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
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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
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