What ultimately went wrong in Sir Martin Sorrell's great empire.
The dust has settled on Sir Martin Sorrell’s departure from WPP and now come the questions – what is his legacy and what next?
In the days that followed his departure, there was plenty of admiration for Sir Martin’s drive and relentless energy – seemingly, he rotated the world constantly, meeting staff and networking with clients. He made advertising an important global business and built a huge company. Yet, the commentariat have arrived at no consensus as to his legacy – and what the future might hold for WPP. There are now two CEOs in place, which is not a good sign, and indicates that his departure was an unplanned panic – an indictment of the board of this large and important company. I enjoyed working for Sir Martin Sorrell and have written about how he supported me. Now, I want to take the longer view and offer some solutions.
To understand a brand or business, it is useful to go back to its origins – often this uncovers the DNA, the successful formula that tends not to change unless the organisation faces a disaster and is forced to do so.
The DNA of WPP
When (then) Martin Sorrell bought Wire and Plastic Products (and renamed it WPP) as a vehicle for acquiring companies, I am not sure that his plan was to create a brand. He bought famous brands like Ogilvy and J. Walter Thompson. WPP was a holding company aimed squarely at the money men (finance was a macho world in the 1980s) with a promise of increasing shareholder value. He certainly did that – it just grew and grew and got bigger and bigger. Owners of independent companies were keen to sell and cash in and Sorrell was hungry for growth. He did not invent the holding company model but he pursued it on a global scale. And his senior executives – members of the share scheme did well too. (It would be mealy-mouthed of me not to thank Sir Martin for the cheque at this point).
WPP becomes a brand!
Sorrell’s big insight was that ad agencies were relatively small businesses, often poorly or self-indulgently run, with margins as low as five percent. With some professional financial management, cost cutting and cost control, these could be transformed into businesses making a 20% margin. And that trick could be repeated over and over again globally for quite some time.
Sir Martin, being a great and acutely perceptive businessman, seized the opportunities of his time. But he failed, in my view, to stand against the ills of our time and point the way to the future. This is a tough ask, given his achievement I realise, but it is what a great and enduring brand has to do. Fiercely competitive and driven to win on a day by day basis, Sir Martin lost his moral compass.
Yet, through his high profile he also, perhaps accidentally, built a recognisable global brand. Certainly, when you say that company x is “a WPP company” it stands for something – good management, efficiency, scale, globalism, and, from all that top-level hobnobbing at Cannes and Davos, a touch of glamour too. When I was CEO of Red Cell Advertising in London, it was a mark of quality to say that it was “a WPP company.” Sir Martin is, as journalists say, “good copy” and all those column inches added up to a brand in the vanguard of globalisation.
There was innovation too (most notably in GroupM) where the spend of all the media companies was brought together to deliver financial and negotiating clout on behalf of the clients. WPP was not the first to do this – success does not always go to pioneers but to those who execute with the most conviction. WPP did that. There were ‘team WPP’ organisational innovations as well, in which people from different WPP companies were brought together in a tailored offering for individual clients. This, in WPP, went by the deadening jargon of ‘horizontality’. I led such a team and it was a compelling new business winning offer. WPP got better at the running of these teams by putting them under a single P&L – but too often, these were proposed as ways of achieving efficiency and saving money which tended to hobble them from the get go. Cheap/efficient rather than clever/strategic/creative is rarely a good position for a creative outfit. People often did not want to work in these units. Rank and file clients often resented a deal that had been done at top level around financial criteria and handed down. There were successes – but too often, they fell apart. What had made GroupM a compelling and easy to understand proposition in ‘media investment management’ did not necessarily play in the creative arena.
What went wrong?
Sir Martin, being a great and acutely perceptive businessman, seized the opportunities of his time. But he failed, in my view, to stand against the ills of our time and point the way to the future. This is a tough ask given his achievement I realise, but it is what a great and enduring brand has to do. Fiercely competitive and driven to win on a day by day basis, Sir Martin lost his moral compass. The signs that his model was running out of steam started to emerge about a decade ago. WPP, by now huge and global, found it difficult to pivot. It had a human brand symbol – the extraordinarily energetic and high-profile Sir Martin, who outshone all the other holding company heads. But – it had got big but it did not know why it wanted to be big. Great brands answer ‘the why question’. Perhaps the problem was that Sir Martin thought he was running ‘his baby’ and not stewarding a great and enduring brand for the next generation. Unlike Bill Gates, he stayed too long.
Moral compass and WPP culture
Sir Martin’s pay packet became big news, whether he liked it or not. He publicly and convincingly defended it as the hard-earned fruits of risk taking and entrepreneurship. His argument, forcefully put as ever, played well with other winners of the game. But it was an argument out of time. From about 2008, an alternative narrative emerged about globalisation – that it was a pitiless form of extractive capitalism in which huge rewards went to those at the top, whilst those in the middle saw their wages stagnate or go down. I think many of the staff at WPP companies and their junior clients felt this as the media covered Sir Martin’s huge pay packet. In WPP meetings, I often felt that I was surrounded by people who had read way too much Ayn Rand – a world view in which tough, dynamic leaders are valued and rewarded more than the rank and file. It could be an alienating place to be if you were of a gentler disposition or ‘a creative’ or a ‘strategist’. This was my background and when I took over as CEO of one of his companies, Sir Martin asked me whether l was “tough enough”. I was not asked about my vision for making Red Cell a great creative agency and what that might mean for the agency staff and culture. (Still, if he had his doubts about me, I should also record that he put new business opportunities my way despite the fact that we were a mere pimple in his empire. He was always hungry to win new clients).
