THE MT INTERVIEW: Sir Martin Sorrell

THE MT INTERVIEW: Sir Martin Sorrell - You'd expect the enduring head of WPP, the world's biggest communication services agency, to influence his peers. But he has far more clout than that - he's listened to as an oracle at Davos. So where are we headed, Sir Martin? When will the gloom lift?

by Matthew Lynn
Last Updated: 31 Aug 2010

You'd expect the enduring head of WPP, the world's biggest communication services agency, to influence his peers. But he has far more clout than that - he's listened to as an oracle at Davos. So where are we headed, Sir Martin? When will the gloom lift?

If the FTSE-100 index ever decides to appoint a Father of the House figure, in the same way the House of Commons does - an award for its longest-serving boss - the first candidate for the post would be Sir Martin Sorrell, founder and chief executive of the advertising and marketing services giant WPP.

Sorrell has been running the company since he started it in 1986, and in the years since WPP entered the FTSE in 1994, most rivals in the long-distance managing sweepstakes have fallen by the wayside.

Sir Stanley Kalms, who used to rule the Dixons high street empire from the office next door to WPP's headquarters in Mayfair's Farm Street? Gone. Lord Sterling, who was running P&O before many of the firm's silvertopped cruise customers retired, has announced he is stepping down.

Even Sir Geoff Mulcahy, Kingfisher's evergreen boss, finally stepped down earlier this year.

Of all the captains of industry who were players in the 1980s, Sorrell is virtually the only one left in the game.

True, he hit the top younger than most. Seventeen years since he took control of WPP, he is still only 58 and, with a full head of black hair, he could pass for younger. And he built his own empire - founders are always hard to get rid of: it takes a crisis to dislodge them, and Sorrell survived his.

But it is also because he is smarter than most of his peers.

If ever proof were required that brains will go further in business than any other single quality, then Sorrell would be Exhibit A.

Sorrell himself is not averse to occasional moments of sentimentality about the length of his journey. 'It's just amazing, when you think back to the little Wire & Plastic Products office in Folkestone,' he says.

'I mean, we started this business from nothing 17 years ago, and now we have relationships with some of the largest companies in the world. And we can talk to the key people in these companies - that is extraordinary to me.'

Certainly, among his many followers in the City, his sheer durability has won him a respect that flips between the awe-inspired and the grudging.

'The man has kept at it,' says Lorna Tilbian, media analyst at Numis Securities. 'He is incredibly focused and incredibly dedicated. He keeps working at a phenomenal rate. I mean, if you send him an e-mail, you always get a reply within five minutes. Not many people can keep that up year after year.'

But his longevity itself poses questions. What point in his career has Sorrell reached? What mountains are there left to climb? And what state will WPP be in when he finally departs?

A conversation with Sir Martin verges on the professorial. He treats journalists - and very probably staff, analysts, bankers and clients - much as a university tutor might treat a promising yet sometimes dim student.

He listens to questions politely, engages in some debate, then explains at length why he is right and why everyone else is wrong. Along the way he references every point with some theory, a couple of anecdotes, and drops in a liberal quantity of names to illustrate every turn in his argument.

'He has balls of titanium,' says one banker who has worked with him for many years. 'He came back from being virtually dead in 1991, and not many people have done that. And he has re-invented himself, going from being an entrepreneur to this corporate mega-manager. Not many people have done that either.'

So, I wonder, what point in its evolution has WPP now reached? And where has he got to in his own career?

Sir Martin swivels in his chair, glances out of the window, thinks for a moment, then starts to explain. 'We're just at the beginning,' he says, a chuckle spreading out across the broad features of his face. 'I think the issue for us now is quality. We've got enough stuff. We don't need another hundred countries. We don't need another 10,000 people. What we need is more quality. That doesn't mean we aren't doing things well, because we are. But we need to do things better.

'We have three long-term objectives,' he continues. 'We have to alter the balance of our business from 45% in advertising and 55% outside, to one-third/two-thirds to reflect the fragmentation of the industry, and the growing importance of other media. The second objective is to alter the geographic balance from 45% US, 35% Europe and 20% Asia-Pacific to a third, a third, a third, to reflect the way the world has changed. And then the third objective is, given that we want to have two-thirds of our business outside advertising, we want to develop what we call quantative aids to decision-making. By that I mean research, and ways of measuring the effectiveness of what our clients are doing.'

