When Mark Penn assumed the function of CEO at MDC Companions in 2019, the corporate was collapsing. A advertising and marketing holding firm as soon as valued at $1.5 billion had plummeted to a market cap of simply $90 million, weighed down by poor governance, fractured tradition and mounting debt. “It was an archipelago,” Penn says now, “a set of separate islands.”
However Penn didn’t see chaos—he noticed alternative. Having spent many years constructing corporations, working billion-dollar advertising and marketing budgets at Microsoft and guiding political campaigns on the highest stage, he dropped at the duty a uncommon mixture of strategic readability and tactical self-discipline. Backed by his personal firm, Stagwell, and $100 million from his key investor, he drafted a 48-page turnaround plan, gained the arrogance of a divided board and finally took the reins of each MDC and Stagwell.
What adopted was an aggressive restructuring, a pandemic-era survival technique and a daring reverse merger that introduced the 2 entities collectively below one roof. As we speak, Stagwell is a publicly traded challenger to the trade giants, with Penn on the helm. Within the following Q&A, he talks candidly concerning the early days of the turnaround, the artwork of integrating fractured companies and what it takes to steer with each imaginative and prescient and execution.
Take us again to 2019 whenever you grew to become CEO of MDC and the corporate’s market cap had fallen from $1.5 billion to $90 million. What was your evaluation within the first 90 days of what was damaged right here past simply funds?
Let me provide you with just a little pre-context. I had 30 to 40 years of expertise as a founder, a grower, a vendor, a shopper and a supervisor of larger properties like Burson-Marsteller, after which on the shopper facet with Microsoft and a $2 billion price range. I had expertise throughout the trade in all of those completely different disciplines and enterprise and practitioner roles, plus two books and two presidential campaigns.
In 2015, when Steve Ballmer exited Microsoft, the place I used to be chief technique officer, he got here again to me and mentioned, “Properly, that concept you could have for a brand new advertising and marketing firm—I like working with you. I’ll be your core funder.” So on September fifteenth, 2015, I opened Stagwell with one worker and the purpose of rising the following nice advertising and marketing firm with $250 million of funding between me and Steve. We took in one other investor, ALP Make investments, and we started constructing—digital first. We introduced in Code and Concept, Ahead 3D, nice efficiency advertising and marketing, nice digital transformation. We had been proper into what I name ‘the trendy marketer financial system.’
MDC was an organization we noticed that had quite a lot of significantly inventive properties. However after I mentioned we wished to merge with MDC, the SPAC that wished to take us public mentioned, “We don’t need to tackle fuzz like that.” However in my opinion, it wasn’t fuzz—it was the opposite half of the peach. A variety of these advertising and marketing corporations take a slice, have a interval of development after which get leaned on by the majors who’ve the larger relationships throughout completely different companies. What I made a decision was we’d like to have the ability to do the spectrum of actions that features inventive with an enormous ‘C’ in addition to digital with an enormous ‘D.’ For those who might do each, you possibly can start to chip away on the monopoly that the others had.
MDC appeared to have nice properties with nice manufacturers like 72andSunny, however complete central monetary mismanagement and points with their CEO and the SEC—quite a lot of fuzz. We did an evaluation of it. I met with their CEO and administrators twice, they usually principally informed me to get misplaced.
How did you get to sure?
My new investor, ALP Make investments, was cautious, so that they put a restrict on the funding—they okayed $100 million. I wrote a 48-page plan for all of the issues that had been flawed and the way we’d repair it. Then I went to see the lead director, Irwin Simon, in his house. I defined our plan, and he thought it was terrific. He’d been with the corporate a few years and actually hadn’t seen something prefer it.
The interim CEO that they had thought he was going to make this his life occupation whereas he really lived in Los Angeles and was kind of part-time—it was actually weird. Irwin took it ahead to what I collect was a really divided board. They got here again and mentioned, “We’ll take your $100 million, Mark, provided that you’ll be CEO.” I didn’t really suggest that—they proposed that to me.
