Black­friar

WORD FROM THE CITY

Yorkshire Post - Business - - BUSINESS / NEWS - @york­shire­post

In the roller­coaster world of busi­ness, some truths are eter­nal.

One of the big­gest chal­lenges fac­ing any com­pany – re­gard­less of size or sec­tor – is plan­ning for the day when the founder fi­nally heads off to re­tire­ment.

Suc­ces­sion plan­ning is a ne­glected art. It’s one of the rea­sons so many firms strug­gle when a sin­gle, dom­i­nant per­son­al­ity calls it a day.

Sud­denly, the or­gan­i­sa­tion could face an ex­is­ten­tial cri­sis. Why does it ex­ist now the driv­ing force has gone? And what does it do next?

The abrupt de­par­ture of Sir Mar­tin Sor­rell from the helm at WPP, the world’s largest ad­ver­tis­ing com­pany, high­lights the dan­gers of fail­ing to have a clear suc­ces­sion plan.

Shares in WPP dipped af­ter Sir Mar­tin, who has been at the head of the firm for 33 years, stepped down over the week­end in the wake of al­le­ga­tions of per­sonal mis­con­duct.

The ad­ver­tis­ing firm car­ried out an in­quiry into al­le­ga­tions that Sir Mar­tin mis­used com­pany funds, but said the amounts in­volved were not ma­te­rial.

Sir Mar­tin, who has de­nied any wrong­do­ing, re­signed on Satur­day evening, say­ing the al­le­ga­tions were “putting too much un­nec­es­sary pres­sure on the busi­ness”.

In a note to staff, he said: “That is why I have de­cided that, in your in­ter­est, in the in­ter­est of our clients, in the in­ter­est of all share­own­ers, both big and small, and in the in­ter­est of all our other stake­hold­ers, it is best for me to step aside.”

Sir Mar­tin has been the driv­ing force be­hind WPP’s ex­pan­sion and it’s un­sur­pris­ing that some an­a­lysts fear WPP could start to drift off course with­out him in charge.

Roddy David­son, an­a­lyst at Shore Cap­i­tal, said: “This is a dis­ap­point­ing end to Sir Mar­tin’s il­lus­tri­ous ca­reer at WPP which saw him build the world’s largest mar­ket­ing ser­vices group and de­liver sub­stan­tial value to share­hold­ers over three decades.

“It also high­lights the ap­par­ent lack of de­tailed suc­ces­sion plan­ning that has trou­bled us and many other ob­servers for some time.”

“It is not clear whether the cur­rent mar­gin tar­gets or div­i­dend pay­out will sur­vive man­age­ment change,” Citi an­a­lysts said in a note, adding that the stock’s loss of a third of its value in the past year could at­tract “value” in­vestors.

An­a­lysts have spec­u­lated that the group, which was be­ing re­struc­tured af­ter a year of lower spend­ing from some clients, could now sell some as­sets if it is led by a new man­age­ment team.

This type of spec­u­la­tion is ex­tremely un­set­tling for staff and clients.

“Sor­rell’s de­par­ture is neg­a­tive con­sid­er­ing ... how in­stru­men­tal he has been in as­sem­bling the as­sets WPP has to­day,” said Piv­otal Re­search an­a­lyst Brian Wieser.

WPP said that chair­man Roberto Quarta will step up to

be ex­ec­u­tive chair­man while its dig­i­tal boss Mark Read and An­drew Scott, the chief op­er­at­ing of­fi­cer of WPP Europe who over­saw ac­qui­si­tions, be­come joint chief op­er­at­ing of­fi­cers.

Sir Mar­tin’s suc­ces­sor will have big shoes to fill at a time when WPP faces chal­lenges. In March WPP pub­lished its weak­est re­sults since the fi­nan­cial cri­sis.

There’s also the pos­si­bil­ity that Sir Mar­tin could set up a ri­val ad­ver­tis­ing busi­ness. It’s hard to avoid the con­clu­sion that much of this dam­ag­ing un­cer­tainty would have been avoided if a clear suc­ces­sion plan had been put in place. It’s a sober­ing re­minder that com­pa­nies of all sizes must spend more time con­tem­plat­ing the day when their founder ex­its the stage.

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