There is something very midwestern about adman Tom McElligott. He cut his teeth working on the General Mills account, writing copy for Hamburger Helper and Bacos. And in an industry given to self-promotion, he's quite shy -- so shy, in fact, that he used to vomit before making presentations to clients. Still very much the son of a Minnesota preacher, he talks passionately about his craft, using words like integrity and idealism.

But don't be fooled. Here is one clever advertising executive, who in only five years has leveraged a case full of national advertising awards and a reputation for creativity into an agency with billings of $80 million per year, whose work is now the envy of Madison Avenue. Among its more famous national clients are The Wall Street Journal, AT&T spin-off U.S. West, Rolling Stone magazine, and the infamous Continental Illinois. But back in Minneapolis, they'll never forget Fallon McElligott for its television spots for Gold'n Plump Chickens, showing Minnesota-bred hens in full battle gear on maneuvers against a battalion of southern imports.

As Fallon McElligott's creative director, McElligott, 42, has been one of the advertising industry's sharpest critics. It was somewhat surprising, then, when the American Association of Advertising Agencies picked him to develop an ad campaign aimed at improving the industry's image. And even more eyebrows were raised late last year when McElligott and his three partners decided to cash in on all the sizzle by selling a majority interest to Scali, McCabe & Sloves, one of Madison Avenue's prestige shops, itself owned by giant Ogilvy & Mather.

Senior editor Steven Pearlstein spoke with McElligott in Minneapolis.

INC.: In a recent Gallup Poll, advertising executives were rated very low in the opinion of the general public -- just below politicians and just above car salesmen. They rated even lower with businesspeople. How come?

McELLIGOTT: Very simply, because a great deal of the time, agencies don't do what they're supposed to do on behalf of clients, for reasons having to do with fear, greed, and self-interest. Businesspeople don't think there is very much honesty and integrity in this industry, and to a large degree, they are right.

INC.: Are you talking about overbilling here or something more fundamental?

McELLIGOTT: No, I don't think it has to do with overbilling, although I'm sure that occurs from time to time. But the bigger problem stems from a kind of misrepresentation about how effective most advertising really is. And most of it -- I'm talking here of somewhere between 95 and 98% of it -- just doesn't work. It doesn't break through, doesn't get by all the other advertising clutter. That happens for a couple of reasons. Either the ads are strategically stupied, or they are executed stupidly, or both. And the reason for it -- once you get past the small advertisers, the little retailers who simply don't know any better and haven't got a marketing guy on board or an agency -- has to do with agencies playing it safe, going with the known quantity, the formula-type ad. In order to protect the account, they shy away from giving clients the sort of advertising that make the palms sweat a little, that make you a bit nervous. In my opinion, at least, these are the only ads worth running.

INC.: Are there any rules for developing the type of ads that break through?

McELLIGOTT: The rule, pretty much, is to break the rules. If you break the rules, you're going to stand a better chance of breaking through the clutter than if you don't. If you try to live with the rules, in all likelihood the work will be derivative, it won't be fresh, it won't have the necessary ingredients to disarm the consumer, who increasingly has got his defenses up against all sorts of advertising messages coming his way.

INC.: That rule about breaking rules -- does it apply as well to deciding when to advertise, how much, what media to use?

McELLIGOTT: Absolutely. We like to say that when everybody else is zigging, that's when it's time for you to zag. And the smaller the company is, and the bigger the competition, the more crucial that advice becomes.

INC.: Can you name a company that did that successfully -- one we've all heard of?

McELLIGOTT: Look at Federal Express -- which, by the way, is a new client of ours, for their Zap Mail program. Years ago, when they weren't a client, they looked at their market and they figured that their target audience was maybe 2% of the population -- something like that. And yet for years they have been running major, national television compaigns to reach that very small part of the market. Very resourceful.

INC.: Very expensive.

McELLIGOTT: Very expensive indeed. You'd say, "Why don't they reach their market through rifle-shot media buys -- trade publications, business publications, direct mail . . .?"

INC.: And what's the answer to that?

McELLIGOTT: The answer is that national television was a very resourceful way to blow a hole in the consciousness of the target market, of making that company legit very quickly in a memorable and colorful way. And only TV could really do that. You could never have done what they did to the same degree with print. And what most people assumed was an absolutely strange, stupid move at the time turned out to be incredibly perceptive and smart.

