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Is WPP like a football club?

Here’s an interesting post about the downside of hiring a big network agency to do your advertising.

The gist of the argument goes that by paying Martin Sorrell $66m, a large chunk of WPP’s clients’ fees are going to people (mainly one particular person) not directly involved in the day-to-day business of the agencies: namely, to improve their clients’ businesses through advertising and related services.

I see the point, but I think there are less visible ‘benefits’ (I use the inverted commas to recognise that many of these ‘benefits’ are subjective) apparently not considered by the author. Many of the systems and processes created by WWP, perhaps instigated or approved from the top, might go some way to streamlining wastage and saving time/money for clients (possibly not, but for the purposes of this post I’m being the devil’s advocate). In addition, large organisations might be able to attract better talent all the way through the organisation, either through the more attractive career path, the greater compensation, or both. Again, you could argue that the ability to do that trickles down from the top, with Martin/John Wren etc. hiring very good people, who hire very good people, who hire very good people.

Perhaps there are also economies of scale that allow for better facilities or reduced fees that may or may not be passed on to the client. Many clients also like to walk into swish receptions and speedy glass elevators before being metaphorically fellated (or cunniliguified?) by the discovery of extra thick chocolate on their meeting biscuits or account people who will pick up their dry cleaning.

But this is actually a little more complicated than that. Apparently the cash doesn’t just go up a funnel to Martin’s wallet; it’s actually part of a long-term incentive scheme that sees him do well when WPP does well. So… is it client money finding it’s way directly into the pocket of the bloke at the top, or is it just a reward for making the whole company richer, along with its shareholders? And where does one end and the other begin? It’s WPP cash that’s making up that $66m, but is it client cash?

Perhaps the argument is like that of a football club: lots of season ticket holders complain when their seat prices rise but the club doesn’t spend the extra cash on things the supporters benefit from, such as better players. But a large club needs many other elements to be successful, such as sponsorship, corporate entertainment and branding in places like Singapore. Does a more expensive season ticket pay for a business class seat for a club executive to travel to Jakarta and arrange for a sponsorship from a tyre manufacturer, thus bringing in the £20m required for a new defender? Some fans talk about ‘net spend’, which says that if a manager spends 100m on transfers but brings in 80m by selling players, he has only made a net spend of 20m. But there are so many other expenses in these large corporations that you really have to look at all the ins and outs to make a proper analysis of where the P and L happens.

Does Martin Sorrell’s ‘spousal travel’ budget (the £274,000 he expenses for his missus to travel with him) lead to him being more relaxed on trips, thus in better form to win a big global pitch for his holding company? Do his nice suits create the right impression at a corporate retreat, inspiring his top mangers to do better? Who knows? But the only measure that matters in this case is WPP’s share price. Whatever the thousands of factors that contribute to that share price are, the only deal was this: share price up, Martin’s money up.

If you are a client who thinks your money is being somewhat wasted by paying a lot to a man at the top, then don’t spend that money in that place. Of course you’ll get better ‘value’ by going to a start-up, but you won’t get all the extras, or the security.

You pays your money, you takes your choice.