Fallon McElligott Inc.

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Fallon McElligott Inc.

901 Marquette Ave.
Minneapolis, Minnesota 55402-3281
U.S.A.
(612) 321-2345
Fax: (612) 321-2601
Web site: http://www.fallon.com

Private Company
Founded: 1981
Employees: 350
Gross Billings: $500 million (1996 est.)
SICs: 7311 Advertising Agencies

With barely a decade and a half under its belt, Minneapolis-based Fallon McElligott Inc. (FM) emerged as America’s hottest advertising agency in the mid-1990s. The firm’s groaning trophy case holds two Agency of the Year awards from Advertising Age (1983 and 1996), ADWEEK’s National Agency of the Year, and innumerable accolades from trade organizations and global advertising shows. Fallon McElligott’s annual billings swelled from less than $150 million in 1990 to an estimated $500 million in 1997 on an influx of major new accounts, including United Airlines and Miller Brewing Company’s Miller Lite. In the early 1990s, its roster of clients included some of the nation’s biggest and most coveted accounts: Ameritech, BMW of North America, Lee Jeans, USA Network, Holiday Inn Worldwide, Brunswick Corporation’s Mercury Marine division, The Coca-Cola Company, Ralston Purina Company, Jim Beam Brands, Weyerhaeuser, and Timex.

Having long limited its operations to creative, production, and media services, the agency expanded in the mid-1990s to incorporate a broad spectrum of advertising and public relations functions. With its domestic reputation firmly in place, FM set its sights on international growth as the turn of the 21st century approached. It established a New York arm in 1995 and was expected to launch a London operation in 1997.

Early 1980s Origins

The agency was established in 1981 as Fallon McElligott & Rice (FMR), and named for its three cofounders: Patrick Fallon, Tom McElligott, and Nancy Rice. Fallon and McElligott had first met in the late 1970s, when both were moonlighting with a freelance agency called Lunch Hour Ltd. After a year of planning, Fallon, McElligott, Rice, and Irv Fish formed a new, independent agency. Fallon was the agency “suit”: the executive in charge of cultivating and coddling clients. Copywriter McElligott, once crowned “King of Print,” provided the creative genius that would become the agency’s hallmark. Rice served as art director, and Fish was chief financial officer. The new partners crafted a mission statement that would remain essentially unchanged throughout its history: “To be the premier creative agency in the nation that produces extraordinarily effective work for a short list of blue chip clients.”

In fact, FMR put the art of advertising above practically all else, even a client’s comfort level. McElligott once told an Inc. magazine interviewer that his intention was to “give clients the sort of advertising that makes the palms sweat a little, that makes you a bit nervous,” adding, “In my opinion, at least, these are the only ads worth running.” The print medium was the agency’s particular forte throughout the 1980s. FMR developed a recognizable style during this period, with ads featuring bold headlines. A piece for the Episcopal Church asked, “Whose birthday is it anyway?” above pictures of Jesus Christ and Santa Claus. A trade campaign for Rolling Stone titled “Perception/Reality” juxtaposed images of the magazine’s perceived audience—hippies, earth shoes, and psychedelic-painted Volkswagen buses—against its actual readership— yuppies, Nikes, and Ford Mustangs—in order to convince high-end advertisers to place ads in the periodical.

FMR exhibited a talent for promoting not only its clients’ brands and products, but also for getting itself noticed. The agency won numerous regional and national awards and used these credentials to draw media coverage as well as new clients to its Midwestern headquarters. Fallon reflected on the group’s early success in a 1989 AD WEEK article, saying that “Virtually everything we touched worked dramatically in the marketplace.” FMR won accounts with Federal Express, Hush Puppies Shoes, Jack Daniels Distillery, the Wall Street Journal, Lee Jeans, and Porsche U.S.A. Critical acclaim came early, too. Just two years after its foundation, FMR was named ad agency of the year by Advertising Age magazine. The agency’s style set the trend for cutting-edge advertising—especially print— throughout the 1980s. Annual billings mounted from about $24 million in 1984 to more than $110 million by 1987.

In 1985, Nancy Rice left the agency to form her own agency, Rice & Rice, with her husband, Nick. That same year, the remaining principles sold a majority interest in their agency to Scali, McCabe & Sieves—itself owned by international advertising powerhouse Ogilvy & Mather—for an estimated $6 million.

From its outset, FM cultivated a familial atmosphere that featured a flat organizational structure, few titles, and a very relaxed corporate culture. An April 1992 ADWEEK article called the agency “obsessively egalitarian,” so much so that clerical workers occupied the headquarters’ coveted corner offices. Some competitors dubbed it “Camp Fallon.” As McElligott told Madison Avenue magazine in 1986, “The unspoken contract [with employees] is to do the best work of their career, which means longer hours, really putting the screws to themselves. Our side is if they do their best work, we would not stop it; we’d have the courage to show it to the client.” This covenant helped give employees, especially those of the creative department, an unusually high level of job satisfaction, which in turn resulted in low turnover. Though FM, like many other regional and national agencies, had now become part of a global family of ad agencies, it strove to maintain this aesthetic paradise.