Quantative aids to decision-making? See what I mean. One question down, and already we are into an advanced seminar from Harvard Business School (where, unsurprisingly, Sorrell is a member of the board. He also sits on the boards of three other business schools: Boston, Cambridge and London).

The emphasis on business-school language is understandable, however.

That is the fog from which Sorrell emerged. And, in decades to come, WPP will no doubt come under academic scrutiny in those same schools. An MBA case study on 'How to construct a world-beating company from unpromising beginnings'.

At first glance, few people would mark Sorrell out as one of the world's leading admen. He is modestly dressed and modestly mannered, neither slick nor flash. None of the well-worn cliches of his industry are visible.

His ascent to the summit has been due to astutely crunching numbers rather than coining winning slogans.

Business was in his blood. Sorrell's father Jack was a successful businessman, running the electrical retail unit of the old Firth Cleveland group. An only son - his elder brother having died at birth - Martin inherited limitless ambition from his father, and a love of commerce. He read economics at Cambridge, took the inevitable MBA at Harvard, then worked first for the sports agent Mark McCormack and then for the retail entrepreneur Jimmy Gulliver before becoming finance director for the Saatchi Brothers.

As a student, he was badly injured in a car crash, and, according to his great Cambridge friend, the historian Simon Schama, the experience was one of the things that gave Sorrell his formidable drive. He knows how fragile life can be.

While finance director of Saatchi's, he bought an ailing shell company in Kent called Wire & Plastic Products, which made wire baskets for supermarkets.

Slowly Sorrell transformed it, buying a string of marketing services companies and putting them under the WPP umbrella. In 1987, he pulled off the deal that really made the business, the purchase of top ad agency J Walter Thompson. The following year, he bought Ogilvy & Mather, another huge deal and one that almost bankrupted him. WPP was driven close to extinction, but Sorrell hung on, and nursed the group back to health.

Since then, he has rewarded himself with huge - controversially huge - pay packages. And he has hit the acquisition trail once more, buying businesses even as the world economy - and the media sector in particular - slipped into recession. In 2000, he paid dollars 4.7 billion in stock to acquire Young & Rubicam, the industry's biggest-ever deal. And in 2001, he paid pounds 437 million for Tempus in a fight with its French rival Havas. In the past two years, Sorrell has made 75 acquisitions, extending WPP's reach in the Far East and deepening its involvement in public relations.

He has also, along the way, made himself lots of enemies. David Ogilvy, the founder of Ogilvy & Mather, famously described him as 'an odious little jerk', although he later became chairman of WPP and said much nicer things.

More recently, the chairman of Havas, Alain de Pouzilhac, said: 'Normally it is the French who are arrogant but I have found one guy who is more arrogant than our entire nation put together. He (Sorrell) must have a bit of French in him. You have good guys and bad guys in life, and I think Sorrell is in the second category.'

For someone who appears mild-mannered and reasonable, I point out, Sorrell seems to have a remarkable ability to annoy other people - particularly when they are on opposite sides of a deal. 'Well,' he says in his own defence, 'I think if you take a wire-basket manufacturer to being one of the biggest players in the industry it's not quite U, is it? It irritates some people.'

Going back 15 or 20 years in this saga, I ask, did you ever have a roadmap for WPP? Or have you just been making it up as you go along? 'The old Wire & Plastic Products that became WPP, we started below the line. People think that when we bought JWT that was a big shift in direction, and the roadmap had changed because we went above the line. But it was always the same plan. We wanted to build WPP into a major force in advertising and marketing services. I think the strategic direction of the business is a lot clearer than it was in the early 1990s.'

Really? In the early 1990s, you expanded by buying big agencies. Now you are expanding all over the place. 'In the early 1990s, there were more sensational stories for journalists to write. Company takes over rival 13 times its size. Those are good headlines, but as we all know, there is a big difference between doing the deal and making it work. So making it work, and improving the quality of what we do, is the critical issue for us now.'

