IPG Makes Room at the Top

Interpublic Group CEO John Dooner and CFO Sean Orr survived another financial bombshell last week. But with a search for a COO under way and new presiding director Frank Borelli’s influence growing, questions are mounting about the ongoing viabil ity of the holding company’s sophomore management team.

Dooner shrugged off speculation that the decision to bring in a COO is a means to find a replacement for the CEO himself—should IPG’s fortunes not turn around. “The reality of today’s holding companies is that the scope of their needs, their requirements is very expansive,” he explained. “The idea of having help from multiple people may have seemed strange five years ago, but it doesn’t seem that way now. I look forward to it.”

IPG is moving quickly to control the damage after announcing third-quarter earnings last week. At 2 cents a share, earnings fell far short of Wall Street expectations of 8 to 10 cents a share. The company also confirmed that its previously disclosed accounting imbalance has increased by more than a half, as expected [Adweek, Nov. 11], to $181.3 million. IPG said it will delay filing its 10-Q report with the Securities and Ex change Commission until Tuesday, when it will offer investors more details about its third-quarter performance.

In a conference call with analysts last week, Dooner and Orr indicated that Tuesday may also bring a personnel announcement. Much of the IPG rumor mill continued to focus on the future of Orr and of Jim Heekin, CEO at McCann-Erickson WorldGroup, whose European operations are the source of the accounting imbalance.

Insiders said Heekin and Dooner’s relationship is strained because of McCann’s financial performance and its deteriorating ties to flagship client Coca-Cola. In addition, Hee kin and Orr are said to strongly dislike each other.

Several sources said Orr, who is said to be among the IPG executives whose severance packages were recently renegotiated, is also on the hot seat, particularly with the pending arrival of an IPG COO with a financial background.

Dooner denied that Orr’s job is on the line. “He has my support,” Dooner said. “Sean is a part of the solution. He is not part of the problem.” He also cited his belief in Heekin. Heekin was traveling overseas and was unavailable for comment.

Chief human resources officer Brian Brooks, who starts at IPG this week, will work with recruiting firm Heidrick & Struggles to fill the COO post. That job was eliminated in January 2001, after Dooner was promoted from president and COO.

“They’re looking for someone with strong administrative and financial skills,” said one source. “There’s a situation now where there’s a gap. The banks don’t buy into the team now. They need someone they respect.”

On Tuesday, IPG also hopes to announce a replacement for WorldGroup CFO Sal LaGreca, who made an abrupt exit last month in the wake of the accounting errors. The company is close to signing an undisclosed financial executive who works in the industry, sources said.

What most worries some in the analyst community is the toll taken on IPG staffers by the financial setbacks and ongoing uncertainty. “I believe new-business revenue will give them the benefit of the doubt,” said Merrill Lynch analyst Lauren Rich Fine. “One of my main concerns is morale. There are a lot of individuals going through a difficult time, and if I was at WPP or Omnicom, I’d see it as a real opportunity [to lure talent away].”