Fear of disaster in a fragile ad industry

As “an industry run on gossip”, in the words of one senior agency figure, advertising can often appear to the outside world as frivolous and fragile. Clients and other observers witnessing the ongoing spat between WPP Group chief executive Sir Martin Sorrell and his former top Italian executive Marco Benatti, as well as the shockwaves caused by financial probes at Interpublic Group, may wonder what all the fuss is about. But tremors at the top can penetrate deep within agency structures and destabilise even the best teams.

By contrast, the majority of high-profile legal or accountancy firms are built on stringent entry qualifications and an ability to close ranks in the face of scandal or misfortune. But advertising agencies live in constant fear of disaster. Charlie Rudd, deputy managing director of Bartle Bogle Hegarty, explains: “It’s easy to generate a perpetual sense of insecurity. It can be overlooked externally how fragile an agency’s confidence can be.”

Reputation is paramount for an agency’s success. Libby Child, managing partner of business relationship consultancy Aprais, believes the fact that clients hire a collection of individual talent, rather than a qualified team of professionals, can create an unconventional – and unstable – business dynamic. “If an agency is a public company, a scandal can affect price as well as reputation,” she states. “IPG has suffered because of its financial issues. It’s had to up its financial management, which affects morale and strategy.”

One City analyst admits to taking the unusual step of tracking senior agency talent as individuals, as their movements and behaviour can have repercussions on the value of their employer. Child adds: “Marketing professionals and analysts are aware of holding companies being brands just like multinational advertisers.

“That’s partly Sorrell’s doing. By being the public face of WPP, he has put the spotlight on the other groups. If there are issues at a holding company, clients and investors will be aware of them, and it can’t but impact on individual agency brands in the group,” says Child.

Other senior figures agree that agency bosses sit uneasily beneath the Sword of Damocles. IPA director general Hamish Pringle says: “When agencies lose their way there can be a steady trickle of quality people leaving. New business machines at other agencies scent blood in the water. Clients can be made unhappy or nervous.”

Leo Burnett group chief executive Bruce Haines believes the nature of a scandal will determine the reaction of clients. He says: “Anything financial is problematic, but personal issues perhaps less so. Clients have been incredibly supportive of people going through tough times in the past.”

Few agencies have systems in place for dealing with upheaval, preferring more “on the hoof” responses. Cagney chief executive Paul Simons, a former Ogilvy & Mather London group chairman and chief executive ousted during a wrangle over strategy with the agency’s European chairman Mike Walsh in 2002, says: “I have lived through difficult moments. The best process is to come clean with clients and explain the circumstances. Some people hide under the desk, and that compounds the problem.”

If the chips are down, Rudd believes the only way of clinging on is to look to the future. “Despair can be turned around very quickly by one bit of great work,” he explains. “It’s not about what has happened, it’s what you do next that counts.”

Ian McCawley