Y&R: Short On Sizzle, And Losing Steam

The ad agency's clients and execs have defected. Are Ann Fudge's days numbered?

For Ann Fudge, Jaguar could have been a chance to redeem the sagging reputation of Y&R, the flagship ad agency of marketing services giant Young & Rubicam Brands. When Jaguar's $150 million global account came up for review last fall, incumbent Y&R teamed up with sister agency Red Cell, both units of WPP Group PLC, to keep the business. But Fudge, chairman and CEO of both Y&R and its parent company, skipped the all-important first meeting, which rival CEOs attended. Fudge says the top brass at Jaguar, a subsidiary of Ford Motor Co. (F ), knew she wouldn't be coming and that "it wasn't an issue." But her absence, along with with the mediocre impression left by her team, prompted the carmaker to take the agency out of the running before ultimately awarding the job to Euro RSCG Worldwide in February. "It was an unfortunate way for Y&R to behave considering we still have three other brands at the agency worth much more than Jaguar," says a top Ford executive.

The loss was another stinging defeat in what has been a rough period for the ex-Kraft Foods Inc. (KFT ) marketing star. Since taking over two years ago, Fudge has presided over a string of high-profile defections of execs and clients, including Burger King, Computer Associates (CA ) International, Sony Electronics (SNE ) -- and Kraft.

The turmoil has fueled widespread industry speculation that Fudge's days atop Y&R are numbered. In an exclusive interview with BusinessWeek, Fudge conceded that she and WPP are looking for someone to replace her as the head of the agency, though she'll remain in charge of the parent, which also includes PR agency Burson-Marsteller, branding powerhouse Landor Associates, and direct marketer Wunderman. WPP CEO Martin Sorrell says that under Fudge, "Y&R Brands is strengthening," and Fudge insists the shift was always intended. "I want to focus on the whole marketing communications company," she says. Still, two senior WPP execs see her likely exit as a prologue to her leaving altogether.

Fudge's lack of ad experience made her a controversial choice to revive Y&R when she took the job in May, 2003. Although at Kraft she rejuvenated such brands as Kool-Aid and Maxwell House, many questioned if she had the connections and feel to revive the moribund agency. Y&R insiders say she erred in focusing on productivity and "thinking like a client" rather than on the culture needed to inspire creativity. Clients say they have not been wowed by Y&R's campaigns, while the tendency to shun agencies seen to be in decline has added to Y&R's woes.

With Fudge having taken a two-year break from corporate life between Kraft and Y&R, many insiders also wondered if she had the drive to make it in the ad world. Nor have her marketing savvy and renowned people skills been enough to repair a culture ripped apart by Y&R's stormy recent past: Following a public offering in 1998 and a WPP takeover two years later, many senior execs cashed out.


While Fudge argues that the agency is already benefiting from an influx of new talent and a broader mindset that has "moved beyond the 30-second ad," it's hard to put a positive spin on her record. New accounts such as Toys 'R' Us and Weight Watchers don't make up for those lost, though WPP doesn't break out separate numbers for the group. Moreover, she has lost key talent, including recent departures like executive creative director Ann Hayden and William Eccleshare, chairman and CEO of Young & Rubicam Brands in Europe, the Middle East, and Africa. Layoffs and defections have shrunk the New York office alone more than 10%. "This kind of negative momentum is hard to reverse," says a rival agency head. Adds Y&R North America Chief Gord McLean: "There are some things we could have done better."

Fudge argues that more time is needed to fix Y&R. "I knew a turnaround would take three to five years," she says. "Business is starting to come back." Insiders can only hope that Fudge's replacement at Y&R can convince clients to stay put.

By Diane Brady, with David Kiley, in New York

— With assistance by David Kiley

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