THE KINGS OF MADISON AVENUE: Mike Dolan - Jenny Watts talks to the man with the challenge of stabilising a floundering Young & Rubicam

Behind the elegant facade of 285 Madison Avenue sits a challenge.

Behind the elegant facade of 285 Madison Avenue sits a challenge.

Inside, at the headquarters of the Young & Rubicam global network, things are anything but elegant. From debilitating merger speculation, damagingly divided loyalties, staff redundancies and a record number of clients walking, it's been a tough few years at the world's fifth-largest advertising agency.

And it's up to Mike Dolan, the chairman and chief executive of Y&R Group, to sort it out.

Dolan is the man briefed to breathe new life into the flailing agency, injecting strategy and direction where for too long there has been none. His first hurdle is to establish business as usual following WPP's dollars 4.7 billion takeover of Y&R in October last year. Once the ship has steadied, the real challenge will be to grow the business and get to grips with an agency that is a prisoner of its own history.

Described as a charming yet resilient leader, the genial Dolan cuts an unusual figure among chief executives - not least for his habit of courting employee opinion and then acting on it. To many, Dolan is the fresh air that the agency so desperately needs. Although his previous incarnation as the vice-chairman and chief financial officer of Y&R will mark him as a money man rather than an ad man for some time yet, Dolan has an impressive history in general management - experience that he will need to bring into play as he rolls up his sleeves in the chairman's office.

Starting life at JP Morgan, he became a partner at Booz, Allen & Hamilton, then joined the construction and mining conglomerate Peter Kiewet Sons.

By 1991 he had taken the president and chief executive seat at Snack Ventures Europe, the joint venture between PepsiCo Foods International and General Mills. He joined Y&R in 1996.

Which means Dolan was in place when the rot started to set. Dolan believes the train of events leading to Y&R's downfall can be traced back to 1997, when a recapitalisation of the company with Hellman & Friedman, the San Francisco-based private equity investment company, facilitated a stock buy-back. Although it was denied at the time, this represented a first step to taking the company public.

It was also a deal which fostered an unhealthy management culture, Dolan now admits. 'The recapitalisation meant that a whole bunch of very senior people who would have otherwise retired decided to hang on. We didn't anticipate the number who'd wait and opt for retirement once they'd gotten the gain they were looking for.'

Following the IPO in 1997 came further distractions when WPP's intentions to buy the company were revealed. The deal was inevitable, as without the backing of such a substantial player Y&R was in danger of being trampled in the fast-consolidating communications market. Still, aside from the top echelons of the company, the multibillion-dollar deal was not widely well received.

'There was a paranoia among employees of what would happen when the ink dried,' Dolan recalls. 'They seemed to think Martin (Sorrell, WPP's group chief executive) would come running in with a sledgehammer. They thought there was a secret plan to try and break Y&R apart.'

The immediate lay-off of 100 staff in a bid to streamline operations went some way to explaining - and justifying - this mistrust. And, seeing the agency's eye had been taken firmly off the ball, clients showed their dissatisfaction by taking their business elsewhere. When the year closed, the agency had suffered the high-profile loss of flagship blue-chip clients including the dollars 175 million KFC creative account, the US Postal Service, the US Army business worth dollars 100 million, and most of the dollars 50 million Kraft Foods business. Plus United Airlines consolidated its global account into Fallon, and Ford decided to centralise its European business into Ogilvy & Mather. This, along with other casualties such as the dollars 120 Citibank account, cost the agency almost dollars 800 million in billings.

Speculators have also cited dissent in the higher ranks and distraction with the newfound wealth from attractive stock options following the takeover as triggers for the client exodus. And things weren't helped when the agency did not present a united front. 'Ed Vick (Y&R's former chairman and chief creative officer and now the chief executive of Y&R Advertising) was unwise to be so uncandid in print about people getting rich post-sale,' one insider says of Vick's notorious comments.

Peter Georgescu, the former chairman and chief executive of Y&R Inc, who had been opposed to a takeover, and Tom Bell, the former chief executive of Y&R, whose ambivalence about the deal was well known, both left the agency, while Vick is the only figurehead from the old rat pack remaining.

The departures brought a series of problems. One senior Y&R source says: 'Mike's a really nice guy but he's been propelled into this position. Tom Bell wasn't going to share power with Martin (Sorrell), so now Mike's the boss and he's got people reporting to him who didn't before, like Ed Vick.' In addition to the obvious politics, the management upheaval has left the US office, the lynchpin for the whole company, wobbling. However, he needs someone with a fresh perspective and rumours are circling that he's looking overseas to find such a saviour to help turn the tide.

While Dolan is teeing up to be a strong leader with vision, there are certain observers who are questioning where the inspirational leadership for a global agency brand is going to come from. A high-profile team of heavy hitters is needed to reinvigorate the network and New York in particular needs a heavyweight to turn fortunes around. 'It'll need a changing of the guard in the New York office of quite substantial proportions,' one WPP observer says.

And Dolan has got to be surrounded by good advisors. 'He's got too many people in his ear,' the insider adds.

Dolan,though, insists he has the right people around him to make it work.

'We've got a very strong group of people in New York at the working level,' he says, adding: 'We need to attract the best people and build from the next levels down. This is our most important task.'

But the agency is still missing a worldwide creative director. 'The global creative head is less of an issue than getting it right across the network,' Dolan responds. At the moment Jim Ferguson, the flamboyant Texan, is running the New York office but Dolan admits: 'We need to regain a much more prominent role on creative leadership.'

