Lines Of Succession

At a WPP Group annual meeting in London a few years ago, one shareholder asked about the holding company’s CEO succession plan. As chairman Philip Lader began to respond, CEO Martin Sorrell cut him off. Sorrell gave the investor a withering look and curtly replied that WPP would deal with the situation in due course.

Among his holding-company peers, the WPP founder, who turned 60 in February, may be having the toughest time contemplating the moment he will step aside from running the worldwide operations he has built over the past 20 years. But it’s not much easier for many of his rivals, who, while not founders, are the kind of entrepreneurial personalities who have steered industry holding companies during a dynamic period of consolidation. Driven and competitive, they aren’t the kind of men who look forward to golfing into the sunset. They’re accustomed to the power, glamour and perks of the top job in the Hollywood of the business world, and the thought of pulling back from day-to-day operations is tantamount to acknowledging professional mortality. But such plans are increasingly becoming a priority: Publicis Groupe CEO Maurice Lévy is 63; Interpublic Group’s Michael Roth and Havas’ Alain de Pouzilhac are both 59; Omnicom Group’s John Wren is 52. (Corporate best practices call for consideration of a successor to begin three to five years before a CEO’s 65th birthday.)

Lest any of them underestimate the importance of one of the biggest decisions of their careers, they need look no further than IPG, which is on its fourth CEO in five years. IPG is a case study in how even the most highly considered plans can go awry. When longtime head Phil Geier retired in 2000, along with his financial partner, Gene Beard, his choice of protégé John Dooner was a no-brainer: The McCann Erickson WorldGroup CEO had spent his career at the IPG unit and worked closely with Geier in preparing for a leadership role within a corporate culture and client universe he knew well. But after a tumultuous two years, Dooner returned to McCann in March 2003, handing the reins to IPG vice chairman David Bell. In turn, Bell relinquished the post in January 2005 to outside IPG board member Roth, who had been named chairman in July 2003. (The company has also had three CFOs during that time.)

“This is an industry where you can have two extremes, with IPG getting its succession planning wrong over and over again while Omnicom is much more consistent, whether it’s at a network or the holding company,” says Alexia Quadrani, an analyst at Bear Stearns. “The process looks seamless at Omnicom, with the older executives staying around during the transition to make sure it’s very smooth. The company’s history of doing this gives investors a lot of confidence.”

Succession planning is a key aspect of business continuity at any company, and is particularly critical in a people business like marketing communications. Ironically, it is Wren—the youngest in his CEO peer group—who has the most tangible plan in place. Wren, who has had the top job since 1996, is said to have identified three candidates, all in their early 40s, to groom over the next 10 years. “They’re being developed equally but differently,” says one executive.

Observers speculate that CFO Randy Weisenberger and BBDO Worldwide CEO Andrew Robertson are in the running. The third contender is said to be Michael Birkin, who just took on the job of Omnicom president and CEO for Asia-Pacific, a new position. Sources speculate that Birkin, previously worldwide president of Omnicom’s largest unit, Diversified Agency Services, was moved into the Asia job because Wren thinks he has the strategic skills but needs to bolster his operational experience. Wren declines to comment, saying only: “Our board is very actively engaged; it’s a function they take very seriously.”

Good corporate-governance practices call for a company’s directors to make the ultimate decision, even if it means vetoing the outgoing chief’s recommendation. “The days of selecting one’s successor and foisting them upon the board are over,” says one industry CEO.

Omnicom’s board has been given detailed profiles of the 50 most influential executives who drive the company’s business sectors, sources say. Directors can develop contact with them, so they can identify alternatives to Wren’s choice, if need be. “That’s not something a board can do in a short time,” says a source. “In the old days, you had network executives on the board who knew these people, but now, in a new governance world, that’s not the case anymore.”

In the new, more activist shareholder era of Sarbanes-Oxley, longer-term planning has other benefits as well. “Crisis strategies are more important than ever, should there be a situation where a CEO dies or if financial performance is bad or a financial scandal occurs and prosecutors say, to settle the case, the CEO needs to step down,” says Rosalinde Torres, group executive for global practices and marketing at Mercer Delta Consulting.

Industry execs who shrug off such unexpected scenarios got a wake-up call recently when McDonald’s went through three CEOs in a year. (Turnaround architect Jim Cantalupo died suddenly from a heart attack in April 2004. Charlie Bell took the job, but he left in November due to illness and subsequently died of cancer. Vice chairman Jim Skinner then took over for Bell.)