His own profile helps. Sorrell plays the media skilfully: it does no harm that he is a voracious consumer of their output himself. In the past few years, Sorrell has emerged as a guru of the world economy. He pops up at Davos, berating the rest of the world's businessmen for being too gloomy. He pops up on television, pronouncing on the state of the world economy. Rightly or wrongly, his views on the state of the global economy are taken as accurate predictors of its health.

In part, that reflects his seniority. But it also reflects the way that in a post-industrial economy, a marketing services company makes a better leading indicator of where the markets are going than anything else. If there is a bellwether stock on the London market these days, it's certainly no longer ICI. It may well be WPP.

The latest numbers have all flipped between the gloomy and the grim.

At the end of April, WPP reported that first-quarter sales had dropped by 4%. Meanwhile, Standard & Poor's cut its credit rating on the company.

The reason? A combination of an economic downturn and the looming war in Iraq had stopped companies from launching new campaigns. 'There are little signs of oomph,' commented Sorrell, as he announced the figures.

True, there were some big wins for WPP. Its Young & Rubicam agency picked up the Burger King account, while its Red Cell collected BSkyB. Analysts estimated that, even from a high base, it was slowly gaining market share from big global rivals such as Publicis of France, and Interpublic and Omnicom of the US. But the trend was still down. First it was 9/11, then it was the war, and straight after that it was the Sars epidemic. It has not been an easy time for the economy, or the company.

Indeed, if there has been a criticism of Sorrell's management of WPP in the past few years, it is that he expanded into the downturn. The acquisition of Y&R, in particular, now looks expensive. There can be little doubt that he could have picked it up cheaper if he'd waited.

Sorrell bats away the objection, pointing out that he paid for the acquisition with highly rated shares, rather than with cash. If there is one thing he learnt from the crisis of the early 1990s, it was to be conservative financially. He bet the ranch once and found it a nasty experience. These days, although he will still make big acquisitions, the deeds to the ranch are staying safely locked away.

So, where's the economy going? 'We're in deep do-do,' he replies smartly.

'We are paying the price for a nine-year bull market. Everything is cyclical. We all had a great year in 2000, but you have to pay the price for that; it can't go on for ever. You can argue that there are things that are going on in the economy that are different, but at its heart I think the cycle has just turned.'

WPP's own share price has reflected that. From a high of more than pounds 13 in 2000, it has drifted all the way back to below pounds 4. That is a much worse performance than the rest of the FTSE. And the downturn, surely, means people are spending far less on marketing - and will do for some time.

Sorrell shakes his head severely. He is fascinated by big global mega-trends, of the sort kicked around in seminars at the business schools he is so fond of. And, lo and behold, when he starts to unpack those trends, they all turn out to be good for WPP.

'We have a wider thesis that the whole world will be spending more on advertising and marketing, and I really believe that.'

How so? They aren't at the moment. 'There is overcapacity in every industry.

There is the importance of the web, which disintermediates people. And there is the growing importance of internal communication. And then there is distribution. The stranglehold that retailers like Wal-Mart have is posing all sorts of new challenges for the way people get their products to the consumer. And all that demands that companies focus more on product differentiation - and that's essentially the business we're in.

'So all that is good for us, and I have no doubt percentage of GDP spent on marketing will burst through in 2004.'

But maybe Sorrell has just spent too much time hanging out with copywriters.

The adman's ability to turn anything into a sales pitch has rubbed off on him. Surely not everything in the world is good for WPP? For example, overcapacity and deflation might mean more products get turned into commodities, brands wilt, and less and less gets spent on marketing.

'Well, I don't think I'm a serial optimist,' responds Sorrell, a tad huffily. 'I'm a serial realist. But there are things going on that will fundamentally help what we do. Businesses can't keep on competing on price and cutting costs. That just leads to profitless prosperity, which is what you see in Detroit, where more and more cars are being sold, but nobody is making any money.

