Sir Martin Sorrell sat down with the Holmes Report following a Wunderman event that found the WPP CEO in typically forthright form, discussing everything from the importance of content to the likeliest destination for Interpublic Group (Dentsu, in case you’re wondering).
In an expansive interview, the 69-year-old told the Holmes Report how he feels about the performance of his PR firms, explores the characteristics of great PR leaders and reveals that he would like someone to oversee PR at WPP, a role that was previously occupied by the late Howard Paster. Sorrell also holds forth on the PR industry’s problems in winning Cannes Lions and the rise of Edelman.
There’s been plenty of talk about the ‘Golden Age’ of advertising. What will it take for a ‘Golden Age’ of PR at WPP?
I think the PR and public affairs businesses do reasonably well. Two big changes have taken place. First is the rise of social. Secondly, the rise of data. The importance of research has made PR and PA much more front and centre. And the importance of content in social has made PR and PA much more important and broadly-based. And there’s a third force, that has been important as well. That’s the rise of finance and procurement, which has meant that clients are, rightly or wrongly, very focused on cost. Therefore, PR and PA — because in absolute terms don’t have the media element or content — so PR and PA is seen as being less significant and probably gets less attention. That is a positive force.
Isn’t data important to all disciplines?
It’s particularly important to public relations. Uniting the research part of the business with PR becomes more and more important.
Is that something you do at a holding group level or at an agency level?
At an agency level. You’ve got Hill+Knowlton being driven by Public Strategies. You’ve got Penn Schoen Berland driving Burson-Marsteller. Ogilvy and Cohn & Wolfe would work much more closely with Kantar.
Do you feel they are realising the data opportunity? Is that being reflected in their growth?
To some extent, but not enough. There’s big opportunities there to do more. It’s not a ‘golden age’ for PR yet. But it can become more and more important. As clients want us to integrate all the functional activities in a more cohesive way, public relations and public affairs becomes more and more important.
On leadership. What are the skills a CEO of a global PR firm needs to succeed over the next decade?
I don’t think they are different to the skills that are needed for other leaders of our businesses. Obviously, smart, intelligent, hardworking, responsive — are all really important factors. Having said that, there are two fundamental things they have to understand. One is what’s happening geographically and the other is what’s happening technologically. You can over-complicate it, but it all boils down to those two areas. Whether it’s Myanmar opening up or relations with Iran improving or the Cuban opportunity. It’s unlikely that anybody will be able to figure out what the technological developments are going to be. That’s virtually impossible. Having said that, being aware of the opportunities and challenges as best as you can in the technology area are critical.
Then there’s all the other things related to the first aspect. Our PR revenues are roughly $1.5bn. Let’s say roughly $200m is profit. So $1.3bn of cost, and of that at least half is investment — 600m or 700m year — in human capital. And so understanding that investment in the most effective way.
In terms of understanding the geographic and technological opportunities, are those characteristics represented well enough in the senior PR talent that you see?
Yes, but it could always be more so. If you said to me, ‘what do you need from global leaders’? An understanding of global changes — that America is still very important but it will be a G2 world. Understanding that the BRICS and N11 countries are still growing fast as a group. It’s unfair to say — is there sufficient understanding of that in the PR business, because it’s difficult. If you’ve focused all your life on the mature markets — whether the US or the UK or Western Europe — having a fundamental understanding of what’s going on in China or India or Brazil or Russia or the Next 11 is quite difficult to do.
How happy or unhappy are you with the performance of your global PR firms?
I’m always unhappy.
Well, how unhappy then?
I’m always restless, we can always do better. I’m never happy, as people will tell you.
We’ve seen a situation with the past few years, obviously coming out of the recession, it’s been difficult for all types of agencies. It seems to have been particularly difficult for the PR firms at WPP to return to the double-digit growth that some of them were experiencing before the recession.
There are companies that do that (double-digit growth). They tend to be less the global companies and more the smaller specialist companies.
What does that tell you?
The problem with the smaller specialist companies is scaling. They depend on individuals, and the ability to duplicate that on a global basis is very difficult. The smaller specialist firms — I’m not talking about WPP right not, but the broader industry — can get to 30-40m of revenue. To get beyond that is very difficult. I always remember talking to Gershon Kekst many years ago when he said he wanted to go to the UK. I said to him, ‘Gershon, the moment you’re in New York and client in London rings up and says there’s a deal I want to do tonight, and you’re not there, you’re dead.’ So finding another Gershon Kekst is very difficult. You have global businesses that can scale but they are not going to grow at double-digits. In a world economy that’s growing in real terms in 3/3.5%, you can’t expect that.
Sure, but even single-digit growth?
They’ve had a tough time. 2009 was the toughest year, recovered in 2010, 2011, 2012 — they are growing. Given the circumstances, they’ve done OK. Would I like them to do better? Of course I would.
And margin-wise, how do you see their performance?
Well again, you’d also like them to do better, but OK. The margins of the specialist companies are stronger. The global companies obviously find it more difficult because they have to deal with geographies growing at different paces and they have to deal with functions growing differently. Overall it’s fine. It’s about 10% of our revenues and it grows at a reasonable rate. Margins are reasonable. The specialist businesses, because they are more focused, are strong. The global businesses find it more of a challenge, because there are more moving parts. But I think it’s reasonable.
Do you feel that you need someone in the Howard Paster role?
I think we miss Howard. Howard was unique, irreplaceable. I think we do.
What do you make of the ad agencies winning so many PR Lions?
I think the PR companies don’t understand yet how to submit entries to Cannes. And I don’t think ad agencies understand the PR agencies. This is a little bit odd. What it reflects is the ad agencies understand how to submit entries and gain attention. I think it’s only a matter of time before PR agencies understand how to submit and submit in the most effective way. So, presentation is very important.
There was a long period of time when Burson-Marsteller was the biggest PR firm in the world, and Hill+Knowlton also dominated. Now it’s Edelman and the gap between that firm and the field is widening. How do you view Edelman’s rise?
I look at it as, our PR and PA business is a $1.5bn business. What’s Edelman?
That’s what they claim. So we’re twice the size.