The advertising and marketing giant WPP put out its Q1 results late last week, and they were solid enough. Revenues were up 3.6 per cent and net like-for-like sales were up 0.8 per cent.
It was business as usual for the group in many respects, with WPP’s well-known chief executive Sir Martin Sorrell talking to analysts and journalists about the quarter and about prospects, even if one strong message was that many companies are holding back on advertising spend due to global political uncertainties and sluggish growth.
But next to this overarching challenge there are two others that should be exercising WPP.
One it definitely has a handle on, and that’s the way the industry is facing broader challenges as tech groups upend the way advertising is bought and sold.
The other I’m not so sure about, and for WPP my sense is that it is being too easily brushed away.
What is WPP’s succession story?
The group often makes assurances in its full-year reports about its “rigorous” succession plans but it rarely spells things out in much detail. I think it needs to. Analysts and investors are worried enough to raise it as a concern frequently, which goes to show in its own way that WPP isn’t doing enough in terms of telling its succession story.
My essential point, though, is that WPP is no different from other businesses in needing a detailed succession plan, and then needing to go public with it. In some respects, of course, it is even more overtly reliant on Sorrell than many businesses are on their leadership, which makes the risks that much more acute. But it is also not alone in needing to do better with succession.
Succession needs a plan. What’s the best way to approach it, then?
Succession is about developing the talent and accountabilities in a business from top to bottom. It should be about process, too, rather than leaving any business to rely on individual inspiration.
What is it that makes a business valuable? What value does it create? How is it different from or ahead of the competition?
And succession means nurturing a management team to take over key responsibilities. That’s a lengthy process rather than a sprint, of course.
A business should start by listing the key things the existing owner-director does – and rate the importance. Who within the business could take on those roles? What additional training or mentoring might be needed? What is a realistic timetable to hand over responsibilities? Once it is firmed up, it’s time to create a plan.
The other approach is to identify the gaps in the management team. In what areas are the current shareholding leadership solely responsible, with nobody in the organisation that could step up?
That’s a recruitment and training need right there.
How Mason succeeded at succession
Here’s a story that caught my eye recently that brings the challenge to life.
In early 2016 Mark Mason finalised terms to sell his app-development business, Mubaloo, to a media agencies group wanting to diversify. One of the reasons he got it away so smoothly was his attention to succession.
So how did Mason approach succession with Mubaloo?
Talking to BusinessZone, he explains: “What I wanted to avoid in exiting Mubaloo was an earn-out period that kept me involved for any length of time.
“Some people are happy to commit for the long haul, or perhaps have no choice, but when I sold an earlier business, Mason Zimbler, I stayed on for year and I actually found that too protracted. I did not enjoy it.”
Once the ink had dried on his Mubaloo exit, by contrast, Mason initially stayed involved on the margins and walked away within just a few months.
“One of the arts of selling a business on the right terms, for the right price, and getting the exit you want, is to create the right structures and to understand the context where your business sits.
That’s something I’ve always done quite well,” says Mason.
He also created value at Mubaloo by applying his professional experience with the agency model and the right kind of management scrutiny.
“At Mubaloo we put management controls in place early – and held regular board meetings to keep up with business rigour. All the forecasting was measured and based on real data, not just a gut feeling for the market and where it might be headed.”
“And we grew up fast partly by operating with a full agency structure: from early on we had account managers, user experience specialists, designers. For the customer, it meant they were never just meeting a developer – and for me, it meant that I was creating something that was immediately running well without my input.”
After the deal was done, Mason started out providing two days a week of consultancy, which soon shrank to just one – and then became an even lighter touch advisory role.
“As exits go, it’s been nice and clean – just the way I planned it.”
Mason’s succession plan is what made it possible, and whether you are WPP or fronting a 20-strong agency business you founded, the same rules apply.
At Waypoint Partners we find nearly every time that we have to focus on succession as part of our wider work on value creation with the agencies we support – it’s something you really can’t ignore.
by Miles Welch
Partner at Waypoint Partners