'If clients continue to cut costs in the way you suggest, then they are just going to obliterate costs within the company. And that means they are going to become more dependent on us than ever. And, interestingly, in the last few months we've seen quite a few clients who want to outsource more with us.'

There's that formidable Sorrell brain at work again. It doesn't matter what the trend is, he can turn it to WPP's advantage. And, no doubt, clients and staff are given the same Blitzkrieg of charm and persuasion.

Which is why, despite appearances to the contrary, Sorrell is a powerful salesman. A lot of his time is spent schmoozing with WPP's top clients, with whom he has a natural rapport. He thinks like a client, and likes mixing in the same big-business circles as the bosses of multinational companies. That's one of his strengths at WPP: if a pitch works on Sorrell, it will probably work on the client as well.

Sometimes he schmoozes close to the wind. The Ford chief executive Sir Nicholas Scheele got into trouble earlier this year when he decided to award all Ford's advertising to WPP. Scheele is an old friend of Sorrell's, and his son works for WPP in London. There was a whiff of cronyism about the arrangement, and Ford backed away from the decision, forming a committee to review it.

One of Sorrell's other skills is camouflage. He describes himself as a bean-counter, although it's a long time since he totted up any beans.

He moves as a corporate man among creatives, but it is - partly - a disguise.

By now, he must know more about marketing than almost anyone within WPP.

Isn't he tempted to interfere, to tell them what will work and what won't?

'The balance is very important,' he says. 'The critical issue for me is finding the right people to run all our key businesses, and then keeping out of their way.'

And yet Sorrell is renowned as a micro-manager. He fiddles and meddles.

He works hours that would break weaker men, determined to involve himself in every aspect of the business. All characteristics that helped make WPP what it is today, but which - according to rumours from former employees - don't make Sorrell universally popular with his staff.

'I don't mind being called a micro-manager,' he says, leaping to his own defence. 'The honest approach is that you should look at strategy, but you should also be able to implement it. Grand strategy is fine, but getting it done is what's important.'

But the trouble with micro-managing, surely, is that you risk jangling nerves. Don't good people want to be left alone to run their companies?

'I don't think there is anything wrong with getting on people's nerves,' he replies, laughing. 'Somebody wrote to me the other day saying: God, I'm delighted that you've been a pedant, because you pointed out some crucial issues.'

So what signals do you look out for? What makes you say, arghh, this division is starting to go wrong? 'On my blotter in Saatchi's I had an article which I cut out of an old copy of Management Today, and it was Arnold Weinstock's five key ratios for managing GEC. I don't have anything like that any more, but there are things that I look at each day or each week. And then there is the intuitive stuff. I get a report from all our businesses each month, and I talk to everyone on a regular basis.'

Now into his third decade at the helm of WPP, Sorrell shows few signs of losing his appetite for the business. He is a man who likes stability.

There's nothing restless about him - he plays the long game. It is no surprise that his favourite sport is cricket: he likes slow, intricate action, and has the patience to wait for results.

'He has become more cautious,' says Tilbian. 'After having 36 banks on his back for several years, he has become more reluctant to take big risks. That's the only way he's really changed.'

Sorrell has been married to his wife Sandra since 1971. He lived in the same house in Hampstead for 21 years, moving out only in 2002. He sticks to what he knows. Which is why, even as he approaches 60, he's likely to be in place for some time yet. 'It would be difficult for me to depart this place, because obviously I've started something,' he says. 'I am very emotionally attached to it.'

The chances are the FTSE will have its father figure for many years to come.

< SORRELL IN A MINUTE 1945: Born 14 February. Educated at Haberdashers' Aske's, north London, Christ's College Cambridge and Harvard Business School (MBA) 1968: Consultant, Glendinning Associates 1970: Vice-president, Mark McCormack Organisation 1975: Director, James Gulliver Associates 1977: Group financial director, Saatchi & Saatchi 1986: Joined WPP as a director and then became chief executive (current salary pounds 849,000)

Sir Martin is also a director of Nasdaq, Colefax Group, Boston University School of Management, Harvard Business School, Judge School of Management, Cambridge and deputy chairman of London Business School. He was knighted in 2000. Hobbies: skiing, sailing, cricket.

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