Is re-organisation the new normal in big agencies?

In the last few weeks, both Ketchum and Ogilvy have gone to considerable trouble to re-organise their businesses around new visions of what they believe the market and clients demand. They won’t be the last.

But why bother, given that delivering and communicating these things is a task usually met with derision by competitors, indifference by clients (as long as they keep their team) and fear and loathing by employees?

The brutal truth is that big agencies simply cannot grow at the current pace of change and so after a while they get bogged down in legacy. ‘Re-boots’ are a painful, but essential part of getting back to growth and my guess is we will see more of them more often.

By some reports, Ogilvy has 15,000 employees and Ketchum 4,000. Ketchum shrank last year and though WPP does not break out revenue by brand, the group averaged no revenue growth for the first half so it is doubtful Ogilvy outperformed that by much.

Although never a good thing, 20 (or even 10) years ago this no/slow growth was not such a big problem. Change was not so changey! Hiring was simpler because the job specs were basically the same as they had always been, structures were more static and you could afford to train your people because your training programmes were not outdated by the time you rolled them out and so you could mould a workforce and a business to the incrementally evolving media market and client needs and fashions.

The difference between the service and approach of your most advanced office and your most ‘traditional’ was not that great. And even if one was much better than the other, the underlying organizational structure was probably very similar.

That is no longer the case. The difference between the most advanced and the most traditional office or unit in big agencies (PR and Advertising) is now huge. Other than the logo on the door, they could be from different planets (and the most advanced is very often NOT based in London or New York by the way).

The challenge is with middle management. It’s a bloody difficult job running a business unit of a big global agency at any time but add to that the new imperative of managing exponentially faster change on a much more complex business model, often in an undersized unit, with far fewer global clients and some simply cannot keep up. And, to be fair, many are not adequately supported by their far-away and high taxing centres (increasingly the agency equivalent of absentee landlords).

If those big agencies are growing at a decent clip, however (mid to high single digit or above) the chances are that most of that growth is in the ‘new stuff’ with the new skills and new people.   And so a lot of organizational change happens naturally, even in the less adaptable of business units.

People within the businesses see what is working across the company and have more case studies to be inspired by and more successful colleagues to confer with, often in a more generous culture, so the new ways of working and organising spread faster organically.  A successful, fast-growing big agency business can re-shape itself much easier on the fly.

By contrast, if growth is slow or non-existent, then it is more difficult for a big global agency to organically mould itself to the new marketplace. It is more likely that it has bigger pockets of legacy businesses with legacy people and legacy structures. The gap between those units (and in some global firms these could even be a majority of them) and what the market demands therefore increases.

Responsible leadership then has to force the pace of change from the top. They really have no choice, but it can be bruising and energy-sapping to lead that sort of change and it can be hard and often disheartening to be on the receiving end of that sort of change. And it is a distraction from working on clients, improving skills and pitching new businesses.  But…done right…it can be inspirational to employees; it can stamp new leadership with authority and credibility; it can make clients and prospects re-evaluate and re-consider the agency and the best and brightest recruits decide to join. The stakes could not be higher for leadership.

For small and medium-sized businesses, on the other hand, the imperative for huge set-piece re-organisations is not as great. Owner-operators and smaller, tighter knit management teams can flex their businesses much more easily through sheer force of will and personality.  There are fewer management layers between the coal-face and the top and legacy people tend to be weeded out much more quickly.  Perhaps this is one of the reasons, we have seen the rise of the mid-size agency?

Assuming communications and employee engagement are well managed, the ingredients for a successful big agency re-organisation are; i) an accurate assessment of what the market (media, platforms, technology and clients) demands now and in the future; ii) as simple an organizational structure that delivers on that as is possible; iii) a fully thought-through commitment to management and skills training that makes that structure and offer deliverable in all offices and units (not just the centres); iv) a generous and genuinely client and employee focused culture.

Like the tip of an iceberg, only the first two of these are visible to the outside world, but it is the last two that will define whether these agencies will kick-start growth again with these changes or whether five years from now leadership (possibly new) will have to do it all again.  In big agency re-organisations, market vision and organisational design are the table stakes. Execution and culture are the winning hands.

David Brain

2 Comments

  1. Nicely put, and a great read. However, you inspire me to write a similar article from the midsize agency view – but in brief … I think the fleet-of-foot-ness the midsize enjoy is liberating and mobilising but the challenges of running slimmed down business units and funding new roles and greater integration can be a real challenge. The parallel remains – good leadership and a genuine employee led culture with a passion for great client work and service will alway rise to the top.

  2. Right on, David. You could also add legacy ignorance and arrogance within many agency brands as a key obstacle to overcome.

Leave a Reply

Your email address will not be published. Required fields are marked *