The dramatic downsizing at Stoorza Communications, Inc. announced this month came as little surprise to the local public relations industry, which has faced a particularly tough time.
The locally based, 27-year-old firm, until now considered the highest-grossing PR company in town, announced July 20 it had sold off its political consulting practice and two of its four offices to high-ranking company executives.
Stoorza’s Sacramento operation was sold to Jeff Randle, an executive vice president who had been general manager of the office.
The Riverside branch was sold to its general manager, Patrick O’Reilly, an 11-year Stoorza veteran who had been president of the entire company since March.
The company’s political consulting division was sold to the vice president who ran it, Tom Shepard.
No terms of the various sales were disclosed.
The company also had a one-person Fresno office that was put on hold in April when the sole employee took another job offer.
Stoorza continues to maintain its San Diego and Los Angeles offices. However, Jack Brumfield, general manager of the L.A. operations, has left to become an independent consultant.
John Spelich, who joined the firm three months ago as general manager of the San Diego office and head of Stoorza’s public relations practice, has taken over as president. The corporation’s founder, Gail Stoorza-Gill, continues as chairman and CEO.
The company dropped from more than 90 employees to between 25 and 30 in its two remaining offices, Spelich said.
The San Diego office laid off about 10 percent of its staff, including two or three employees who did account work.
Industry Woes
According to Spelich, the company had revenues of $8 million in 1999 and $10 million in 2000. This year, with fewer offices, sales are expected be significantly smaller.
The changes at Stoorza are taking place in what San Diego executives are calling a “painful” time in the public relations and marketing industry , propelled by the slowing economy.
Many clients have trimmed marketing budgets significantly, said Jonathan Bailey, CEO of Bailey/Gardiner Inc.
It’s led to layoffs and budget cuts at the local PR firms. It’s also been an impetus for firms to aggressively pursue business, said Bailey, who’s president of the local chapter of the Public Relations Society of America.
Another factor for PR companies is that clients are extending their pay cycles, which can affect the agencies’ cash flow, said Richard Flannery, CEO of the Flannery Group. If anything, Flannery said, a stagnant market reminds PR agencies to set aside reserves and to run a “lean” operation, he said.
Political Scandal
The downsizing at Stoorza takes place a year after the company was forced to defend its role in the scandal of former state insurance commissioner Chuck Quackenbush.
Quackenbush resigned last summer after a Stoorza-written proposal surfaced that suggested a campaign that would educate the public about insurance but also advance the ambitious former commissioner’s image.
The multimillion dollar campaign would have been paid for by funds from insurance companies in lieu of billions in fines stemming from the 1994 Northridge earthquake.
Stoorza’s also seen several leadership changes in recent years. In March, Stoorza president David De Pinto left after a 19-month tenure. Former president and longtime partner Alan Ziegaus had left in February 2000. Ziegaus and De Pinto founded their own firms.
At Stoorza, the move to sell the two offices is intended to create a more streamlined and cost-effective operation, Spelich said.
He said the company is trying to position itself as a “boutique” firm that offers more personal PR service, rather than a large, leadership-heavy corporation.
Bailey said Stoorza’s downsizing came as no surprise.
“There have been many changes at Stoorza over the last several years,” he said. Also, he said, “Everyone in town has been affected by the economy.”
Spelich declined to discuss the number of clients Stoorza has had this year, and whether that number has changed. He also did not want to speculate on the company’s income in 2001.
According to Bailey, the firm has strong survival skills. “Stoorza’s been around for a long time, and they didn’t grow to be one of the largest firms in the country without being incredibly smart people and without careful growth management and without an ability to ride economic ups and downs,” he said.
“Sure, they need to do some rethinking about their business model , as we all have had to do , but they’ll remain a key player in San Diego because they’ve built a strong company.”