INC: You were once quoted as saying, "It's not by mistake that all these movies were made about admen drinking martinis and going golfing and taking people to lunch." Doesn't that pretty much get at another aspect of the businessperson's critique of advertising, especially as it is practiced on Madison Avenue?

McELLIGOTT: Well, as I hear you read it, it sounds like a somewhat dated critique -- martini lunches are out now, even in advertising.But the gist of it still holds, and that's this whole business of schmoozing clients. They feel they are being handled, patronized, manipulated. And I think that if I were a businessman in need of an ad agency, I'd be very wary that I was not getting the whole truth from somebody who appeared to be selling me all the time.

INC.: Of course that's the irony, isn't it. The businessman doesn't want to be handled, to be manipulated, but he does want an advertising agency that will help him handle and manipulate the customer or the consumer.

McELLIGOTT: Well, I guess it's how you are schmoozed, the style, that has a lot to do with it. There are a lot of clients who feel they are being schmoozed too obviously and that their advertising, in turn, schmoozes the consumer too obviously. Good salesmanship is not an obvious thing. It is a subtle art form. The best salesmen are able to charm you into a sale. You don't buy from a salesman who insults you, who is shrill, who sells with the same message that you've heard a hundred other times from a hundred other people for a hundred other products. You don't do that -- or if you do, you're a fool. You buy from somebody who has found an interesting way to state a proposition, to make you interested in something that you might otherwise not be interested in.

INC.: As you talked about ads that are shrill, I remembered a series of ads from when I was a kid in Boston. They were by a car salesman named Ernie Boch, who stood there in front of the camera and made something of an ass of himself pitching his dealership, promising the lowest prices or something like that. He was probably the first local dealer to be on television. And as obnoxious as he was, everybody in Boston remembers the ads. And it's probably no coincidence that today he has one of the biggest dealerships in the region. If that's true, why bother with a fancy agency doing polished ads? Why not just do an Ernie Boch?

McELLIGOTT: Well, remember that it worked for Ernie Boch at another time -- probably 15 years ago. But there's a lesson there -- and it's why, in a sense, I consider myself a cousin to Ernie Boch. Ernie was willing to insult and lose a large part of the marketplace in order to gain another part. He was willing to take risks, and that is what made the ads memorable. Other marketers could achieve a lot of the success that Ernie Boch achieves, not by being obnoxious and shrill, but by employing freshness and charm and irreverence, and being just as memorable. This is what I mean by breakthrough advertising -- it is that it's unexpected, it's unsettling, it's different. And some people aren't going to like it.

INC.: Which perhaps explains why Jello brand gelatin, for example, can't do that kind of advertising -- because they have such a huge market share to protect.

McELLIGOTT: Exactly. As the stakes go up, it gets tougher and tougher. General Foods, General Mills, Procter & Gamble -- these companies are talking to such a large part of the market, have such high stakes, that they have to be very careful about how far they go. And more often than not, that makes them very cautious in their advertising, very derivative. They let risk management become the dominant part of their thinking.

INC.: You're critical of them for that.

McELLIGOTT: Yes and no. Yes, because I don't think it's very effective advertising. No, because it doesn't have to be that good. This is what Procter & Gamble understands so well. By the time Procter & Gamble gets to advertising, it's the last in a very long series of smart moves that they've made to get into a market and to be successful in it. They know the product's right. They've got the distribution, the shelf space. The package is all tested. And so they can put out a very safe, middle-of-the-road commercial because they're going to succeed. They'll put the ad on 30 to 50 times a week. The product will get tried. And they know that when the product gets tried, they'll get a certain percentage to repeat.

INC.: That sounds like a pretty good model for any business to follow, big or small.

McELLIGOTT: But that's just the point -- it's not. A little guy who copies that is going to get in real trouble most of the time because he doesn't have the sales organization, doesn't have the market research, doesn't have the distribution, doesn't have the way to leverage his way into the shelf space. He doesn't have all those things that can make a product successful before the ad even goes on the air. And so he can't afford to do a derivative, "me-too" advertising campaign.

INC.: It sounds like you'd prefer to work with a small or midsize client than one of the larger ones.

