Eighteen months ago, Ogilvy Government Relations was a $20 million enterprise, the sixth highest-grossing firm on K Street that, because of its relatively small size, was also raking in more revenue per lobbyist than almost any other shop.
But within a matter of days last June, the firm lost its biggest rainmaker, Chairman Wayne Berman — the contact point for the firm’s largest client, Blackstone — as well as its chief executive, Drew Maloney.
The departures came shortly after the firm was fired by its third largest client, Chevron, after a now former employee of Ogilvy Public Relations — a separate business with whom Ogilvy Government Relations shares a name and corporate owner — spoke before an environmental nonprofit that supports plaintiffs in a multibillion dollar lawsuit against Chevron over alleged pollution in the Ecuadorian rainforest. Chevron deemed the affiliation a conflict of interest and terminated contracts with both Ogilvy PR and Ogilvy GR, a Chevron spokesperson confirmed.
A domino effect followed at Ogilvy GR, with several other lobbyists scattering to other firms or opening up their own shop. In June and July, Ogilvy ended its relationship with at least seven corporate clients – including Goldman Sachs Group, Hilton Worldwide and CIT Group – whose contacts at the firm were lobbyists who left for other jobs, according to reports filed with the Senate. By August, the firm had been whittled down from 17 lobbyists to five: Gordon Taylor, Chris Giblin, Dean Aguillen, Moses Mercado and Tony Bullock.
Now, the remaining members of Ogilvy — plus the three they’ve hired since last summer’s rapid unraveling — are looking to rebuild, knowing the business will look very different than it did before. They’re working with a smaller budget and revenue expectations, transitioning to a flatter management structure and partnering with a boutique tax lobbying firm, GDS Strategies, to replace the tax expertise they lost when some of their former colleagues departed.
The firm has signed eight clients since January and re-signed 80 percent of the clients they had last year, said Giblin, the firm’s chief executive. Ogilvy’s revenue for the first quarter of 2013 was $1.5 million, putting it on track to earn about $6 million this year — less than a third of what it was making in 2011.
“We’re not going to go back to being a $19 million firm by the end of this year because the price of doing that is not what we’re looking for,” said Taylor, the firm’s president. “We’re interested in being a profitable business and one where we don’t abandon the culture of what we like about the business.”
They’ve eliminated a level of senior vice presidents in favor of a more partnership-like structure, which Taylor says helps with recruiting.
“A more vertical management structure creates the question from people you look to bring in, ‘Do I fit in above you or below you?’” Taylor said. “We wanted to operate our business from a management perspective more like we operate from a client service perspective. We all work on all clients together. We have no silos. It reflects the culture and values we want to build out.”
In September, the firm began adding back manpower. It hired Dee Buchanan, former House Republican Conference chief of staff, and Con Lass, a former lobbyist for the American Petroleum Institute. Bill O’Neill, a former adviser to House Republicans on telecommunications and technology issues, joined soon after. The firm is now seeking to bring in lobbyists with Senate experience on both the Republican and Democratic side, Taylor said.
Ogilvy has seen its fair share of change in the past, morphing through several iterations over the past decade. The firm’s predecessor, GOP shop Federalist Group, was founded in 1999 and bought by London-based advertising giant WPP Group in 2005. The firm then took on the Ogilvy Government Relations moniker, went bipartisan and grew to its peak size of 19 lobbyists. In 2010, after the five-year buyout period, two of the original partners of the Federalist Group, Stewart Hall and John Green, left to form the Republican lobby firm Crossroads Strategies. Several others left at that time, and Ogilvy went from 19 to 12 lobbyists overnight, Giblin said. Before the spate of departures last year, Maloney and Berman were the last two Federalist Group partners still at Ogilvy. At its smallest point last summer, the firm’s composition was four Democrats and one Republican — a near-180 degree switch from the partisan tilt the Federalist Group started with.
The magnitude of last summer’s losses, though, presented a challenge the firm had not seen before. While Maloney’s departure to the Romney campaign was not a surprise — Maloney had been moving toward it since he worked on Romney’s 2008 campaign, Taylor said — Berman’s exit was. When Berman left to go in-house at Blackstone, he took with him the firm’s signature client that paid between $3 million and $5 million a year. Losing Chevron’s $600,000-a-year business was another major blow. In 2011, the last year both Blackstone and Chevron were Ogilvy clients the entire duration of the year, they accounted for 29 percent of the firm’s revenue, according to public filings analyzed by the Center for Responsive Politics.
Losing Chevron was also a symbolic hit, according to some former Ogilvy employees. Some said they felt WPP was dismissive about the incident and didn’t appreciate the importance of client relations in the lobbying business. For them, it was an eye opener about the concerns that come with being owned by a company whose top executives are far removed from Washington.
At Ogilvy and other WPP-owned lobby shops, lobbyists are salaried employees who are eligible for bonuses. They do not have an equity stake, and a percentage of the firm’s profits go to WPP. Many lobbyists acknowledge the difficulty of attracting top rainmakers to corporate-owned firms because they often want equity ownership, and don’t like having to contribute a percentage of revenue to the parent company.
But Taylor and Giblin said had it not been for WPP’s support, they’re not sure Ogilvy Government Relations would have survived. When WPP chief executive Sir Martin Sorrell was in town last summer, he reassured them Ogilvy would have the parent company’s backing.
“WPP worked with us on our revised budget projections, on every idea we had on how we’d rebuild and what our needs were going forward in order to attract and retain talent,” Taylor said. “If that wasn’t the case, I’m not sure we’d be here. While the instability was going on, one of the easier options would’ve been to rebrand with a new name and discharge any negative association created with [the old] name. But we’re proud of what the brand is. Had we been independent, I’m not sure you would’ve had as much invested in that brand to defend it and restore it as we did.”
In an interview, Sorrell said it was “never a question” whether WPP would keep the Ogilvy GR brand alive.
“All services firms go through challenges,” Sorrell said. “It was a challenge with the change in leadership. It was a question of replacing Wayne Berman in the most effective way. It was a question of rebuilding and they’ve done that successfully last year and continue to do it this year.”