I’ve lost count of the number of journalists who have asked for my perspective since WPP announced its investigation into misconduct claims against Martin Sorrell almost two weeks ago. I don’t engage in speculative conversations with journalists, on or off the record, but in any event, I assumed Sir Martin would continue to lead WPP for years to come, and the question of who might succeed him was a moot point as far as I was concerned.
I’m breaking my silence because the coverage of this story has largely focused on the whys and wherefores surrounding Sir Martin’s resignation and the future leadership of WPP, rather than the profound symbolism of his departure. By that, I mean the collision between the ownership model of these listed communications agency groups and the unprecedented changes taking place in the space in which they operate. Let me explain.
The starting point is the ownership model of the major publicly owned holding companies. The key investors are fund managers who need to deliver a steady return for the pension funds they represent. Fund managers can’t tell pensioners that there may need to be a moratorium on dividends and that the share price will take a temporary hit while the company re-engineers its business model. And yet, these holding companies face unprecedented changes in the communications landscape that demand a major reorganization of their assets and capabilities to deliver against the business transformation challenges that their clients face.
Sir Martin’s track record of delivering sustainable growth and shareholder value for over 30 years is extraordinary, but the game has changed. What it will take to deliver sustainable growth in the future, and what this means in terms of the type of leadership these groups will require, has changed beyond recognition.
For example, the scale and clout of GroupM and the segregation of media and creative has driven a significant margin for WPP’s media business over the years. WPP now faces a scenario where greater transparency in media buying will most likely impact GroupM’s margin and where media/creative segregation seems out of step with the convergence of channel and content provided by tech platforms. WPP’s ability to innovate now may be hampered by its historically winning formula.
So what type of leadership will be best equipped to navigate the holding companies through a prolonged period of unprecedented change? The current slate of holding company CEOs represent a spectrum of styles, all of them effective in their own ways. While Sir Martin has been more heavily engaged in the day-to-day machination of WPP’s operations and actively fostered personal relationships with senior clients and prospects, Omnicom’s John Wren and IPG’s Michael Roth appear to have been less “interventionist.” Their focus appears to have been more corporate, relying on the operating company leadership to run their businesses.
Publicis’ Arthur Sadoun is an interesting case in point, given his age and newness to the role. He appears to be more focused on two things: building personal relationships with senior clients and prospects and the reorganization of the group’s assets to put digital/innovation at the heart of the organization. In this sense, he is stylistically closer to Sorrell than to Wren or Roth. The big difference, however, is that Sadoun has built a leadership team around him that can collectively solve the problems and navigate the challenges of the changing market context and who appear to be more comfortable with the current pace of change.
Moving forward, I believe leadership of holding companies will be increasingly about blending the right cocktail of skills and experience in the management team. This doesn’t change my perspective that leadership is the key determinant of business success, but a successful leader will be the one that gets the formula right and who continually keeps it relevant. This is not just about competency, but about diversity of the leadership team and the different lenses required to deliver the best solutions. I also believe this new generation of leaders will be more attuned to the importance of purpose when shaping narrative and culture.
The markets have spoken with regards to Sir Martin’s departure, and I’m inclined to agree with them. On the face of it, there’s a significant vacuum to be filled at WPP. How you fill it to drive the business transformation required is the key question. Mark Read and Andrew Scott’s promotions to joint COOs make good sense to me. Read is an accomplished leader with a strong track record in innovation, and both have the chance to create a distinct leadership formula at WPP and to shape a new purpose and positioning.
Despite this collision between the ownership model of the holding companies and the unprecedented changes taking place in their space, I do believe there is still a significant opportunity to be leveraged. The tech platforms that are the source of so many of their ills have their own regulatory and reputation challenges ahead of them, while the management consultancies do not yet really understand how to leverage creativity for commercial advantage. There is everything to play for if the holding companies can reorganize and invest, and if they have leadership capable of driving business transformation.