned for a reason,” Jim Dougherty, who covers the ad industry for Prudential Securities, said of such scenarios. “When there’s a plan, the other guy is there at the podium, they’re patting each other on the back.” TN president Chuck Peebler is said to be eager for the job, but is believed to be a dark horse candidate.
Because it is a public company, TN’s corporate problems and lagging stock performance are no secret. But the CEO search papers are unusually open about TN’s lack of growth, global clout and cultural cohesion.
The document says TN stock “appears to be undervalued” based on problems including “perceived issues of management succession.” The company’s stock hovered around $25 per share last week, which the search papers noted was a multiple “40 percent below its peers and 30-50 percent of its growth rates.”
The search papers do point to the upside at TN, noting that its interactive and pharmaceutical units represent 13 and 14 percent of company revenues, “making them the ‘hidden gems’ for True North” because both of those sectors are fast-growing.
That advantage, however, seems overshadowed by what the paper states is an overdependence on U.S.-generated revenues (70 percent) and overreliance on Chrysler (at Bozell) and S.C. Johnson (at FCB) “as the only two truly global clients” on TN’s roster.
That’s one item likely to change in any future version. The definition of a “global client” is fairly subjective, however, and varies from agency to agency. Some shops measure global accounts as ones they handle in 10 countries or so, while others use a benchmark of 20 or more.
Executive recruiter Bob Tesar of Tesar-Reynes in Chicago says there are advantages to being so frank.
“You need to know the lay of the land, you don’t want to sugarcoat it,” Tesar said. He added that in some ways, making clear a company’s shortcomings makes the job more attractive.
“We’re dealing with substantial egos, some of them deserved,” Tesar said of those who apply for such jobs. “It’s hard to resist the opportunity to take a company that’s stumbled a little bit and bring it up. It’s a chance to be a star.”
Others said such a frank view could scare some candidates off.
The challenges at TN are substantial, as the documents spell out to CEO hopefuls.
The successful candidate will need to “lead without alienating, provide for a cohesive corporate management team, instill confidence in the existing client base and gain the respect of the financial community.”

“The stock is undervalued based on:
* Lack of topline growth, especially organic growth.
* Lower operating margins (9% vs. 12% to 14% for the major networks).
* Perceived issues of management succession.
* Heavy dependence on Chrysler and S.C. Johnson-as the only two truly global clients.
* Least international capability.
* An expected slow-down in U.S. advertising revenues.
* Publicis’ 10% equity stake i.e. a locked asset value; if available in cash, would be worth a lot more.”
“Core competencies required in a new Chief Executive Officer.
True North is a company with two and perhaps three different cultures. A chief executive officer is [also] needed … to improve relationships with the subsidiaries and the Board which (it is fair to say) are not currently as good as they should be.”