Big Chill: Layoffs at Leo Burnett Portend Cold Winter in Chicago

Last Updated Oct 28, 2010 4:55 PM EDT

Venerable ad agency Leo Burnett in Chicago laid off 35 people this week, but why? It's a bit of a mystery: The ad economy is recovering nicely and the U.S. is leading the way. Publicis (PUB), Leo Burnett's corporate parent, reported that organic revenue growth in the U.S. was above 10 percent in Q3 2010. Leo Burnett's boat ought to be rising on that tide but somehow, it isn't.

Leo Burnett recently won the $70 million Travelocity account, and its new "Mayhem" work for AllState has been well-received, so the shop ought to be hiring, not letting people go. These layoffs come as an ominous sign. Can CEO Tom Bernardin turn this ship around?

There are four other things linked to Leo Burnett's fortunes that I wouldn't like the look of if I were an employee at the once-dominant agency that partially inspired Mad Men.
  1. Publicis' real growth is in digital ads, not traditional advertising, and healthcare. None of these are Leo Burnett's specialties.
  2. Leo Burnett won only one account in the U.S. in Q3 (sister shop Fallon won 3, by comparison, see page 7).
  3. There's been a steady leak of executive talent out of Leo Burnett for several months, and little news of major talent hires.
  4. Chicago is not the town it once was in the ad biz.
Aside from Travelocity, the only other account win at Leo Burnett reported by Adweek or Ad Age in 2010 was the Sealy bedding business, where spending is currently less than $1 million. Doubtless there have been other wins and incremental growth from existing clients such as McDonald's. But not spectacular coups. Aside from Travelocity, Leo Burnett in the U.S. has not won a single other account according to the "Key Wins" section in Publicis' Q1, Q2 and Q3 earnings statements. That may not be enough to sustain an agency of Leo Burnett's size (its HQ is pictured at right).

Some staffers are voting with their feet:
  • Executive creative director Bob Winter left in October.
  • VP planning director Neil Cleary left in August.
  • Executive creative director Kevin Flatt left in May.
  • Chief strategy officer Ben Kline left in March.
Big agencies have turnover, of course, and these aren't crucial cogs in the grand scheme of things. But put that together with a lack of big name hires and the tepid reviews that existing staffers give to working at the shop -- "LB pays very low compared to other agencies, especially for the amount of work done," is one comment -- and you can see that Leo Burnett appears to be engaged in a war of attrition with itself. Agencies need new business to come in the door. Without that, management is reduced to chiseling staff and talent will eventually get bored and leave. It even seems to be embarrassed by its age -- the shop turned 75 this year, but who knew? The agency told AgencySpy:
We made the difficult decision to restructure a bit today with some job eliminations. Our business is very strong but ever changing, and these changes allow us to get and stay ahead of the curve.
The question is, can the agency wake up in time to avoid the fate of JWT Chicago and DDB Chicago, also once-great shops that have struggled to adapt to the new century? (P.S.: George Parker thinks there are impending layoffs at DraftFCB, another agency with a large Chicago footprint, and commenters under the AgencySpy item also mention jobs gone at Draft. Yikes! Chilly winter in Chi-town!)

Related: Image of Leo Burnett HQ by Flickr user Jay Denhart, CC; image of winter in Chicago by auntjojo, CC.