McELLIGOTT: Well, the small clients desperately want to make something happen, which means they're exciting to work with if you're thing is to do advertising that somehow breaks through, that doesn't become part of the 95 or 98% that get lost. That's the good news. The bad news is that, because they have so much at stake, because they invest so much in advertising, they can care too much. About half the time, we can work with the entrepreneurial client -- work with them beautifully. And about half the time we kill each other.

INC.: In what way?

McELLIGOTT: They tend to be control freaks. They have to write the ad, to over-involve themselves to the point where they just destroy whatever enthusiasm a creative shop has. They are the kind of people, ironically, who would work much better with a larger agency, if they could afford to hire one, because a larger agency would happily paper its walls for weeks on end with dozens of proposals until they found exactly the one the client wanted. A smaller, more idealistic agency doesn't work that way.

INC.: That raises the obvious question: How does somebody go about picking an agency?

McELLIGOTT: By spending a lot of time doing a lot of homework. I might look at 100 agencies -- look at them from a distance, read their materials -- before I made my choice. And when I had narrowed it down to a few finalists, I would get personally involved. If advertising were important to me, then I would want to be there at every interview. There's no other way to make a smart choice than to get personally involved.

INC.: And what are the criteria for choosing once you've done all that?

McELLIGOTT: The only good reason for picking an agency is that they will produce advertising that will get maximum results for every dollar you spend.

INC.: But how would you know?

McELLIGOTT: I think you can tell by talking to their existing clients and some past clients. Find out exactly what kind of results these clients have gotten from their advertising investment. Get a sense of whether the personal relationship was good. And then after you've found out all that, and after you've gone through all those tedious meetings and reviewed all those reels and portfolios, then you have to sit back and ask yourself, "Do I trust them?"

INC.: Why trust? Why not respect? Admire? Like their stuff?

McELLIGOTT: Because for the relationship to work, there has to be enough trust so that they can give you the best work they do, without looking over their shoulder all the time. That doesn't mean you have to agree to every campaign or commercial they draw up. They could never know as much about your business as you do, no matter how hard they try, so it's perfectly OK to question what they're doing. But there is a difference between questioning and worrying. Too much worrying bludgeons the life out of agency people. Once you cross the line between questioning and worrying, you simply destroy the excitement, the challenge, the joy of working on the account, from the point of view of the agency. And the sense of partnership is killed.

INC.: How often does it happen that a client comes in, looks at your portfolio and your reel of clever, somewhat controversial -- you call it breakthrough -- advertising, and says, "Gee that's wonderful"; then when you present a similar campaign for their own company, they get timid?

McELLIGOTT: That's what I call the "eyes-are-bigger-than-the-tummy" school of client, and we've seen them occasionally. The problem is that they're too myopic -- they can't get past the sweaty-palms stage.

INC.: How much of it has to do with worrying about the reaction from their employees, their suppliers, their current customers?

McELLIGOTT: Yeah, that's the greatest mistake with people like that. And at other agencies, they end up creating messages that appeal to themselves, to their own staff, to their wives. The stuff is very safe, and it can be very satisfying. They can be overjoyed at the campaign, but it talks only to themselves. And then, when it doesn't work, they blame the agency.

INC.: And yet, in the same vein, a lot of people suspect that advertising creative people are doing their ads just for one another, or to impress their colleagues in the agency across town, or to win awards. Is that a fair criticism?

McELLIGOTT: It's fair part of the time. There's always been a suspicion, I think, on the part of American business toward the arty side of advertising. Businesspeople understandably want to know how their money will work best for them in advertising. They want you to be able to track, on a very linear basis, how much this ad costs and how many customers will be persuaded by it to buy their product. And when they can't know that, when it can't be tracked that clearly, they get anxious. The fact is that some of the best advertising done in our time doesn't necessarily track that well.

INC.: Some agencies try to bring some better objective measurement to this artistic process. . . .

McELLIGOTT: Don't get me wrong. I'm not saying advertising is an artistic process. At its best moments, it is a craft bordering on art. And the craft involves bringing a higth degree of discipline -- business discipline -- to imagination.

INC: One way to get at that discipline, a technique used a great deal by some of the larger agencies, is to test a variety of commercials after the ads are produced, but before they are run. The idea is to go with the ad that tests the best, and take the guesswork out of it. Is there anything wrong with bringing that level of objectivity to the process?