Creativity and culture
Sir Martin woke up late in the day to what drives successful creative agencies. Cost cutting and cost control takes you only so far. The high margin agencies tended to be also those that were perceived to be most creative; these companies have more self-confidence, attract the best people and are desired by clients. The alchemy of growth, in other words, is agency culture. When the procurement folk tried to drive down costs, they hold the line. They earn Sir Martin’s much desired 20% or more margins. At this point, if Sir Martin were standing next to me, I would get an almighty bollocking as he would point out that WPP was year after year, the most awarded creative network. (“Most creative holding company at Cannes for the seventh straight year, Julian, what are you talking about? Don’t you know the facts?”) In recent years, he had become a fixture at Cannes – looking relaxed in a powder blue number – opining about the importance of creativity at high profile events. But that is to miss the fundamental point – which is about culture. If you ran a company that valued its distinctively creative culture, then you would much prefer to sell to Omnicom.
So, what next?
WPP has rewarded its leaders and delivered extraordinary returns to its investors but it has underinvested in its two other big stakeholders – staff and clients.
Not leaders but talent
A whole new generation of staff are being recruited (often called ‘Millennials’ who want to work at a firm that has purpose and in which rewards are more widely spread. The new generation tech companies really do see themselves in a war to attract and retain the best talent at all levels – not just the leaders. In around 1990, WPP nearly went bust and created share options schemes designed to lock in the top talent. That was then, this is now. The new leaders need to talk not only to the city and the top managers but to achieve a new compact with staff in which many more feel they have a stake in the company. Having said this, people are not motivated by money alone, but rather by the opportunities for recognition and new experiences. Things like the WPP fellowship scheme and the Atticus awards are good but small scale. When I worked at Google, I witnessed what it meant for a company to commit and invest in creating the right environment for talent. Most of the big holding companies have missed out on this important shift – the brightest and the best now want to go into tech or one of the consultancies. The future of the company, as David Ogilvy once said, “goes up and down in the lift each night.” He also said, “when people aren’t having any fun, they seldom produce good work.” This point of view, I discovered, did not play well in the Randian world of WPP.
WPP has the opportunity to develop a compelling proposition that brings together Kantar’s researchers, media strategists, creative strategists, data analysts, creative people (often some of the most acute strategic thinkers) and clients.
Client needs and WPP’s strategy failure
Clients face a killer combination of challenges – huge complexity in communications driven by technology, new routes to market and therefore new competitors and of course, limited resources with which to achieve their goals. WPP’s buying power in media is a help, but it is not the most important thing. You need strategy to help you decide where to invest for the best returns. Strategy is also the bedrock of creativity – all the great creative agencies are strong on strategy (and consumer insight) as evidenced by the IPA and the APG awards. This is WPP’s biggest missed opportunity. Sir Martin had put the building blocks in place by acquiring strong research companies, collected now under the internal brand of Kantar (this was smart business as research companies historically perform counter cyclically – clients keep spending on research even as ad budgets are cut). Commentators are now saying that Kantar should be sold and that it would have a better home inside a consultancy. This is an indictment of a failure to focus on what is important and invest – a failure of strategy in other words.
Learn from the consultants: value strategy
WPP has the opportunity to develop a compelling proposition that brings together Kantar’s researchers, media strategists, creative strategists, data analysts, creative people (often some of the most acute strategic thinkers) and clients. Consultancies like Accenture cannot put this together (yet): but they are moving into WPP’s area. The consultants do, however, know how to value and charge for strategy. That is the nub of the problem. WPP, along with other holding companies, have given away strategy cheap in order to make money from execution. It is a race to the bottom in which, if WPP is not careful, the high margin work will go elsewhere. How? Well there are several ways. But a big visible move is needed. I would launch a global ‘Effectiveness Institute’ that would have regional centres. Its agenda would be defined by clients – and WPP would invest in the people and research to develop strategic and creative solutions. It would also provide training for WPP folk and its clients (I have written previously in Aurora about how agencies woefully underinvest in training). This would not be cheap – but sacrifice is the essence of strategy. You have to invest in what is important and not just spin all the plates.
Out of time?
Will this happen? WPP may be too big and unwieldy. The new joint CEOs may not be given the time and the pressure from investors to extract value through sell offs may consume them. As one of my old clients said to me (thinking me way too idealistic): “Julian, when you are up to your neck in alligators, it is easy to forget that your goal is to drain the swamp.” But I think one of the big holding companies will do it. Watch this space.
Julian Saunders was Strategy Director, Ogilvy and Head of Strategy, McCann Erickson. He has worked on behaviour change campaigns for the UK Government and on innovation in The Zoo at Google. He blogs at www.joinedupthink.com