Barry Lustig
May 3, 2018

WPP: Don’t let the headlines scare you

The next six months promise to be unpleasant for WPP. However, it’s a great time for the future of WPP. (Both of these things can be true.)

WPP: Don’t let the headlines scare you

If you were genuinely surprised that WPP’s founder and CEO resigned, you simply haven’t been paying attention. WPP has had that “not-so-fresh feeling” for well over a year now.

This chart from Bloomberg may clarify the situation:

WPP has lost about 35% of its value over the last 12 months. As a backdrop, the London Stock Exchange gained about 28%. Very few CEOs could have withstood these headwinds. WPP’s CEO was no exception. Yes, Sorrell’s departure was abrupt. But that’s just how things roll when you build big.

The next six months promise to be unpleasant on any number of levels for WPP.

Some big clients, like Ford, will likely spend less money with WPP. But if clients who want to use Sorrell’s departure as a pretext to “explore their options,” it’s not necessarily a bad thing for the company over the long term. It’s highly unlikely that WPP will shut its doors anytime soon, even if there are major client defections. As any gardener knows, it’s better to chop off weak branches from a tree than let them rot and sap valuable resources.

Yes, recruiters are swirling around key WPP staff. Many will change agencies or leave the industry altogether. But is this really different than business as usual? Time will tell, but the likely answer is, “not so much.”

The advice Baron Rothschild had with regard to real estate investing likely applies here: “The time to buy is when there is blood on the streets". There will be blood on the streets soon enough.

No snark. No irony. It’s a great time for the future of WPP.

The worst of the current crisis will likely be over during the course of the next year. If you feel like your time is just about up in AgencyLand, or just don’t like your company or job, it may be time to start thinking carefully about making a move or Plan B. Layoffs and general turbulence may be steeper for agencies in the coming year or so—not just within WPP.

If you are looking to improve your position, WPP companies may offer people who are willing to take a little risk greater rewards than they might find elsewhere. JWT, Ogilvy, Y&R, Grey and WPP's other major agency brands will likely be reorganized. Many smaller agency brands will disappear. But these groups are not going out of business. When the smoke clears, what’s so bad if you work at Kantar (or another solid company) and it gets sold? See who the buyer is before making a leap.

Don’t waste time trying to guess what the new leadership structure will look like. Unless you are very senior in your parent company, it doesn’t matter all that much one way or another. In time, investors will have their way with WPP (and its publicly listed competitors) anyway.

For shareholders, clients and average- to high-performing employees alike, the outcome will likely be positive regardless as to whether or not the company breaks apart and/or radically restructures. WPP (or perhaps mini-WPPs) will be leaner, more focused, differentiated, and have stronger overall governance.

The creative destruction, in which innovation replaces outdated business models, according the economist Joseph Schumpeter in 1942, “is the essential fact about capitalism.” Agencies are undergoing a process of creative destruction. WPP will likely lead the way, as usual.

We spend a lot of time telling our clients and friends about how we are creatively driven. To survive, we’ll need to be, um, creative.

Barry Lustig is managing partner of Cormorant Group, a Tokyo-based business and HR strategy consultancy.

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