Melanie Stern is section editor of Families in Business
The Edelman empire reaches around the world and includes clients as diverse as the pharmaceuticals giant Pfizer and the Mormon Church. Richard Edelman tells Melanie Stern about the business and why he gets a kick from challenging consumer fatigue
After keeping me waiting for a good 15 minutes, Richard Edelman (pictured with son Dan) hastily ushers me into his office. I realise quickly that the boss of this interview isn't me. There's no small talk, no pleasantries, no bull: a strong handshake and arresting smile later, the chief executive of one of the PR world's most well respected agencies hits the ground running.
He's fresh from a triumph. Edelman was behind the removal of Morgan Stanley chief executive Philip Purcell, following a pressure campaign from a group of dissident shareholders and former Morgan Stanley executives known as the Gang of Eight, who felt Purcell's backing of the 1997 Morgan Stanley/Dean Witter merger was to blame for the firm's current low share price and staff morale. The gang, including former Morgan Stanley president Robert Scott and former chairman S Parker Gilbert, hired Edelman's global head of financial communications Andy Merrill to orchestrate their efforts and provide a public figurehead. Purcell was out three months later. "All we did was give voice to those interest groups," says Richard modestly into the Dictaphone. Its technologies are not yet advanced enough to record his rather more telling cat-that-got-the-cream expression.
There's an air of confidence to Richard – not too much, not too little – that seems as much a product of Edelman's many successes as it is the driver. The agency is much lauded for its many now-touchstone campaigns (having put Kentucky Fried Chicken on the map with its once-ubiquitous Colonel Saunders icon and its 'finger-lickin' good' slogan) for a swathe of corporations, and represents likes of Starbucks, GlaxoSmithKline, Johnson & Johnson, Microsoft, as well as some more unusual clients, like the Mormon Church. Even though PR has morphed beyond recognition from a novelty concept to an aggressive multi-billion dollar industry in the agency's 51 years, this remains a successful maxim for Edelman, currently ranked above rival PR agencies like WPP, Ogilvy and Golin/Harris. Remaining majority owned by the Edelman family, the company doesn't publish its financial performance, but says that in fiscal 2005 it raked in $239 million in fees. Though that figure is minnow-like compared with the numbers its non-family rivals put out, Edelman's rate of growth and number of high-calibre clients puts them on par.
As with many other successful family businesses, Richard believes family control of the agency – father and founder Dan is chairman – gives it the competitive edge in a fast-moving industry. "We have very short decision times. My father and I have a chat, and if we both like an idea, we do it," he tells Families In Business. "It's just the two of us calling the shots." Strong-co-leadership aside, though, Edelman "has long been regarded a difficult place to work", says the Holmes Report. Richard concedes – with a hint of sensitivity – and says the firm has made a concerted effort to address this. "We can and do make investments in our people, and third I think we are very considerate – one of our guys wanted to go and work on the John Kerry presidential campaign for six months, so we said, go and do it, win or lose. Another staffer of ours wanted to take a long sabbatical – she had been with us for 30 years, so I said, go," Richard reveals. "She deserved it."
Suggestions that Edelman employees have in the past felt they were denied full ownership of the successes they pulled in for the agency – a sentiment allegedly widespread enough to prompt staff turnover levels higher than its rivals in the heady dot-com days, when agency bed-hopping was rife – have been attributed to the domination of family ownership and leadership. This was addressed a few years ago when Richard gave 20% of company stock away to his top officers, most of who, like US head of operations Pam Talbot, have been with them for the thick end of three decades. Whatever the talk was of their personnel issues, there is much evidence that the PR industry's power-brokers like the place, with a few Edelman alumni returning to the fold after years away; in April, the company welcomed back Michel Ogrizek, the World Economic Forum's managing board director and Edelman's European president in the mid-90s, as one of its three vice-chairman. "In the late 1990's, as per many PR firms, we had a high turnover of clients and staff because it was the rock 'n' roll dot-com era, and companies were being formed all over the place. Our people were being poached like crazy by rival agencies or even clients," says Richard. "It was an insane time. Agencies were growing 15-20% every year at that point. Now we're more used to 5, 6, 7, 8, 9% growth every year. But of our top 20 clients, we've had them for years. And most of our senior people have been with us for yonks. So I think the perception that we have an issue with turnover of staff and clients is a late 90s perception – and it was a phenomenon that we and the other guys out there had to keep up with."
Edelman seems to boast an uncontrived and successful gender balance, with many of its longest-serving staffers being women in pivotal roles. US operations head Talbot marshals business that is responsible for some 67% of Edelman's global revenues, and personally manages some of the firm's most prestigious client relationships, including those with companies like Kraft.
Still, some leading industry observers think Edelman has missed recent commercial opportunities. When integrated pitching (competing with titanic one-stop-shop agencies by teaming up with rivals to pitch clients with a package of services, including PR, advertising and market research) became popular, some say there were big pitches Edelman weren't in on that they should have been.
