Changing Agency Org Structures – Evolution or Revolution?

Agency land is buzzing with news of changes in agency organisational and operational structures, including Ogilvy’s ‘refounding’, Dentsu’s Future Proof 2020 vision, and Publicis’ Sprint to the Future strategy and execution plan. But what do these changes really mean, and more importantly, will they make a difference? 

The fact that major agencies are taking steps to streamline their structures, to make cost efficiencies and become more agile is no surprise. Ex-WPP CEO Sir Martin Sorrell described 2017 as ‘not a pretty year’ for agencies, shortly before departing under a cloud of his own. And the sentiment seemed to be shared across agency land with even the most successful agency groups reporting flat
like-for-like, top-line growth, and operating margins.

There were a raft of reasons for these underwhelming results – from clients reducing their advertising budgets, to question marks over “non-transparent” practices at media agencies, to personnel changes, and the simple fact that competition between agencies has never been more intense. Digital disruption and the pressure put on traditional agencies by Facebook, Google and the like had left agency holding companies questioning the organisational, operational and compensation structures that would work best for them and their clients.

In a rapidly evolving environment, independent agencies are also well placed to challenge established holding companies – a point, Helen Johnson, Founder of Tangram Consulting notes:

“Independent agencies are positioned to provide a threat like never before; their lack of red tape can attract top talent and also provides the freedom needed to develop agile working methods. As a result, they are able to compete on cost, creativity and speed. Holding companies are focusing largely on two things in their response:
1. collaboration across a network resulting in a cost effective, straightforward client experience, with a pool of people that have a deep understanding of the client’s needs
2. the ability to leverage a large pool of multidisciplinary talents.”

Is Changing Agency Org Structures An Evolution or Revolution?

Breaking down silos – or ‘Horizontality’ reinvented

So, what do we know about the response from holding companies, to the multiple challenges they’re facing in 2018 and beyond?

WPP showed some of their hand early, aligning agencies, and creating a flexible team system – something of a pick-up game, which allowed the very best talent from across all the WPP agencies to come together to work on specific projects. The approach showed promise, with WPP’s ‘Team energy’ bringing together creatives from across a variety of agencies – including Ogilvy – to compete to retain BP’s business. After winning the opportunity to take the relationship between WPP and BP into a third decade, Co-COO at WPP Andrew Scott said the new approach allowed WPP to continue “delivering agile, responsive and impactful services that drive results and help realise the client’s growth ambitions” – and hinted that this was the model for the future of the business.

The WPP approach drew on Sorrell’s favourite buzzword of ‘horizontality’ – although the agency themselves declared horizontality to be dead, at their AGM in June 2018. While the word itself was not favoured, WPP did not propose a fundamental shift away from this way of working. Instead, WPP stated that the concept of horizontality was too confusing for staff and customers, and possibly lacking the very transparency clients actually want from agencies today – although the opportunity to step away from a phrase so closely linked with the now-departed Sorrell might also be appealing to those looking to rebuild WPP.

From shareholder-friendly structures, to a pure client focus

In a similar vein, other agencies have also sought to break down silos, and encourage cross functional teams to work on projects in a more agile way. This move gives big agencies the opportunity to deliver a more client-centric service, and is a shift from a traditional model of a shareholder focused structure. Publicis’ 2020: Sprint to the Future plan, released in March 2018, includes details of their approach:

“The model: the Power of One gathers all the capabilities of the Groupe under one roof, putting clients at the core of the organisation. It has led to the deployment of global client leaders (GCL) and the implementation of the country model with one leadership and a unified executive team from all the expertise of the Groupe to break down silos and increase efficiency.”

Helen Johnson shares her thoughts on the shifting shape of agency organisational structures:

“As clients continue to react to the changing nature of communications, traditional agencies have had to learn to adapt to this new speed of working, whilst still delivering on the quality that has defined their brands over many decades. As a result, we have seen a monumental shift over the past two years in the way our clients are restructuring to recognise the importance of simplicity, in a way that they have never done before. This is being achieved through client focused (not shareholder focused) structures and a heightened value on the skills required to deliver projects. These are skills that pureplay digital agencies have (arguably) valued highly since their inception.”