While not in such a dire situation, IPG is a prime example of the need to be prepared for the unpredictable. Roth, who was given the CEO job in January, joined the board in 2002, while he was still running The MONY Group. “The good news is, I don’t think the [IPG] board is looking to replace me yet,” he says. Nonetheless, he is shoring up management strength at the company. He has upgraded IPG’s human-resource reviews into what he describes as “total talent reviews” across IPG’s top 300 people. “We need to see where the risks are and where the talent is,” he says, adding that he is already taking that information to IPG’s board.

Insiders say Roth is planning to stay in the job for at least five years, which is reflected in his incentive-based compensation plan. He is quickly making his presence felt as he puts his own people in place: In the last month, Roth brought in Mark Rosenthal, the CEO of MTV Networks, to head up IPG’s troubled media operations, and he has hired Steve Centrillo to be IPG’s chief growth officer. Centrillo had been a managing partner at Grey Global Group’s darkGrey integrated technology and telecommunications unit and the COO of Grey’s Atlanta office.

While Roth faces succession planning as Madison Avenue’s newest CEO, one of its longest-sitting executives poses the industry’s most intriguing guessing game. Martin Sorrell has given few public clues about his eventual replacement at WPP. Strong-willed founders like Sorrell don’t see themselves as hired hands, given their corporate history and ownership stake in the companies they run.

“I don’t think he has any succession plan, except perhaps an emergency one in case something should happen,” says Lorna Tilbian, a financial analyst with Numis Securities in London. “He probably takes some inspiration from [78-year-old Grey chief] Ed Meyer, although I don’t think he’ll stay around that long—he’s keenly aware of founder’s disease. But I don’t expect any change this side of 65; he’ll probably stick around till he’s 70. He’s got more energy than men half his age.”

Of WPP’s next CEO, Sorrell will say only: “We do succession planning all the time, and we have plans in place.”

Some insiders think Sorrell had identified close associate Eric Salama, now CEO of WPP consultancy Kantar Group, as a possible heir apparent, but that speculation has lost traction recently. Sources say succession is not a topic even high-level WPP executives feel free to discuss with Sorrell.

“Martin trusts very few people. You would think [he] would do something in the Rupert Murdoch model and bring in one of his sons,” says one observer. “All three of his sons work at Goldman Sachs, a company he loves and reveres. He would think that’s great training to run a public company. He’d never mention this to anyone, and he’s probably not going anywhere for another 10 years.”

Mercer Delta’s Torres says WPP’s situation is not unusual in a business where multinational corporations grew up around men named Ogilvy, Burnett and Rubicam. “The issue you often have in this industry is that you have icons as CEOs: individuals or founders posing a situation where succession isn’t discussed because these executives are very attached to the brand equity of the company. What we advise is to objectify the selection criteria so it’s not so much about the individual, the icon. If you can’t find all those qualities in one person, think about a new leadership team.”

One such leader recommends a gradual transition process: “It’s best to do it over time. You find your most likely successor and introduce them to the clients and to the press. You let outsiders get to know him and gradually increase the spotlight on them.”

Another leader closely associated with his company is Maurice Lévy. While not Publicis’ founder, he has nonetheless played a comparable role to Sorrell’s in transforming a local French agency into a global powerhouse. Lévy, who’s been at the helm of Publicis since 1988, says he spent last year discussing his succession strategy with his supervisory board and has committed to stay five more years while actively preparing his plan. (Lévy has no employment contract.) He says he expects to step down at the end of 2010.

The Paris-based CEO says his objective is to “grow” two or three internal candidates for the consideration of the board, which he says is “100 percent” in charge of the choice. “We have to look at candidates who can run a large holding company,” Lévy says. “People who understand clients’ issues, have a good vision of the industry and the direction in which the business is going. They must be natural leaders and inspirers. He or she must gain the confidence of the team and be a true entrepreneur with an excellent business sense.”

Lévy says the next CEO could be of any nationality, but given the company’s strong ties to the family of its French founder, observers doubt he or she will be anything but French.

Alain de Pouzilhac, who has been CEO at Paris-based Havas since 1996, did not respond to an interview request about his succession strategy. A rep says, “That’s not our priority now. Our priority is June 9.”