Someplace within the interim, their CEO resigned or was fired. So that they had no CEO, they had been working out of cash. We might supply them about half what we supplied a lot earlier after they mentioned no. So we received much more of the property than had they finished one thing earlier. I agreed to be CEO of each MDC Companions and Stagwell.
I parachuted into what was a really luxurious workplace at 745 Fifth Avenue with a rooftop backyard. One in all my first acts was to do away with that workplace. It was some huge cash for a showplace, and the CEO had this monumental workplace whereas all people else had like a two-by-two cubicle. The earlier CEO had collected quite a lot of expertise, after which received into some issues with the way in which he dealt with the funds.
There have been like 50 completely different offers of all kinds of shapes, sizes and flavors. He’d arrange a washer the place he was giving out dividends, paying huge earnouts—a whole lot of hundreds of thousands of {dollars} in a few of these offers that had no caps. The varied individuals within the companies by no means met one another. There have been zero synergies in operation.
I keep in mind the primary time I convened a bunch of them, I mentioned, “I don’t know the way it was finished right here earlier than, however that is the way in which we’re going to do it.” And someone interrupted and mentioned, “Mark, this wasn’t finished in any respect.” I all the time described it as an archipelago with an entire bunch of separate islands, and we had been going to deliver it collectively as a collective group.
I went about recutting quite a lot of the offers, eliminating those that might by no means be paid or could possibly be extremely damaging financially, and placing in additional wise offers. Folks had been amenable to it. Since I preferred creativity and expertise and had expertise, I actually didn’t lose anyone—no one walked out. The entire worry was that everyone was going to depart, however none of that occurred. I feel they noticed that I used to be being constructive, they usually preferred working the place they had been working.
The thesis was that for those who might repair the coordination and repair the middle and get the offers below management in order that it wasn’t a washer, do away with the dividend, you possibly can deliver it again to sanity after which implement the broader technique.
That’s rather a lot. In what order did you deal with all that?
I imagine that first you need to have a plan, then you need to have a group, after which you need to execute the plan with the group. Sounds easy, however you’ll be able to’t actually take it out of order.
First, I took my 48-page plan and determined how I might implement the varied parts of it. Second, I needed to consider the administration inside 90 days and resolve which I might maintain, which I might change. I needed to assemble a brand new group with a brand new CFO. Then we targeted on getting the offers below management so that they wouldn’t bankrupt the corporate. These had been most likely a very powerful issues to do first. Then we needed to deliver the teams collectively—what I known as “you now have brothers and sisters”—to fulfill one another, to grasp what items of the advertising and marketing puzzle all of them had, so we might start the method of collaboration.
You mentioned expertise stayed as a result of they understood your plan and believed you had a superb technique. How did you talk that to them? How did you create that stickiness? As a result of that’s the place quite a lot of leaders get tripped up in M&A.
I introduced them collectively in Washington, D.C., of their first-ever assembly, and offered the plan. I mentioned, “Look, that is the plan. There’s no secret plan for buyers and one other plan for you and another plan that I actually have. That is the plan.” Then I met with every of them individually and received a greater sense of the place they had been.
By and enormous, whereas I made important modifications within the company group, I didn’t make important modifications within the company heads, except media. I had lunch with that man, and it was not occurring. He had a view that the inventive corporations had been going to be out of enterprise and that solely the media firm mattered. I wanted the inventive corporations and the media corporations to work collectively. It was fairly clear that he thought there was no level in working along with the inventive corporations. Philosophically he was by no means going to have the ability to execute on the plan I had in thoughts. I needed to change him, and all people was type of shocked.
That made them nervous?
Yeah. He was well-known within the trade, however I couldn’t—there was simply zero alignment. He had a totally completely different plan.
It appears like an enormous a part of this communication with workers and their perception in you is partly that you just’re not a B.S. type of individual—it’s, that is what we’re doing and I’m telling you precisely what I’m telling buyers.
