2002 Agency Report Cards

Click here for the 2002 Agency Report Cards

From the Editor

Who would have guessed that the collapse of Enron would impact our annual Report Card issue?

When the federal government instituted legislation in December that established new financial-disclosure guidelines to crack down on corporate crimes, the industry we cover took note. Citing the Sarbanes-Oxley Act of 2002, the publicly traded holding companies decided to withhold the financial information they typically provide. In a memo to its agencies, dated March 3, 2003, IPG wrote: “Release of this type of information might be inconsistent with or not easily reconciled to Interpublic’s publicly reported figures, which in turn, could result in unintended investor confusion.”

Thankfully for us, many agencies had already submitted the data we use to determine the financial grades in this issue. In the cases where they hadn’t, we did what we do on a daily basis: We found sources who would tell us what we needed to know.

So we continued to run the numbers as we have in the past. We start with year-to-year revenue growth as the key element. Then we factor in the revenue-to-staff ratio, which gives a sense of agency profitability. This year, in the few cases where we felt we didn’t have as much information as we would like, we gave the agency the benefit of the doubt. When all was said and done, the average revenue growth for the 33 nationally ranked agencies came out to 1.6 percent – meaning shops that were flat last year (and there were many) would fall in the C range. (The national average last year was a 3.5 percent decline; the shops that held steady earned a B-.)

For the second consecutive year, the regional agencies fared better than the national ones, posting an average 5 percent revenue gain. The regional breakdown: The Eastern region was up 7 percent; the Midwest up 2 percent; New England up 12 percent; the Southeast up 4 percent; the Southwest up 7 percent; and the Western region grew 4 percent. We judge the regional agencies against their peers in their market and then against the pool of all 60 regional shops. To determine overall grades, we also evaluate creative work, with various criteria such as degree of category difficulty. For management grades, we weigh such factors as strategic and cost-cutting initiatives, client retention, hiring and firing activity, and win/loss ratios.

Now you can come out from under your spreadsheets, at least until next year.

Click here for the 2002 Agency Report Cards