Inside Hill + Knowlton's struggle to turn around the fading PR giant and a look at its strategy

• Hill + Knowlton is trying to rebuild its business after a series of losses over the past decade.
• The WPP-owned public relations agency has been changing how it charges clients, investing in creative and digital work, and shaking up its leadership.
• It folded one of its best-known subsidiaries, Blanc & Otus.
• But morale problems and internal divisions linger at Hill + Knowlton after a decade of restructurings and shifting strategy.
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Hill + Knowlton Strategies seemed poised for a comeback in the US, winning more than 70% of all of its business pitches for the past year.
Then employees were hit with the news in mid-May that the WPP-owned public relations firm would lay off a small percentage of staff in response to the coronavirus pandemic's impact, following similar moves by PR firms like Weber Shandwick and ad giants like Publicis.
Founded in 1927, Hill + Knowlton used to be considered a global PR juggernaut. But it's lost big accounts and shed headcount over the past decade, including about half of its staff in the New York and Washington, D.C., offices. It was on a path to turn around its US business by restructuring its operations, cutting billing rates, changing how it pitches, and spending in areas like creative, behavioral science, and data analytics when the pandemic struck.
Business Insider spoke to 10 former Hill + Knowlton employees of varying seniority and former clients who said constant restructurings and leadership changes precipitated the agency's decade-long slide.
Hill + Knowlton's global chair and CEO AnnaMaria DeSalva, global president Richard Millar, and Sam Lythgoe, global chief business development officer, also spoke with Business Insider about how they're trying to revive the business.

Leaked documents show the agency cut its 2020 billing rates

Hill + Knowlton's turnaround efforts started back in April 2019, when DeSalva was named global CEO and Millar got oversight over the US a few months later.
In September 2019, Hill + Knowlton gathered its highest-ranking executives for a summit in New York City to lay out a plan to turnaround the fading PR giant, according to two attendees.
The plan called for Hill + Knowlton to focus on winning healthcare, technology, and energy clients, which includes industrials. The agency also was going to spend more on digital planning, crisis strategy, behavioral science, data analytics, and creative.
Along with laying out the plan, Hill + Knowlton execs introduced a new title structure, with eight levels of seniority replacing five, and cut its 2020 billing rates, according to leaked documents from the meeting.
For example, Hill + Knowlton managing directors used to charge $500 per hour. After the restructuring, managing directors became EVPs or SVPs. Now, EVPs' standard rate is $450 per hour and SVPs' is $375 per hour.
Millar told Business Insider the point of the additional three layers was to give the agency more flexibility in how it charges clients.
Millar also said he relaxed most staffers' billing targets. Former employees said those targets were unrealistic, making it hard to win new accounts. Millar said he had "no evidence to suggest that price was a barrier for conversion," though.
Reactions to the summit were mixed. One attendee said it showed Millar had discipline, but also called the message "threatening," summing it up this way: "You're either in or you're in the way. You have to take the initiative to retool yourself and make yourself viable for the account."

Hill + Knowlton folded Blanc & Otus into its technology practice

In one of the most immediate moves following the summit, Hill + Knowlton folded its tech subsidiary Blanc & Otus into its technology practice.
Blanc & Otus was one of the firm's best-known units and it billed itself as one of the industry's best tech communications firms, but it had bled lucrative business over the years. Blanc & Otus lost half of its Oracle account and its entire VMWare account, which collectively were worth millions, said two people familiar with the matter.
Blanc & Otus also lost people when its own clients poached key staffers, according to two sources familiar with the matter. The agency couldn't fill the vacancies when it re-pitched for the Oracle business and had to rely on staff from offices outside Silicon Valley when it re-pitched for VMWare. But Blanc & Otus was unable to field an effective team.
"Geographical proximity to corporate headquarters is critical," said a source familiar with the review process. "When you do product-oriented PR and engage with the community, building respect with executives in the Bay Area is material."
Millar wouldn't comment on Blanc & Otus' loss of business, saying he folded the firm to simplify Hill + Knowlton's technology practice.
With the new streamlined approach, Hill + Knowlton has picked up some new accounts. Under US technology lead John Derryberry, the agency has won Alteryx, OpenText, and Ring Central, according to Hill + Knowlton.

Hill + Knowlton is pushing hard into creative and digital

Today, Hill + Knowlton is looking to creative and digital to grow its US business.
In London, Millar rolled out an initiative call The Studio to produce brand content and digital work for clients. The initiative is credited with fueling the firm's profitability in Europe, and Millar is trying to replicate that success by launching nine more studios worldwide, including the US, each office having its own specialty.
The idea is to provide services beyond the traditional PR playbook of media relations and reputation management. Competitors like BCW Global, Weber Shandwick, FleishmanHillard, and Edelman have launched similar initiatives.

Hill + Knowlton has had some recent wins

The agency was winning more than 70% of its pitches in the past year, up from around 65% in previous years, when the coronavirus struck, said Sam Lythgoe, global chief business development officer at Hill + Knowlton.
It had added accounts like Cotton Council International and DS Smith, and leaked documents show Hill + Knowlton "increased [its] performance margins and beat revenue forecasts" for 2019. Millar declined to break out revenue projections for the US for 2020.

Morale problems still linger at the firm

Like other PR firms, Hill + Knowlton's work in crisis and public affairs softened the pandemic's economic impact.
But morale problems and divisions linger at Hill + Knowlton due to leadership changes and shifting strategy.
Over a decade, Hill + Knowlton has had six US heads, including Millar, following its reverse merger with Public Strategies in 2010 and its acquisition of Group SJR in 2013.
"It was almost an internal joke that no one who was president of the US or US CEO stayed for long," said one former employee.
After Millar's promotion in September 2019, the firm appointed an executive committee, promoting some managing directors to EVPs overseeing regions. The move effectively demoted some senior executives, ruffling feathers, one former employee said.
There are also divisions between employees over what the firm's mission should be, mirroring a debate within the industry more broadly.
Hill + Knowlton is one of the oldest agencies in the world. One of its founders, John Hill, is considered a founder of modern PR. Some believe Hill + Knowlton should stick to its traditional PR roots while others think that model is unsustainable and support the push into creative and digital.
"When they talk about themselves, they see themselves as advertising firm: 'We can produce ad content and we have behavior science,'" a former employee said. "But media relations and corporate communications and strategic communications, that's all out the window."
DeSalva acknowledged that lifting morale is a top priority. For a while, her outreach to employees seemed to be paying off. Several former employees spoke positively about her and Millar.
Whether the firm can sustain its momentum once lockdown orders lift will depend on whether it can convince staff that the firm needs to go all-in on its creative and digital initiatives, though.
"We've really worked very hard to focus on non-staff costs as much as we can because companies like us have to make talent a priority, even in the midst of a crisis like this," DeSalva said. "We want to be strong coming out the other side of the pandemic."
Got more information about this story or another tip about the PR industry? Contact Sean Czarnecki on Signal at 734-249-1166, via email at sczarnecki@businessinsider.com, or on Twitter @SeanMCzarnecki.
SEE ALSO: Leaked documents show what WPP's PR firm Hill + Knowlton Strategies is charging clients for 2020
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