Ogilvy ‘refounded’ their business

Ogilvy puts craft front and centre

The move to break down barriers to collaboration within agency holding companies – and therefore deliver a better client service – is industry wide. The latest example of this strategy comes from Ogilvy.

In June, Ogilvy Chief Executive, Worldwide, John Seifert announced changes described as “refounding” the business which has existed since 1964, and traces its history back to even earlier – Mather’s ad agency was originally founded in London in 1850. These changes follow hot on the heels of other announcements earlier in the year, which saw Ogilvy consolidate other areas of the business, and create a “marketing technology center of excellence”. This next chapter completes the changes which are intended to clarify the company’s purpose, simplify its structure, and unify the team behind one single brand.

The new organisational structure at Ogilvy is arguably the biggest true change. Seifert describes it as an opportunity to “build a new model for our industry”. 12 new crafts have been highlighted – creative, strategy, delivery, client service, data, finance, technology, talent, business development, marketing and communications, administrative, and production. In the past, these 12 craft areas may have simply been described as departments – but here the stated aim is to have everyone skilled in one or more crafts. This should remove the ‘silo mentality’ of compartmentalised businesses. Furthermore, describing these skills as ‘crafts’ shifts the focus onto continuous improvement in personal skills, and allows for the creation of fluid teams. A good idea, after all, can come from anywhere.

Competing in an omni-channel agency world is the reality for agencies.

Competing in an omni-channel world

Another striking theme of the organisational and operational changes happening in agency land, is the move to compete in a digital, and omni-channel environment. Dentsu allude to this shifting landscape in their Future Proof 2020 strategy:

“The advent of digital technology has transformed the way companies operate in today’s economy – from how they produce, to what they offer, to how they reach their consumers. The growth of digital and social media has transformed how companies and brands engage with their consumers, but it has also given consumers a more driving role in what they want to consume and how.”

A change in consumption means a change in approach, and Dentsu have stated their aim to become a 100% digital economy business by 2020, in part through strategic acquisitions.

Publicis also refer to digital transformation in their Sprint to the Future plan:

“In this context, each of the Groupe’s clients will increasingly need to build one-to-one consumer engagement at scale. They have already started to shift their investments to obtain it. And Publicis Groupe delivers it. Interactivity with every consumer at each point of his / her journey has been the “Holy Grail” for advertisers for decades.
Publicis Groupe is now able to achieve it as marketing and digital business transformation converge to connect data, content and technology in an omni-channel world.”

And over at Ogilvy, although the recent org changes mean that the OgilvyRed brand will disappear, it effectively evolves into Ogilvy Consulting, and will be working horizontally across the business in digital transformation, innovation and growth. This is intended to allow Ogilvy to better compete with consulting firms such as Accenture, Deloitte and PwC – and reflects the moves of other industry players.

Natural evolution or game-changing revolution?

So, the most important question – will the changes in agency organisational and operational structure produce results? That might depend on whether they turn out to be a superficial tweak or a more thorough, revolutionary refounding of the way the industry works.

For example, we have a few clues about how much the personnel changes at Ogilvy will be joined up with fundamental changes to the operation of the business. Seifert alluded to the pricing and compensation model challenges which have helped create a burning platform for agencies“If we don’t connect our brand promise to the ability to better influence market place performance we’re going to be subjected to the on-going water boarding in the industry around cost and the suspicion that you’re not worth what you charge.”

“There’s definitely a move away from time based cost models. We’re moving more and more to either task based or outcome based models.”

The debate over agency revenue models is not new news – even if the description of the price crunch facing agencies, as a form of torture is a first. But the acknowledgement that a change in department name, or agency branding, is not going to produce transformative results alone, is an interesting one – suggesting a revolution is afoot in agency land, rather than a gentle process of evolution.

Pairing structure changes with a positive effort to become more client focused, including an active effort to change revenue model is far more likely to scratch the right itch. Changing organisational structure to reduce costs, or keep up with the latest in talent management thinking will not be enough to turn the tide. But organisational change to become more customer-centric, more able to deal with the challenges of clients with agility and focus – that just might. The rest of agency land will watch with interest.

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