"We saved money by having no administrative overhead or large management structure. Our salaries may have been lower initially, but we compensated by giving people ownership."
"Coming from TNE, we had enough knowledge and sophistication about health care, 401(k)s, and retirement plans to enable us to shop around and get a really good package."
| Cost of Capital |
0% |
Prime plus 2 points* |
"It's a miracle we didn't need to borrow any money. We were most fortunate that way."
* As of 9/7/95
WHAT THE EXPERTS SAY
Karen Hopper Wruck
Associate professor of business administration at Harvard Business School
Many companies find improving efficiency in operations easier than improving efficiency in internal service departments. Harnessing market forces to discipline both the department and its customers can provide a simple solution. For example, a company can allow internal customers the option of outsourcing work and force the department to charge a price and be evaluated on profitability. A more radical approach allows the department to sell outside as well. The extreme case is to disgorge practically the entire department, as TNE did with Trinity. How should a parent choose among alternatives? Important questions to address include, Is our department really providing specialized services unavailable from an outside vendor? If so, is the benefit from specialization worth the inevitable loss of efficiency? If we decide to spin off a department, what is it worth? In spinning off Trinity, TNE took a radical, market-oriented approach to restructuring, but I question whether it might have charged Trinity managers a higher "price" and insisted on an equity stake. It appears that Trinity managers were presented with an attractive business that was subsidized and insulated from many risks normally faced by entrepreneurs. For them, it was a fantastic opportunity.
Jerry Della Femina
Advertising guru; chairman, CEO, and creative director of Jerry & Ketchum, in New York City
The only thing I would have done differently would be to try to get a longer contract from TNE. It's always disappointing to bring something to people, see them enjoy it (and save millions of dollars), and then have them say, "Thank you very much, we're going to someone else." On the other hand, maybe in the long run it's good not to be so tied to one giant master. With everybody downsizing, Trinity may have hit on something -- becoming the in-house/outside agency. Think of all those sleepy old companies all over America that have giant communications departments, that are there only because they have been there for 50 years. I was impressed by Trinity's example: it provides giant, sleepy corporations with a way to save a lot of money, downsize, and get out of a business they really shouldn't be in. A lot of other people in corporate communications should look at this and say, "Why don't I try this at my company?"
Karen Green
Director of marketing and senior executive vice-president, BayBanks Inc., in Boston
Trinity will prosper if it continues to diversify its client base and finds a way to improve margins without sacrificing quality. Logan will want to review fee structures to ensure that costs are covered. Moreover, planning has never been more important than it is right now. If Trinity expects to continue its impressive rate of growth, it will need to explore alternative funding sources, since not all clients will agree to pay fees up front. Sustainable growth is contingent upon three key factors: a reputation for good service, aggressive self-marketing, and adequate financial resources, including access to credit.
James X. Mullen
President and CEO of Mullen Advertising, in Wenham, Mass.
Dan Logan is not only a competitor but a friend and a former client, so it's easy to admire his volcanic entrepreneurship and sudden success. Still, it's one thing for a newly messianic entrepreneur to trim corporate bloat -- 77% fewer people managing 40% less business -- and another to build an agency that sustains enduring and profitable growth in this hard, cut-and-thrust world of advertising. For instance, how much of those fat profits are due to the fact that virtually all of Trinity's initial physical and operating investments were handed to it debt-free? Are Trinity's earnings evenly spread across all its business segments, or does the account inherited from TNE still contribute disproportionately to the bottom line? What will happen to Trinity's momentum when it does lose a large piece of business, say, TNE itself, in one fell swoop?
In the long run, though, I'm betting on Trinity to help make New England's advertising community stronger, better, and more distinguished, as well as to make things a little tougher for all the rest of us.