That plus the truth that I used to be an precise practitioner within the trade versus a lawyer or accountant that ran quite a lot of these different issues. I knew what it was like. I used to be a founder. I used to joke that I knew what it was like when company got here—”conceal all the pieces!” I understood that. I feel it was crucial that they knew I had designed nice adverts, I’d run campaigns, I had labored for giant company purchasers—that I used to be simply not a go well with, however someone they may relate to otherwise.
Feels like a fantastic begin. Then what occurred?
Simply as we started to point out development, the pandemic hit. Each shopper referred to as to cancel all the pieces. What we did was—thank God I had already created collaboration—I created what I name the BLT, the Enterprise Management Crew, and received all of the members of the important thing companies collectively frequently. We had conferences each single morning, which gave us the visibility and coordination wanted to make speedy staffing choices. We couldn’t have finished that if we didn’t have coordinated central operations. So we had been in a position to survive the pandemic.
For those who checked out your TV set, there have been no adverts. Folks discuss AI and this and that, and Google’s going to do that—the pandemic was the one worst occasion you possibly can probably think about in advertising and marketing. We had to enter a semi-hibernation stage. The inventory received right down to a greenback, and I purchased extra of it. I really would have purchased much more, however there was some Canadian restriction so I used to be restricted. But it surely was a fantastic funding.
In the course of the pandemic, when our inventory was at a greenback, I really satisfied my buyers that we must always launch and purchase the entire thing. So we got here to the board and mentioned, “Okay, we now need to purchase all the pieces reasonably than simply the $100 million.” As a result of I used to be CEO, that was a battle transaction, so that you wanted a committee from the board. The board had a separate committee and a bunch of advisors, and Stagwell had a bunch of advisors. It took a 12 months to finish the transaction.
Pre-pandemic, I felt we had cleaned out quite a lot of the issues, we’d gotten again on an inexpensive footing, we’d launched individuals to their brothers and sisters. I satisfied the buyers to make this supply to purchase the remainder of it—or really to reverse merge. Stagwell would are available, and we’d get the itemizing in the marketplace. What we would have liked was a vote of the MDC shareholders to approve that. We wanted an opinion, we would have liked a worth, we would have liked bondholder approval and we would have liked a shareholder vote.
Contemplating that MDC was close to terminal once we took it over, I used to be working towards myself as a result of having restored it to some stability, it was price extra. Then the MDC buyers wished extra. One of many buyers led a marketing campaign to cease the transaction.
All of it comes right down to at some point. I spotted I don’t have the buyers, I don’t have the bondholders, I don’t have the board of administrators—I received nothing. I’m sitting on this motel as a result of my daughter, who was on the highschool basketball group, had an away sport. And I mentioned, “You don’t get credit score for two-thirds of a deal that then falls aside.”
Three hours later, I had each one of many gamers. I handled my buyers first, they usually simply wished some tax assurance on sure points. I handled the bondholders, they usually wished their level. Then I handled the board by way of the value they wished. By eight o’clock it was finished.
How did you really get all people on board?
The trick was to provide all people a chunk. What actually was underlying this was that everyone knew it was a superb deal—they simply wished their piece. They wished to be sure that I didn’t get the entire sweetness of it. So I simply gave all people just a little little bit of what they wished, they usually all mentioned sure. And I made a judgment that I gained’t fear concerning the 5 p.c that I distribute now as a result of I’m going to make this two, three, 4 occasions extra precious. A hundred p.c of nothing is nothing. So if you will get 50 p.c of one thing, you need to do it.
How do you preserve an entrepreneurial tradition whenever you’re scaling to hundreds of workers?
You give you larger concepts. A part of what I did after I was at WPP was to discover ways to run larger belongings. You must maintain scaling the concepts you could have, as a result of the principle downside I see is that individuals have the identical measurement concepts when those self same measurement concepts gained’t work anymore.
How do you give you these larger concepts?
Properly, fortunately they don’t should all be mine. That’s why we host an annual “Shark Tank” competitors the place everybody throughout the community can current an concept or invention, after which we fund the successful concept and provides them some working room.