Indeed, any plans for the next CEO may become a moot point as Havas shareholders vote that day on French corporate raider Vincent Bolloré’s request for four seats on the board. Havas is urging shareholders to veto the move, saying Bolloré—who now owns more than 20 percent of the company—has failed to make clear his intentions behind the investment. Bolloré appears to have targeted Havas because of its financial woes and restructuring after paying $2.1 billion for Snyder Communications in 2000. Should he gain more influence at the company, many believe he could force a management change or sale.

Indeed, in the era of public ownership, financial understanding outweighs traditional client-management skills as criteria for the top job. “A CEO needs to be a strong financial person or find the best financial partner they can,” says one executive recruiter. “Unless you have a good financial partner, these big monolithic operations become unwieldy. Look at IPG.”

Sean Orr, a former PepsiCo exec who joined IPG in 1999, got off to a rocky start as Dooner’s CFO and left in 2003. The freshman team found themselves saddled with the new rigors of Sarbanes-Oxley, a bill passed in 2002, just as they were learning their tough new jobs. “The world changed during John’s time,” says Roth. “A CEO needs more business skills now. Sarbanes-Oxley was all new stuff to him. To his credit, he brought in [International Flavors and Fragrances CEO] Dick Goldstein and myself to help him.”

Former IPG CEO Geier says the company followed best practices in choosing Dooner: “We went ahead with the possibility of looking for not only someone in the industry, but also [an external candidate] who could be in consumer companies who had possible advertising experience in an agency and had a very good reputation involving managing the marketing and advertising side of a division or a company. And there were several. The board made the decision to go forward with the internal candidate based on his experience and success in heading up and operating a unit.”

Dooner did not respond to an interview request.

Dooner’s return to McCann plays to his client-handling strengths. Indeed, three of the CEOs now running the top five companies—Wren, Sorrell and Roth—have financial backgrounds, further evidence that the path to the top job may no longer lie in agency account management. Aside from the different skill sets, making the move to a holding company might even be at odds temperamentally for agency network executives who have spent their time protecting their companies from undue corporate interference.

“Holding companies get in [network executives’] way. When things were falling apart at an IPG agency, John didn’t want to get involved, because he’s got a deep-seeded distaste for intervention,” says one former IPG executive.

Arguably, because of the project nature of below-the-line companies, up-and-coming executives there tend to get more diverse operational and geographical experience, making them better-suited for a holding-company CEO’s job. Their counterparts at ad agencies tend to rise through the ranks based on the strength of their client relationships. So while it may limit the breadth of work experience, client-centric talent is essential in running agency networks, as proven by outsiders who have failed to crack the job.

“Working with clients is critical. It’s hard to find anyone running an agency without hands-on experience,” says Abe Jones, a principal with industry investment bankers AdMedia Partners. “Look at Ammirati & Puris and Wunderman. It’s not that the agency business is totally unable to cope with the problem of succession planning, but there are disastrous consequences when it doesn’t go right: Accounts go out the door. Good people leave.”

Former McKinsey consultant Rick Hadala had a short, stormy tenure as CEO of Ammirati Puris Lintas in 1998. Jay Bingle, whose company, Capital Consulting & Research, was acquired by Young & Rubicam, became CEO of Wunderman Cato Johnson. He changed the name of the unit to Impiric in an unsuccessful move to reposition the direct firm as a CRM specialist. It was quickly reversed as Bingle left the company.

Now, ex-Kraft marketing exec Ann Fudge is finding it tough going at Y&R as well, with Sorrell looking for a CEO to run the company’s flagship agency at the same time that he’s searching for Meyer’s replacement at Grey. By most accounts, Sorrell is looking at candidates outside those companies. That lack of homegrown talent underscores a paucity in the larger industry: Foote Cone & Belding has reached outside the company for its last two CEOs, while the chiefs currently at Lowe and Leo Burnett also came from outside the agencies’ corridors.

So, as industry CEOs face questions about their own transition strategies, they will do well to view it as a longer-term proposition that ensures talent is nurtured at the operating units. Given Meyer’s tenure at Grey, it may not be too late. Says one former top industry executive: “It’s the same at the holding company or in a network: Picking your successor is one of the most important, if not the most important, CEO responsibilities you have. Not to succeed yourself properly could undo the best things you’ve ever accomplished.”