“Dinka Incident” Stunts Late 1980s Growth

Fallon McElligott suffered a self-inflicted black eye in 1987. That fall Dr. Neala Schleuning, director of the Mankato (Minnesota) State University Women’s Center, attended a workshop on marketing given by Fallon McElligott employee Charles Anderson. Offended by what she perceived as sexist language—for example, the presentation featured several references to prostitution and the agency’s “BITCH BITCH BITCH” campaign for the “Dynasty” television series—Schleuning wrote a critical letter to Anderson. Anderson responded by sending her a photo of a member of the East African Dinka tribe pressing his face to a cow’s hindquarters. His accompanying letter suggested that Schleuning go to Africa and “put a stop to [the Dinka’s] horrible social practices.”

The astonishingly unprofessional behavior did not stop there. When Schleuning reported the incident to Fallon and McElligott, they responded by sending her a pith helmet and offering to pay her way to East Africa—but not back. Schleuning took the correspondence to the Minnesota Women’s Consortium, which sent copies to FM’s clients and the local news media a week before Christmas 1987. Not surprisingly, what came to be known as “the Dinka incident” launched a firestorm of controversy in the press and among FM’s clients. Fallon apologized in writing to Schleuning on New Year’s Eve, but the damage had already been done. In the year to come, the agency lost a total of $22 million worth of billings, including the U.S. WEST, Federal Express, and The Wall Street Journal accounts. Morale at “Camp Fallon” hit the skids.

FM’s troubles continued in 1988, when Tom McElligott resigned over “disagreements with management about the future creative direction.” McElligott later admitted that he had struggled with alcoholism, though all involved stressed that the episode had nothing to do with his departure from the agency. He went into a month of treatment, and did not return to the advertising business until late 1989. Though the agency had dropped “Rice” from its name when Nancy Rice left in 1985, it retained the celebrated McElligott name into the 1990s.

Observers within and without the agency speculated that it would lose its cachet, having lost its most noted creative person. But as it turned out, Fallon McElligott’s best trait has been its ability to read and adapt to the advertising industry’s leading trends. And while its daring, funny, and sometimes shocking ads continued to garner attention and awards, it was “the suit,” Patrick Fallon, who would shepherd the company through this succession of near-disasters to unqualified success in the mid-1990s.

In 1990, Fallon was called to New York City, long the hub of the advertising world, to turn around FM’s parent agency, Scali, McCabe & Sloves. That year SMS lost its flagship client, the $41 million Volvo account, over a television ad featuring a reinforced Volvo withstanding the weight of “monster truck” Bearfoot. Volvo’s resignation from SMS ended a 23-year relationship. Fallen’s presence helped inspire confidence among SMS’s employees as well as its remaining clients. With the New York agency’s future secure by early 1992, Fallon made a pivotal career move. Though he was reportedly tempted to stay on in New York, Fallon returned to Minneapolis with a slight revision to his agency’s mission statement: to make it “the premier creative agency in the world.”

Mid-1990s Ascent

Pat Burnham, who had served as associate creative director since 1985, succeeded McElligott as creative director in 1989. The first of many talented creative people hired by McElligott, Burnham inherited a team that was actually little diminished by the loss of its star. FM began to recover in 1989, winning accounts with Aveda Corporation, Amoco Oil Company, and an estimated $35 million worth of annual billings from Ralston Purina. In order to manage its growth, the agency limited its clientele to less than 25 accounts at any time.

Company Perspectives:

Mission: To be the premier creative agency in the world that produces extraordinarily effective work for a short list of blue chip clients.

Fallon thought he had found the stepping stone that would put his agency on the path to global eminence when FM was invited to pitch for the Compaq and MasterCard accounts in 1992. But after investing more than $250,000 and months of nights and weekends, the agency lost both clients to a competitor, so-called “blue chip” agency Ammirati and Puris. A major shakeup followed these missed opportunities. In 1993, Fallon and several other top executives borrowed $14 million to buy the agency back from Scali, McCabe & Sloves (by this time owned by WPP Group PLC). That same year, he asked for and received creative director Pat Burnham’s resignation. Reflecting on the shakeup, Fallon told ADWEEK’s Andrew Jaffe that, “After MasterCard, I knew we needed a broader, more business-based product offering and new creative leadership.”

Fallon’s new hires shed light on the agency’s redirection. In Burnham’s place came Bill Westbrook, a “rainmaker” adept at pitching potential clients, something that Burnham had been unwilling, if not unable, to do. To its creative core the agency added an integrated marketing department as well as design, editing, interactive, direct marketing, promotion research and planning, public relations, and account planning services. West-brook further shook up FM’s egalitarian culture by adopting the title president/creative director, and promoting or recruiting several group directors to report to him.

The shakeup worked. By the end of 1996, FM had won accounts with BMW, Prudential, Ameritech, United Airlines, Mercury Marine, Holiday Inn, the USA Network, and even McDonald’s, which awarded it the Arch Deluxe campaign. Fallon McElligott capped off the year by winning the $150 million Miller Lite account. Total billings for the year reached an estimated $500 million, and FM won Advertising Age’s Agency of the Year award.

Fallon McElligott’s future in the mercurial world of advertising remained unclear. Client turnover continued to be a challenge for the agency in the mid-1990s. By 1997, for example, FM had resigned the McDonald’s Arch Deluxe account and lost the Prudential campaign. The agency hoped to make up for the lost billings by winning the $75 million Domino’s Pizza account then under review. Later that year, President/Creative Director Westbrook announced his intent to cut back on his day-to-day duties, raising speculation that the agency would be hiring yet another creative director in the near future. One element—perhaps the most important one—appeared constant, however: Pat Fallon. Having guided his agency through a number of difficulties to industrywide acclaim, Fallon still strove to maintain “the premier creative agency in the world.”