Many have said the firm should have a large, global sister agency to compete with the one-stop shop approach of its biggest rivals. To the contrary, Richard steadfastly disagrees; to him, Edelman's perceived weakness is its USP. He points to Edelman's smaller research-led agency, Zeno. "Zeno is a $19 million company, which is a nice size, and we have plans to take it international," says Richard. "Fair enough, those clients who want a one-stop shop solution may not pick us. They might go to Interpublic or WPP.
Integrated pitches may well work out cheaper for a client, but what really happens in those things is that the PR agency dominates and becomes the tail on the doggy. We think clients should pick the best in class in PR first, and the best in class in advertising second; integrated pitching doesn't allow that flexibility. I think PRs should fight for their position." Never has this rung more true of Edelman's market than today, with a clutch of dominant agencies jostling for the affections of the world's big spending (but return on investment-driven) corporate powerhouses – and the glory of pioneering a sexy brand.
But the task of selling these brands in the 21st century isn't a particularly enviable challenge. While consumers today have more disposable cash, buy more junk they don't really need, and are more easily sucked into various trends than ever before, they've never been more informed, interested and influenced by what lies beneath a product or corporation. Agencies have had to change tack to remain influential among today's over-preached public, who, having discovered that commerce seems collectively culpable for the decay of the planet and humankind, have very low trust in corporations – especially American ones. "It isn't like the old days when you just said, 'here's the product, here's the advert,' and people bought it," says Richard. "It's a different scene today, in which people do not trust established organisations. They seek out information on the internet for themselves, and they don't want to be sold to – they want a relationship and dialogue with companies instead."
Edelman is one of the front-runners in the belief that grass-roots culture – consumers trusting the opinions of other consumers and 'people like me', often through internet blogs, rather than any official voice, sophisticated advertising, or the supposedly independent stance of the media – is what leads spending today and in the future.
Richard's keen sense of where his market is moving has paid dividends for his company, particularly at the turn of the millennium when advertising took a critical hit. The agency rode out four years without making much margin, but it kept its tariffs static and held onto its best people; it avoided a few rounds of market consolidation.
Edelman's reputation for being ahead of sentiment curve is an achievement Richard claims as one of his best since taking over from dad, whose reputation and memorable campaigns (his 1952 'which twin has the Toni' media tour, in which he was charged with erasing the effects of a smear campaign to undermine Toni permanent wave home perm kits, and did so by taking six pairs of identical twins on a tour of supermarkets and salons across 36 US states, coined the now infamous catchphrase) made for a tough succession benchmark.
Under Richard's leadership, Edelman has expanded its global network to Asia and focused on winning contracts to represent domestic clients in their other markets, instead of opting for a local agency. United Parcel Service, Unilever, AstraZeneca, Pfizer and Microsoft are a few of the agency's global brands. "My dad had a lot to do with establishing that framework, but I made it happen," Richard says. Ex-journalist Dan – who founded the agency in 1952 when he was given the Toni Company account after securing a cross-promotional radio deal with them and his brother-in-law's record company – is the archetypal founder.
Richard is also an archetypal successor, clearly eager to live up to and exceed his dad's distinctions, with ambition in his belly, and his own style of management. A consequence of being similar in some ways and opposites in others, the pair have locked horns at times. "Put it this way," Richard concedes. "It's a good thing that he lives in Chicago and I live in New York. You've got two fierce entrepreneurs with two different styles running the company. He's a details-oriented guy and wants to know everything everybody's doing – I just want to know what the strategy is and then leave it to our people to execute. So long as there are results, I don't need to test and check what they're up to every day. My dad likes being at his desk all day, doing his thing; but I can't stand that. I prefer to be running around, having actual contact with people, knowing their personalities."
The handover was textbook, as Richard thinks he didn't get a true crack at the role until crunch time. "In 2001 (five years after the succession), all of a sudden tough decisions like redundancies had to be taken, and I just got on with it, That was the real point at which the transition had happened; I had a good CFO in place by then and dad was comfortable with my taking control. I do have to tell him what I'm up to, though fundamentally we share the same goals for the company, and these days he basically lets me get on with it. But we still have 'episodes', shall we say, like any family business. It took a few years for the training wheels to come off."
As a family business, the Edelmans manage the company with a long-term view and are subsequently risk-sensitive – though not averse. In the same week as our meeting, French family-owned agency Havas' chairman Alain de Pouzilhac resigned following pressure from non-family shareholder Vincent Bollore. Industry insiders always thought Edelman a ripe target for acquisition by Havas. Have the tables turned? "We don't want to buy an ad agency – we want to continue to grow geographically and grow what we do in specific markets," Richard reveals. "Our classic model is to enter a market starting out in marketing and PR for the healthcare, tech, and consumer products. Then we migrate onto the corporate side with financial PR and communications, and then we take on the research, CSR consulting – that's how we grow and we have been systematic about that. The US, particularly in Chicago and NYC are built out, as is London, but in, say, Paris, we just operate as a public affairs handler. In other places we offer just financial PR, or crisis management."
Richard believes the agency has hit its stride and can look forward confidently to a fruitful 2006, without having to make too many strategic adjustments. "If there are opportunities to make acquisitions our ears are open. But we are singles hitters rather than the types that gamble on a home run," he says. "The long kick we don't do; it's short passes. We've been doing this 53 years and I don't envisage changing that."