One of Dolan's key tasks will be to drive home Y&R's integrated positioning, historically its raison d'etre but a positioning that observers point out has not been much in evidence recently.

Sorrell says that Dolan, who is now one of the four Y&R representatives on the WPP board, is well placed to push ahead with this. 'Mike is a first-class operator who is making tremendous progress with Y&R's differentiation as a truly integrated advertising and marketing services company - spanning advertising, direct and interactive, public affairs and public relations, corporate identity and healthcare communications.'

Dolan, though, admits: 'We've got a long way to go to see it to fruition. Y&R was known for its intellectual product and point of view. Now we have to take a much more prominent stand on this.'

While Y&R Advertising has had its troubles, so have its sister agencies.

Parts of the Y&R portfolio, which include Y&R Advertising, The Media Edge, 2.1, Impiric, Burson-Marsteller, Landor Associates and Cohn & Wolfe, have suffered a direction crisis of late. Impiric, formerly Wunderman Cato Johnson, has borne the brunt, culminating in the removal last December of the worldwide chairman and chief executive, Jay Bingle. 'Impiric was flat in the water before,' says Dolan, who was seen as a staunch advocate of Bingle's bid to make one of the world's biggest direct marketing companies more contemporary by bringing it into the multimedia age with controversial moves such as the infamous name change.

Dolan is reticent about whether what Bingle was proposing was too much too soon. 'We were just a little bit out in front of where the market was,' he counters. But the Wunderman name was an institution and many believe it was a mistake to get rid of it; Dolan won't rule out a reversion to the old name.

As observers wait to see if the changes at the top of Impiric are having a positive effect, it's likely we'll see a similar approach to the other strands within the Y&R group. It's clear now that Dolan is in the hot seat, he's looking to give the company a well-needed spring clean. His next stop looks set to be the network's conflicting media issues.

'We've identified media as one of the biggest areas of synergy within the group,' he says. 'We want to leverage our strong position in North America and strengthen it elsewhere,' he adds, indicating Y&R has plans to strengthen Media Edge in Europe, where it is seen as a weaker player. Mounting speculation has Media Edge's back offices combined with MindShare, but Dolan is emphatic that no details have been finalised yet, and he's leaving the matter in the hands of his experts. 'We've asked Irwin Gottlieb (the chief of MindShare Worldwide) and Beth Gordon (the chief of TME) to think about what's the best way to capture those synergies. We need to make sure that if we put the back offices together, they've got extra clout. But there's no burning deck issue here.'

In many markets Y&R is still a formidable player. Seventy five per cent of Y&R offices are in the top five. But what effect have the changes had in the UK? Dolan, the man responsible for major acquisitions in his finance days, was instrumental in engineering the Rainey Kelly Campbell Roalfe deal. 'The thing I like about them is that they operate as a team,' Dolan says. 'It's like a puzzle where the pieces fit together.' This kind of model infrastructure is what is missing in the New York office, but is clearly the kind of creative synergy Dolan is looking to emulate elsewhere in the network. 'We've got to get our pieces to work together as a team seamlessly,' Dolan agrees. But the London agency is still feeling the aftershocks from the tremors of the flagship office and until issues over the Atlantic are resolved, RKCR/Y&R needs to concentrate on staying true to its potent brand and let New York ride out the storm.

A clear Dolan mission is to convince clients of the agency's ongoing commitment to their business. He's implemented a scheme where clients now have someone at the top of the company to partner those who handle their business on a daily basis. Dolan's personal remit covers Colgate, AT&T and Ford, and he goes to client meetings along with the account team. 'We'd lost that client contact, and now we're getting it back,' he says resolutely. This approach seems to be making inroads. 'He's been making the right noises, and keeping everyone focused on their responsibilities to clients, which has to be the priority for the agency at a time like this,' a Y&R insider says.

But how does Dolan intend to court new business? 'A lot of the client losses relate to problems we had in terms of managing accounts over the last couple of years,' he says. But in the aftermath, he believes, 'we're beginning to get our game back'. The approach is going to entail starting with existing clients, but he's under no illusions, saying: 'We've got to prove our way back in.'

He is philosophical about Ford's decision to return lead status in Europe to O&M. 'We were very disappointed because the clients we dealt with were very pleased with the work, and puzzled with the decision, as were we. They felt there was a benefit to align it into one network. The regions have to live with those decisions,' he says, while others cite an inability to crack the brief as the real reason why the account moved networks.

'We've got to go out with deeds, not words, and aim to replenish the bench,' Dolan adds, and the changes in Impiric look set to be a model by which to rebuild the creative business. His rallying cry is typical of the enthusiasm he displays for his task, but it's too early to see what results such rousing words will bring. The early signs are good. Dolan seems to be dedicated to his cause, and believes the morale of the group is better than it was. 'They feel it's the beginning of the turn,' Dolan says - although a Y&R insider counters: 'Morale is no better. There's nothing to indicate they've turned the corner yet.'

But positive signs have come in the shape of the dollars 100 million Computer Associates International and dollars 75 million Land Rover new-business wins, with Jaguar tipped to follow. And the Media Edge has recently taken on the global media responsibilities for Chanel and won the rebranding of Andersen Consulting as Accenture.

Gradually, the clients are coming back. Now Dolan must now convert the dribble to a flood if he is to turn the tide at 285 Madison Avenue.