The biggest PR agencies are merging. Sir Martin Sorrell has been ousted from WPP. Management consultants are circling the industry. Is it the end of the road for PR’s old business model?

By Ruth Sunderland,

In the roaring 1980s a new phenomenon burst into life, along with puffball skirts, Beaujolais nouveau and brick-sized mobile phones. That phenomenon was WPP, the advertising and PR colossus created in 1985 by Sir Martin Sorrell. Sorrell’s emergence shook up the whole marketing and PR industry – and his exit earlier this year from the firm he created coincided with another seismic shift.

MEGA MERGERS

Shortly before his departure, two WPP agencies, Burson-Marsteller and Cohn & Wolfe, embarked on a merger to create a new top-three operator. That prompted inevitable questions about whether there’d be further industry consolidation. The upheaval at WPP is significant in itself, but it’s also an indicator of wider change in an industry that’s already been disrupted by digital and social forces.

Thrown into sharp relief by Sorrell’s departure, the public relations industry is at a pivotal moment. Generational change is under way and PR professionals are asking themselves hard, existential questions: what will the industry look like in the coming years? Will there be more consolidation? More fragmentation? Both? What will PR be?

The dethroning of Sorrell has certainly reverberated across the industry. As the lynchpin of the WPP empire, he was always a buyer-builder, rather than a seller of businesses – so what will happen now?

“With Sorrell going, one interesting question is what will happen to the structure of WPP,” says Ian Whittaker, head of European media research at Liberum Capital.

“The company has been firm in saying that it is not breaking up, but it could sell off some of the assets.”

Other analysts have speculated that WPP might slim down its suite of PR firms. Mark Read, installed as co-chief operating officer after Sorrell’s exit while WPP hunted for a chief executive, has poured cold water on talk of a break-up. “We don’t believe this makes sense. In a world where clients need faster, more agile, integrated solutions, we need to get closer together, not further apart,” Read has said.

Others reckon the old model that Sorrell embodied no longer works.

“Sorrell built WPP and I admire him enormously, but the coagulation of PR and traditional adland has come unstuck,” says Iain Anderson, executive chairman and co-founder of Cicero Group. “As the Mad Men world has become less profitable, the big conglomerates have asked more and more of their corporate communications arms. It’s broken and will never be the same again.”

Many people have predicted further consolidation in the wake of the Burson Marsteller and Cohn & Wolfe merger. Organic growth has become harder to achieve and the share prices of the big holding companies, including WPP, have been under pressure.

Cost-cutting is the name of the game. Andrew Grant, founder of Tulchan Communications, says the merger of Cohn & Wolfe and Burson-Marsteller (where he worked earlier in his career) makes enormous sense: “There is huge value in crunching them together and taking costs out. The agency model is about to run out of road. Fees and retainers have not gone up. This is why there will be more mergers in the industry.”

TIME TO BE A MANAGEMENT CONSULTANT?

There’s another big question thrown up by the tough, post-digital climate: whether PR firms should be attempting to add value by basing their offer more firmly on data, evidence and research. “Top-tier consultancies now operate with the rigour of management consultants,” says Anderson. “Without evidence and data you are nothing.”

But can PRs really emulate management consultants – and, even if they can, should they?

Lines are certainly blurring in both directions, with the likes of Accenture acquiring PR assets, and PR agencies taking on consultancy roles – for instance, Omnicom’s Ketchum Change division merged with executive management consultancy group Daggerwing Group in late 2016. As marketing, technology, communications and strategy become more interconnected, it’s a trend that’s surely going to continue.

Raise this topic and PR folk soon start talking about Teneo Blue Rubicon, which was born in the US but has become a major force in the UK over the past couple of years, selling itself on its strategic approach – “the global CEO advisory firm”.

“Everyone is looking at them,” says one highly placed figure. “The management consultancy-style PRs are making waves with a new generation of corporate executives, but it’s not happening everywhere or as quickly as some might think. Never underestimate the conservatism, with a small ‘c’, of the British boardroom.”

Others view the fusion of PR and management consultancy with scepticism. Sorrell himself has previously said that management consultancy is very different from what WPP does. “Traditionally, those [management] consultants have worked with chief information officers or chief technology officers on the left brain; we’ve tended to work with chief marketing officers on the right brain,” he said at the end of 2017.

In a similar vein, Tulchan’s Grant says: “Management consultants are about data, analysis and process. They strip the economic model down to pieces and come up with an evidential, fact-based strategy.

“That’s great, but that is not what we do. We help articulate and support the huge change that businesses need to navigate. How a company talks about itself – how it communicates – is massively important.”

NEW BEHAVIOURS NEEDED

An intriguing thought comes from one executive who has just started a new agency. “The industry doesn’t so much need to look to management consultants as to behavioural anthropologists, who would have insights on how technological and cultural change affect people’s attitudes and actions,” he says.

Tony Langham, who co-founded Lansons in 1989, is about to publish a timely book: Reputation Management: The Future of Corporate Communications and Public Relations. The practice of PR, he believes, is transforming not only because of the data and social media revolutions, but also because of changing social attitudes.

“There is less deference to experts, less respect for authority and more whistleblowing,” he says. “Across the political spectrum, people are less tolerant of things like bullying, racism, sexual harassment and discrimination, and the gender pay gap. The PR industry needs more diversity at the top if it is to reflect and advise on these changes.”

The belief that public relations needs more transparency and diversity is shared by Robert Phillips, self-styled industry iconoclast and co-founder of Jericho Chambers.

“PR is an industry with diminishing power and decreasing relevance, but trying desperately to maintain influence and revenues – hence the mergers,” he says. “One reason the industry is struggling is the horrible lack of diversity. There are far too few women and minorities at the top levels.

“And data is going to massacre us. Micro-targeting means companies can talk directly to consumers and other audiences, so the 20th-century practice of PR is being blown apart. Mergers such as Burson-Marsteller and Cohn & Wolfe make sense in terms of a more cost-efficient 20th-century product, but they are not the answer to what PR should be in the 21st.

“Being more like management consultants is not the answer either. We have to shift to a model of radical honesty and transparency or we will become dinosaurs. We need to say the uncomfortable, embarrassing things to clients that are otherwise known as ‘the truth’.”

SHIFT + FOCUS

What does all this mean for those currently trying to chart a course through the profession?

Iain Anderson says: “PR is at the boardroom table like never before”, but it is about reducing reputational risk rather than creating growth. Those who will succeed in future are people who find ways to turn “PR from a risk mitigator to an opportunity creator”.

The industry is certainly braced for transformation. Some 70% of PR professionals believe it will change significantly over the next five years, according to the 2018 Global Communications Report by the University of Southern California’s Center for Public Relations and the Holmes Report. But only 36% of in-house professionals and 61% of agency executives believe their companies are ready to adapt.

There’s a consensus on the biggest drivers of change: a shifting media landscape, new technology, greater access to data and disruption to business models.

Tony Langham argues that, although what PR firms do “is very different from the past, the skills are the same. It’s still about creative spark, strategic thinking, media relations, knowledge of how government works – you just have to be ready to shift focus”.

One thing seems clear in this shifting landscape: while the world is highly unpredictable, the need for companies to respond and communicate with their stakeholders has never been greater.

There are almost as many views on the way forward as there are PR people – but, as the saying goes, change is opportunity.

Ruth Sunderland is city editor of the Mail on Sunday

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This article was originally published in Influence magazine, Q3 2018.

Photo by DAVID ILIFF. License: CC-BY-SA 3.0