What next for WPP now Sor­rell has lost his crown?

It is the end of an era as Sir Martin walks away, but who­ever fol­lows must act fast to turn the ad gi­ant’s for­tunes around, says Lucy Bur­ton

The Daily Telegraph - Business - - Business -

Worka­holic Sir Martin Sor­rell once swore that he wouldn’t leave ad­ver­tis­ing gi­ant WPP “un­til they carry me out of the glue fac­tory”.

Lit­tle won­der, then, that he is said to be “fed up and p----- off ” af­ter re­sign­ing on Satur­day night from the me­dia em­pire that he cre­ated. Barely a week back from a rare break, when he vis­ited Venice and Rome for his wed­ding an­niver­sary, and his run as the longest serv­ing CEO of a FTSE 100 firm has uncer­e­mo­ni­ously ended.

The cir­cum­stances sur­round­ing his de­par­ture are not what one of the world’s most suc­cess­ful busi­ness­men would have wanted. His three decades in charge of the £20bn com­pany have ended fol­low­ing an in­ves­ti­ga­tion into al­leged mis­con­duct, and at a time when the in­dus­try is fac­ing a whole swathe of fresh chal­lenges.

Al­though he has al­ways de­nied wrong­do­ing, and WPP said the al­le­ga­tions were not “ma­te­rial”, the probe came at a dif­fi­cult time. In­vestors have been in­creas­ingly ques­tion­ing the group’s strat­egy amid steep falls in ad­ver­tis­ing spend as dig­i­tal giants such as Face­book and Google push fur­ther into the mar­ket.

Be­fore the in­ves­ti­ga­tion emerged, share­hold­ers had told The Daily

Tele­graph that they would be ques­tion­ing whether Sor­rell was the best per­son for the job at the firm’s an­nual gen­eral meet­ing in June. The con­cern was that the 73-year-old was out of touch and un­able to lead it through the next era.

“Martin is one of the great­est phe­nom­ena in the his­tory of the me­dia busi­ness,” said ad­ver­tis­ing boss Johnny Hornby, who runs Lon­don agency The&Part­ner­ship. “Had he stayed, I think he still had the en­ergy and the in­tel­lec­tual ca­pa­bil­ity to have trans­formed this busi­ness. But the job now needs to be done very dif­fer­ently [to pre­vi­ous years].”

Sor­rell has trans­formed the busi­ness from a tiny wire bas­ket man­u­fac­turer that he ac­quired in the Eight­ies into an in­ter­na­tional gi­ant, How­ever, Mr Hornby said WPP’s next boss should not feel in­clined to em­u­late his lead­er­ship style, or rep­u­ta­tion as an eco­nomic guru, as they will face an en­tirely dif­fer­ent set of prob­lems.

“The per­son that does this does not need to be a lead­ing econ­o­mist, you don’t need to be a ma­jor fig­ure at Davos, and you don’t need to be at ev­ery con­fer­ence in the global econ­omy,” he said. “You need to be with your clients. The job will be to re­con­fig­ure this quickly, not to be a spokesman on the world’s stage on what’s hap­pen­ing on the world econ­omy. Martin was amaz­ing at that but that time has gone.”

The new chief ex­ec­u­tive will be un­der in­tense pres­sure to re­vive a com­pany that cut rev­enue fore­casts three times last year. Its shares have been ham­mered by drops in ad­ver­tis­ing spend, as dig­i­tal ri­vals in­crease their dom­i­nance. WPP’s big­gest client Ford, which ac­counts for 4pc of rev­enues, is half­way through an agency re­view aimed at cut­ting costs, with big cor­po­rates in­clud­ing HSBC, Sky, Shell, and Mars also hav­ing an­other look at their agency ros­ter.

The next boss will need to de­cide whether or not the com­pany, which has grown through a slew of ac­qui­si­tions over the years, should be bro­ken up or con­sol­i­dated into a smaller num­ber of groups.

“It’s the end of an era, not just in terms of Martin, but a pe­riod of time where the world’s ad­ver­tis­ing and me­dia agen­cies were all be­ing snapped up by Om­ni­com, Publi­cis and Martin [WPP] – those days are gone,” con­tin­ued Hornby. “There are parts of the busi­ness where it might make sense to sell off, the most ob­vi­ous one be­ing re­search. The struc­ture will have to be very dif­fer­ent go­ing for­ward, I don’t see the rel­e­vance of cre­ative and me­dia agen­cies be­ing sep­a­rate. If they don’t trans­form they might get bro­ken up, so what some­body needs to do is re­struc­ture the or­gan­i­sa­tion rad­i­cally to make the case for why these as­sets are bet­ter to­gether than sep­a­rate. Cre­ative and me­dia, with dig­i­tal, if you put them to­gether, is the way for­ward.”

But ad­vis­ers warn that any ma­jor re­struc­ture will come with prob­lems of its own. “Those cur­rently do­ing well in ad­land are the nim­ble, in­de­pen­dent agen­cies. Yet WPP can’t be­have like an in­de­pen­dent overnight,” said Julie Lan­g­ley, a part­ner at Re­sults In­ter­na­tional. “It’s an in­cred­i­bly com­plex struc­ture with a sig­nif­i­cant num­ber of ac­quired com­pa­nies that are work­ing through their earn out at any given time. Try­ing to re­struc­ture a busi­ness like WPP when you are still manag­ing post-merger in­te­gra­tions and earn outs would be dif­fi­cult and ex­pen­sive.”

Oth­ers in the in­dus­try played down the like­li­hood of WPP im­plod­ing. Ex­ec­u­tives Mark Read and An­drew Scott, who have been handed the tem­po­rary run­ning of the busi­ness, are ca­pa­ble of steady­ing the ship, they say.

Hornby called the pair a “for­mi­da­ble com­bi­na­tion” and the most sen­si­ble in­ter­nal can­di­dates to take over the run­ning of the busi­ness, with an­other se­nior in­dus­try source say­ing Read’s dig­i­tal back­ground should make him top of a short­list of per­ma­nent re­place­ments.

“The com­pany is in very safe hands – Mark and An­drew un­der­stand the busi­ness and how it op­er­ates. There are 150 se­nior man­agers at WPP who know ex­actly what they’re do­ing,” adds En­ders. “Martin long ago stopped press­ing the ped­dles.”

In­deed, those in the in­dus­try say the real lead­ers are the heads of the com­pa­nies within WPP – they are the ones in­volved in the day-to-day run­ning of the or­gan­i­sa­tions. “They drive the work – Martin is like the god in the clouds you don’t see,” says one ex­ec­u­tive. “He isn’t a Don Draper as he isn’t re­ally in­volved in the work. It will be in­ter­est­ing to see what hap­pens when the pup­pet mas­ter isn’t there, and if he still at­tends the Cannes [ad­ver­tis­ing] fes­ti­val in June.”

How­ever Sor­rell’s con­tacts book and unique peo­ple skills can­not be un­der­es­ti­mated. “The key role he had, which is so im­por­tant, is in­ter­fac­ing with top clients,” En­ders said. “Find­ing some­one who is a charisma ma­chine in the same way Martin is will be tough. It may be that an ex­ter­nal per­son is a sex­ier choice for the City. Martin is a very big name. There is no other Sir Martin Sor­rell in the world.”

Sir Martin Sor­rell has been hailed as an eco­nomic guru, as well as pos­sess­ing unique peo­ple skills, but an­a­lysts say the next per­son to lead the firm must con­cen­trate on its clients

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.