McELLIGOTT: Well, you squeeze the life out of the product, that's what's wrong with it.You remove the possibility of powerful imagination, of really reaching for the stars, of getting through to consumers in ways they haven't been gotten to before. For, you see, commercials that test well are commercials that consumers have previously seen in some other form. Any good, experienced advertising copywriter can write a commercial that can test well on a single or double viewing, which is typical of most of the testing services. But what are they testing? They test recall. And the consumer will remember the most from a commercial whose format they are already familiar with -- the two ladies in the kitchen, Madge the Manicurist. But what the tests can't show is whether the advertisement is really getting through the clutter of other ads just like it.

INC: Isn't recall a pretty good measure of whether the ad is getting through?

McELLIGOTT: Increasingly not. We are living in a time of negligible product differences -- all the products within a category are essentially alike. Soap and toothpaste are the obvious examples, but increasingly it's true of other products. Soft drinks. Dungarees. Appliances. Even cars. And so what determines whether the consumer will buy one brand over another has a lot more to do with likability of the product. They need to have a feeling about the product that they can identify with. And in that context, the advertising, more than the product itself, becomes the point of differentiation.

INC.: Can't you test likability just as you might test recall?

McELLIGOTT: No, you can't. No commercial-testing service measures likability.

INC.: Is there any testing that you think is worthwhile?

McELLIGOTT: You can test strategies, certainly. You can go into the marketplace and find out what is it about your type of product that is most important to consumers. Toothpaste, say. Maybe people like it to be creamier, or with flecks in it, or maybe they like it better if it comes in a stand-up container. We encourage our clients to do this kind of testing before we get into the process of designing commercials. But as for testing commercials or the ads themselves -- I think that is not very worthwhile.

INC.: OK, so you're a businessman. Your're sitting there looking at a few possibilities for an ad campaign. How do you know the good ad when you see it?

McELLIGOTT: Probably the first time around, you've got to trust the agency -- that's the bad news. The good news is that you don't have to maintain that blind trust very long. You run the ad -- maybe you only run it in a limited way or a limited market -- and see how effective it turns out to be.

INC.: And if it turns out not to be very effective, do you forget about advertising?

McELLIGOTT: No. If you're in a category in which you're dependent upon advertising, that's like cutting off your nose to spite your face.

INC.: So do you change agencies?

McELLIGOTT: Yeah, I think so.

INC.: You could keep trying with the same agency, hoping they have learned from the mistake.

McELLIGOTT: Not for very long. I wouldn't continue with an advertising agency that wasn't accountable after a couple of cracks at it. Who can afford to do that?

INC: Have you ever had a campaign that you thought was edgy, breakthrough, and it didn't yield results?


INC.: Did you ever figure out why?

McELLIGOTT: No, I never did.

INC.: And did the the client move on to another agency?

McELLIGOTT: Another agency and another city, both. It was a frozen-bread-dough company. It was a declining category, rapidly declining. And it was an even more rapidly declining brand. The reason it was declining was because bread dough had become perceived to be a commodity by the consumer. Bread dough is bread dough. Only this company was charging about 100% more for its commodity than the competition. We had thought about all the things we could do to keep this brand alive while we came up with new products, which was the key thing strategically. And we came up with the idea of putting butter in the bread dough -- again, like the stripe in the toothpaste. It was a physical manifestation of a quality promise. It was a visible additional difference that they could see and wouldn't mind paying the price for -- or at least that was what our focus-group research had said. Well, I don't know what went wrong, but it did. We put it out in the marketplace and nothing happened.

INC.: You're the adman who has been publicly quite critical of the industry, who nonetheless goes out and puts together an ad campaign to defend the advertising industry. You've called much of the advertising done by Madison Avenue agencies stupid -- and now you've sold your company to a very successful Madison Avenue firm -- itself owned by Ogilvy & Mather. Isn't there some irony in all that?

McELLIGOTT: Irony, yes. I hope there isn't duplicity -- I don't think there is. In one stroke I am critical of the industry, but I love it. This is where I'm putting my life. I care a lot about the business. And I'm almost stupidly, perhaps naively, idealistic about the possibilities of advertising in our time. So I don't really see anything wrong with, on the one hand, feeling that a lot of the business is not living up to what it can be, and, on the other hand, defending it because I think there are some people struggling to do great advertising -- on Madison Avenue and elsewhere -- who suffer from being thought of as charlatans or worse.