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AGENCY REPORT CARDS 2001
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From The Editor
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The numbers tell the story.
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Amid the reams of financial data we gathered for this latest installment of our annual Report Cards issue, one figure in particular stands out. The average revenue growth in 2001 for the 33 nationally ranked agencies: down 3.5 percent. That compares with a 12 percent gain in 2000. If we needed another indication of how bleak things were in 2001, there it was in black and white.
Good thing we grade on a curve. In evaluating financial performance - a key ingredient of the overall grade - we first look at pure revenue growth. A few agencies managed strong growth in 2001 in spite of economic conditions, but that was far from the norm. Since a 3.5 percent drop was the average, agencies that held steady with flat revenue generally earned a B- for numbers. We also pay attention to agency size; obviously, a big percentage gain from a tiny shop is less impressive than a decent gain by a large organization.
But we look at more than growth. To get some sense of profitability, we also factor in the revenue-to-staff ratio - crediting shops that tallied more revenue per employee. It was clear that some agencies moved quickly with layoffs last year to keep costs in line. Others didn't, and it shows.
Financially, we grade the 33 national shops against each other. Likewise, we rank the regional agencies against the competitors in their market and then against all 60 regional shops. Combined, the regional agencies actually fared better financially than the nationals, posting an average 2 percent revenue gain for 2001. The geographical breakdown: East was down 1 percent; New England up 7 percent; Midwest down 1 percent; Southeast up 4 percent; Southwest up 5 percent; and West was flat.
Financial performance is just one of three key elements. We also consider creative work and management savvy. Within those categories are a slew of variables. For example, in the management section we consider such things as client-retention issues and win/loss pitch ratios, and may even give points for initiatives that have not yet borne fruit but appear promising or bold.
We look forward to your comments.
- Alison Fahey
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HOW THE GRADES ARE DETERMINED
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NUMBERS
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Grade
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2001 revenue figures were supplied by the agencies. Where they did not provide a figure, we estimated revenue at a conservative ratio of 10 percent of billings. Some results were restated to reflect acquisitions or spin-offs so that year-on-year operating comparisons could be made. Staff counts are as of year-end 2001. The grade is based on several criteria: year-to-year revenue growth; revenue per employee; and client-retention rate, among others. We derive a composite rank that places the most emphasis on revenue growth, followed by revenue-to-staff figures, etc. Letter grades correspond to the composite ranks.
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CREATIVE
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Grade
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Consideration is given to creative quality, range of products worked on, clarity of message, production values and consistency of execution. Each shop submitted seven TV spots and seven print ads for judging.
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MANAGEMENT
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Grade
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Grades reflect how well agency executives handled client and management issues, agency developments, finances, mergers and acquisitions, and other strategic matters.
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REGIONAL HIGHLIGHTS
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For national agencies, we break out significant activity in regional offices.
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COMMENTS
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Grade
The average of numbers, creative and management. |
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