Corporate lessons from WPP after Martin Sorrell
His departure from one of the world’s biggest media agencies touches on many important learning and development and corporate transformation issues. As well as strategic questions such as the efficiency of conglomerates and the limits of an acquisition-led growth strategy, executives can also learn much about ‘founder versus manager’ confusion, and difficulties around succession planning. Many of these issues are touched upon in the FT’s continuing coverage.
Having acquired shell company WPP in 1987, Martin Sorrell used it as a vehicle for an acquisition-led growth strategy, buying up iconic industry players such as Ogilvy & Mather, Young & Rubicam, Grey and J Walter Thompson. WPP soon became the world’s largest advertising agency. As FT’s management writer Andrew Hill observes: Sir Martin was ‘the advertising industry’s most tenacious, most outspoken and — not to be forgotten — most successful conglomerateur.’
However, his leaving is also a tale of corporate over-reach in an industry undergoing its own change. An enterprise that took 33 years to assemble now looks set to unravel. WPP’s PR assets and its data investment unit are prime candidates for disposal. ‘WPP’s particular ill, as with Napoleonic France, is imperial over-reach,’ say FT Lex writers. ‘Removing the conglomerate discount and reducing the debt that goes with it could substantially lift WPP’s market valuation.’ Hill notes that ‘the conglomerate model Sir Martin pioneered is under strain.’ Over the past 18 months, WPP share price has fallen by one third, as the top advertisers such as Procter & Gamble cut ad spend.
As a corporate learning case study, Sorrell’s departure is sure to provide numerous insights into succession planning made difficult by a domineering CEO. Although he retains only 2% of the group, he was often viewed (and paid) more like a founder/owner. Analysts described him as ‘the glue that bound much of WPP together.’ As Hill notes, ‘the real test of Sir Martin’s legacy will be the durability of the structure he oversaw, without him to oversee it.’ The outlook for his successor isn’t promising (not helped by the fact that Sorrell’s contract contained no non-compete clause). To put it another way, ‘WPP chairman Roberto Quarta kept three succession options in his top drawer: “run over by a bus”, a two-year plan and a four-year plan.’ The first option seems most relevant.