I attempted to take the philosophy of administration that I don’t resolve issues on e-mail. Don’t even hassle. We resolve issues at conferences with stakeholders, the place individuals who need stuff or do stuff or have concepts or make a presentation. The primary couple of occasions that was very new for individuals. Their displays would kind of get destroyed, however they’d get to return again a second time or generally a 3rd time till they received the presentation to a normal the place they actually had developed their concepts. After some time they realized that’s the usual they wanted to fulfill. In order that they weren’t going to hassle to return with poorly thought-out stuff that was then going to get dumped on.
Now we have two ranges of groups: the company group, which features a Senior Management Crew, after which we have now the Enterprise Management Crew, the individuals who run the companies within the Stagwell community. Each a kind of slots needs to be crammed with a very good, competent individual. Anytime you don’t try this, otherwise you go away a gap, or you could have someone who’s not nice, you pay a remarkably excessive worth for that.
A variety of the place I realized scale-up was from Ballmer. Martin Sorrell was excellent at monetary administration, however I wouldn’t give him as excessive a ranking on individuals administration. Steve was actually good at time administration as a result of he had an not possible job with 110,000 individuals, and he’d go dwelling at 5:30. He gave me an workplace exterior his. What I spotted was that anytime we’d have a brand new mission, he’d spend the primary three conferences on who was going to be there and the way we had been going to do it, and the way a lot time we had been going to dedicate to it.
I feel that was actually instructive by way of when one thing comes up right here: Who’s on the group? Are we going to fulfill weekly, biweekly, month-to-month? What’s going to be our agenda going ahead? Get all that up entrance. Don’t launch into it and begin to do stuff earlier than you actually have organized what you’re going to should do. That’s half and parcel of attempting to grapple with larger scale.
What’s your expertise technique to recruit and retain these key individuals?
Now we have a very nice recruiting division. And since I used to be within the trade itself, I had quite a lot of entry to present expertise or expertise that will come over. We usually attempt to current the case that we’re the challenger on the way in which up. The largest corporations listed here are shedding hundreds or tens of hundreds of jobs and are in a extra precarious place. Typically, individuals who come right here study that it’s a high-performing tradition. That’s the purpose. For those who’re not snug with a high-performing tradition, you then’re not going to be snug right here.
What’s your consolation stage with new know-how?
I used to be all the time an early adopter. In 1977, I used to be doing punch playing cards at college computer systems, and I received pissed off, so I purchased a pc package, constructed it, programmed it myself and had in a single day polling. I used to be all the time into the mixture of know-how and what we did.
A survey initially took 63 individuals, with most of them being interviewers. Over time we moved on-line. I used to be all the time deeply educated concerning the software of know-how as a result of I hated repetitive duties.
That was a key factor of philosophy. After WPP, I went to Microsoft actually with the aim of constructing positive that I knew what was occurring and that I wasn’t old-fashioned. There I received to grasp the engineering cultures. Folks in huge corporations and know-how can get far faraway from what shoppers really need. I began with a SWAT group, after which they gave me principally a $2 billion price range in advertising and marketing. Then Satya made me chief technique officer evaluating all of the completely different proposals.
The advertising and marketing area is known as a tech-oriented area immediately. We’re now working with Palantir on superior concentrating on, we’re working with Adobe on superior content material administration. We’re making these high-level partnerships as a result of the most effective methods for us to compete towards corporations which can be three or 4 occasions our measurement is to compete with higher know-how.
You can’t be a CEO immediately who doesn’t perceive know-how. As we speak, if AI is one thing {that a} bunch of different persons are going to determine the purposes of to your trade, and also you don’t actually perceive it, that’s going to be an issue. You’ve received to have imaginative and prescient, by no means see partitions and imagine in what you are able to do. You additionally should get together with individuals and like who you’re employed with. For those who’re a CEO and you’ve got these groups and also you don’t actually like them, you’re by no means going to have the type of firm that you possibly can or ought to have.
