Charlotte Beers at Ogilvy and Mather

BACKGROUND

Charlotte Beers became Ogilvy & Mather's first outsider CEO after its acquisition by WPP Group Plc in 1991. According to her memo dated May 19th, Beers' objective was to "re-invent" the mega-agency, whose inertia and complacency had eroded its competitiveness since the 1980s. In fact, Beer’s tenure at Ogilvy constituted a re-creation of the agency, redefining its aims, processes, people, and structure in reaction to the demands placed by the changing advertising industry.

ANALYSIS

The main issue that confronted Beers was initiating and instituting organizational change at the core level. She assumed the leadership of Ogilvy at a time when the organization was internally bleeding. Charismatic founder David Ogilvy’s resignation as CEO in 1975 had created a leadership vacuum which none of the succeeding leaders had been able to fill. In addition, the economic boom of the 80s had created a false sense of security that rendered the firm stagnant, unable to either anticipate or react to the changes taking place in the advertising industry. Most significantly, the absence of a strong leader caused the organization to devolve from “One Agency Indivisible” into individually ruled “fiefdoms.” The firm’s deficiencies came to the fore in 1989-91 when it lost more than $100M of advertising accounts from major firms that had grown tired of the highly politicized organizational environment at Ogilvy.

NEED FOR CHANGE

Since Ogilvy's vision at the time was constrained to “just keep doing the same thing, better," the firm’s re-creation was necessitated by external factors & events. For example, the central office had been unwilling to rein in its autonomous local offices' spending after the 1987 stock market crash even as it spent significantly towards centralization, resulting in high costs that precluded the firm from competing in a low-cost industry. Furthermore, Ogilvy's chronic failure to institute systems for managing collaboration across regions contributed to a general "lack of financial discipline, lack of focus on cost, and lack of structured decision making" that had cumulative negative effects on the company. As a result, Ogilvy's competitive advantage as "the most local of the internationals, the most international of the locals" was undermined by competitors' consistently lower costs.

Compounding Ogilvy's problems was the perception that media advertising was a mere commodity, leading bargain-hunting clients fled to new, lower-cost "boutique" creative shops. Ultimately, despite its consistent "15% up" market performance, and the success of the independent subsidiary Ogilvy Direct, Ogilvy lost over $100 million in advertising contracts from longtime clients including Unilever, Shell, Seagram's, Nutrasweet, Campbell, Roy Rogers and American Express. Its net income actually decreased by 2.8% in 1991.

Clearly, "beleaguered" Ogilvy’s new CEO needed to prevent further decline by instituting changes that were long overdue:

1. Redefine the corporate vision based on Brand Stewardship;

2. Modify the organizational structure to facilitate collaboration among the company’s various regional and local offices and central office; and

3. Resolve the centralization vs. localization issue more definitively, in terms of authority and compensation.

OBSTACLES TO CHANGE

Beers face two primary obstacles to her change initiatives. First, she was the first Ogilvy CEO not to have risen from within the company ranks. As an outsider, Beers did not have the benefit of previous alliances and coalitions at her disposal: she had to build her team from scratch. Further, she had to get everyone on the same page regarding the need for change, what particular changes were necessary, which of these changes should be prioritized, and how the changes would be implemented. Second, the changes she needed to implement involved an overhaul of the core values, structures, processes and very culture that had become ingrained into the organization’s being. Naturally, any attempt to change the status quo, especially of the nature and magnitude as drastic as Beers’ initiatives, would arouse strong resistance throughout the organization’s ranks.

HOW CHARLOTTE BEERS’ LEADERSHIP CREATED STRATEGIC CHANGE

Ogilvy’s insiders quickly perceived a “presence” and “ability to inspire” in Beers that they had not found in the firm's four previous CEOs.