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Holding Co. Teams: Promise or Peril?

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NEW YORK Pitches led by holding companies are giving birth to a new breed of agency—one that combines the resources of multiple shops and disciplines and is supposed to be more integrated and responsive to client needs, since it is dedicated solely to one account.

But in reality, these "mini agencies," where talent from many shops, in one case close to 20, are forced to work together, may end up giving clients less, not more, sources said.

The holding companies promise all-star teams, but in practice, the top creative talent at an agency, for instance, can't devote their time solely to one client at the expense of all the others, even for big spenders such as Samsung, HSBC or Bank of America. At times, team leaders must reach beyond the core group, and that can raise questions about potential conflicts.

Furthermore, the logistics of running these hybrid groups are proving challenging, to say the least. And, more importantly, this omnibus approach, some say, is damaging individual agencies by devaluing their importance and diluting their identity.

From the parent company's perspective, the approach is all about leveraging resources to meet the needs of mega-clients. And clients see advantages beyond just cost efficiencies.

To understand the complexities, consider this: Some 16 Interpublic Group agencies handle parts of Bank of America's $600 million business (that marriage, now two years old, is the longest running of the bunch). About 18 WPP Group shops work on HSBC. And Samsung, which last week awarded an estimated $250 million global assignment to WPP, will at minimum have access to six shops within the U.K. parent company.

The HSBC count doesn't include resources pulled together on the fly to tackle knotty problems in different parts of the world. As of last week, five "virtual teams" of WPP execs from different disciplines were working on projects in the U.S., Canada and the U.K., said WPP global brand leader Toby Hoare. HSBC needs "talent in multi-disciplines in a lot of different geographies, and they need it now, in a seamless and integrated way," he explained.

So far, HSBC seems satisfied with the responsiveness and access to resources. Six months in, the client and WPP Group's Team HSBC are still evolving their approach to problem solving on the massive $600 million global marketing account.

"It's going very well, although what we're finding out is, obviously, to really exploit this kind of relationship takes a long time," said Peter Stringham, group general manager of marketing at HSBC in London. "We're just beginning to discover some of the ways we can use the resources."

Stringham has daily access to Hoare and monthly contact with Bob Jeffrey, CEO of lead agency J. Walter Thompson, and WPP CEO Martin Sorrell. "Toby is absolutely, undoubtedly the leader," said Stringham. (Hoare calls himself "the gatekeeper of all the different companies.") Nevertheless, "Martin stays involved," Stringham added. "I still talk with him, every month or so. He just checks in to keep an eye on it. I really didn't expect that."

Sources expect a similar dynamic to develop between WPP and Samsung. The business will be led on the account side by JWT London CEO Simon Bolton and creatively by Andy Berlin, chairman of Berlin Cameron/ Red Cell in New York.

Managing an account like HSBC is a full-time job and akin to running an agency, Hoare said. Not every problem can be solved over the phone, which means the London-based chief has traveled a lot to Asia, South America and the U.S. Still, he and Stringham appear to have developed a strong rapport, speaking to each other and exchanging e-mails many times a day.

As for BofA and IPG, the main contact is between client CMO Catherine Bessant and Bruce Nelson, evp and chief marketing officer at IPG. Neither was available for comment late last week, but sources said the two speak nearly every day on almost every conceivable issue related to the bank's marketing. Nelson, who previously worked on both the creative and account sides, also is omnipresent at client events, including golf tournaments and last month's unveiling of the "Democracy Plaza" exhibit in New York, celebrating American ideals. (It served as the backdrop for NBC's and CNBC's election night coverage.)

From a mega-client's perspective, having the ear of a holding company boss and a single point person dedicated to dealing with service issues is clearly attractive. "It gives the client greater control—as they say—one throat to choke," said Dick Roth of New York search consultancy Roth Associates.

But with so many moving parts, these marriages can be complicated and cumbersome to manage, said consultants and agency executives. "These clients have to think, 'How on earth am I going to get different parts of a company to work together?' That's the No. 1 fear," said David Beals of Chicago search consultancy Jones Lundin Beals.

Having competing, albeit related, agencies work together on a particular brand can prove problematic, conceding to manage everything from turf battles to reporting lines to multiple personalities. "So I have a creative director who reports to some guy at another agency only when he's working on a particular account that we share? I don't think so," said an agency executive.

Said another: "If you really look hard at this, this is continuing the degradation of agencies, with the clients asserting their own self-worth and saying they are the star.... They are basically saying, "We do not trust the business model you've built and we will define how we want it done."

And not all holding companies embrace this approach either. Omnicom CEO John Wren is known to consider the strategy wrongheaded, telling colleagues it is inappropriate to turn a holding company into a marketing company. Omnicom passed on Samsung in large part due to the client's desire for a holding company approach.

Said one executive: "We are in the business of brand building, and this approach devalues and dilutes individual agencies."

The next test case will be Intel, which initially distributed RFPs to major holding companies but may be open to agency contenders. It is believed that Omnicom, for one, will put forth one agency network to lead the charge.

—with Trevor Jensen