WPP'S TALENT SPOTTER: Beth Axelrod thinks that a philosophy of nurturing young talent will enable WPP to outperform competitors. She talks to John Tylee about her mission

The worst gaffe you can commit within Sir Martin Sorrell's hearing is to refer to his WPP group as a "holding company". The next worst is to infer that Beth Axelrod, his newly installed chief talent officer, has a somewhat overblown title for a head of human resources.

At WPP, the term "holding company" is frowned upon. It implies that the company is little more than an acquisition vehicle, more parasitic than paternal.

Instead, it likes to position itself as a benevolent parent whose ability to provide added value to its operating companies is its raison d'etre.

And that's where Axelrod comes in, anxious to dispel any notion of her being some sort of personnel director with bells on. "The choice of title was deliberate," she says. "We were determined to avoid anything with 'HR' or 'personnel' in it because it suggests the status quo. 'Talent' typifies what we're about."

Axelrod is certainly no ordinary HR chief. She grandly describes her title as "a beacon of what's to come at WPP" and adds: "We want to send a message out to our people that we're going to be taking a different and better approach to their management."

Her brief isn't only to identify and track down the most outstanding senior managers for WPP companies wherever they're to be found but to put together incentive packages that will lock them in. At the same time, she's working with the heads of WPP's divisions to make the most of their talent base.

That means creating bespoke "talent agendas" that will enable WPP's brightest stars to shine and, in doing so, give their full attention to the group's business performance, rather than become distracted by the lure of a rival company's fat pay cheque.

Axelrod's arrival at WPP is significant because it heralds a greater emphasis on the recruitment and retention of talent in an industry that has traditionally betrayed a short-sighted and self-serving attitude when it comes to getting the best people. Why bother nurturing a potential company chief when a rival is likely to pinch them? Why not just let your rivals take the hit on the training costs and simply pluck their precious plant as it's ready to blossom?

Axelrod's task is to break that vicious circle by introducing more disciplined and professional methods of managing talent that are common to big business but almost totally alien to the communications industry.

Indeed, it is an indication of Sorrell's intention to incorporate this philosphy into the heart of WPP's thinking that Axelrod has been propelled on to the group's board less than seven months after joining the company from the consultancy McKinsey & Company. When the pair aren't in face-to-face meetings, the phone calls and e-mails between them are constant.

As the replacement for the mercurial Brian Brooks, now at Interpublic, Axelrod arrives with an unintimidating and approachable personality that belies the formidable academic background of a seemingly compulsive over-achiever. "I've been known to work hard," she smiles, in masterly understatement.

Born in rural Connecticut to an artist mother and a father who is a judge, she got a masters degree in public and private management at Yale during the heyday of its leadership in the field of organisational effectiveness. She went on to obtain a bachelors degree from Pennsylvania University's Wharton Business School.

At First Boston, she worked on mergers and acquisitions in New York and London. But it was during her 12 years at McKinsey that she refined her theories about the link between talent management and commercial success.

Her view is that the key to such success requires a deep-seated belief that having better talent is how companies outperform their competitors. As a result, Axelrod is keen to keep her distance between what she does and traditional HR.

She even suggests some HR directors exacerbate the problems by failing to make chief executives understand the link.

"My experience is relevant because I bring a business-minded view on how an organisation can improve its performance by managing its talent better," she claims. "Most leaders know intuitively that better talent yields better business performance but that doesn't translate into improved management of that talent."

In trying to get up to speed quickly with the peculiarities of the communications industry, Axelrod maintains that she can already draw parallels between the behaviour of the talented people in agency networks and in investment banking. Both sectors are "closed systems" in which talent moves freely across competitive organisations in search of more money and opportunity.

What's more, that talent regards its financial compensation as the ultimate statement of its worth. This isn't necessarily a symptom of greed, she argues. It's more that people don't feel sufficiently valued for their distinct contributions so look instead for that value to be reflected in their earnings.

Axelrod sees no reason why the industry shouldn't reward its best people disproportionately but warns that simply throwing money around won't improve matters when the fundamentals need fixing first.

"This industry operates with the models it has had for years," she observes.

"Now we have to rethink those models, although I believe we have the opportunity to develop very capable leaders." Sure, the industry ought to be paying top dollar to all its highest talents - but it can't do that until it can extract higher levels of profits from its clients, she points out.

And that means finding new ways of adding value. And how does it do that?

By investing in talent, that's how.

The theory has a compelling symmetry to it. However, it is not without its sceptics, who surfaced after the publication of The War for Talent.

It was written by Axelrod and two other McKinsey consultants, and set out their theories about the connection between the relentless search for talent and commercial success.

Their conclusions were based on questionnaires sent to thousands of managers across the US and on 18 companies that were singled out for special attention.

The aim was to find out what differentiated the top-performing companies from others in the way they hired and promoted people. Their verdict: the best companies are obsessed with talent - they recruit ceaselessly, reward their star staff well and push them into ever more senior positions.

Unfortunately for Axelrod and her co-authors, one of the organisations they chose to put under the microscope was Enron. On the face of it, the company seemed the ultimate confirmation of their beliefs. It boasted about hiring the smartest people it could find and paying them more than they thought they were worth. Nevertheless, its policy of packing in the talent failed to prevent the biggest collapse in US corporate history.

Everybody acknowledges that the reasons for Enron's bankrupcy are complex.

But its demise has sown seeds of doubt in some minds about whether the McKinsey trio's conclusions stand up to rigorous examination. The doubts were summed up in an article, by Malcolm Gladwell, in The New Yorker magazine.

"What if Enron failed not in spite of its talent mindset but because of it?" it asked. "What if smart people are overrated?"

The article raised the question of whether having a high IQ is a necessary prerequisite for job performance. High intelligence doesn't necessarily mean that you either have common sense or are good at working with other people, it pointed out.

The magazine cited the success of companies such as Procter & Gamble, the world's biggest advertiser. P&G has no star system but has dominated the consumer products field for almost a century through tried-and-tested management systems and marketing methodologies. And it suggested that maybe the vaulting ambitions of Enron's star employees were in conflict with the company's need for stability. Did it occur to anybody that if all top talent was being asked to "think outside the box", then perhaps "the box" needed fixing, it commented.

So, does Enron's fate seriously undermine Axelrod's insistence that talent is what sets successful companies apart from their competitors? Unsurprisingly, she claims that Enron's bankrupcy does not invalidate the conclusions made by The War for Talent in the slightest.

"What happened to Enron is a separate issue," she insists. "Perhaps its business model was fundamentally flawed, but that can only be speculation.

The fact is that Enron was one of more than 30 companies on which we carried out in-depth case studies. We've a very deep fact base for our findings, which still hold true. Better talent management alone doesn't make for a better business performance. That's down to a complex mix of processes, systems and cultures. But talent is a central part of that."

No surprise, either, that getting more business-minded people into the upper reaches of WPP companies is her declared aim. Internally, that means taking more risks with individuals, giving them challenging roles and, with the right support, getting levels of performance out of them that even they didn't think they were capable of. It also means better feedback to staff so that they are clear how they are performing and what is expected of them.

Externally, her role is to gather intelligence and capitalise on WPP's helicopter view of the global talent market that its operating divisions won't necessarily have. That involves meeting people in the know, sounding out senior managers who might interest WPP at a future date and identifying the best headhunters in particular markets where the landscape is unfamiliar.

"It's not that we want to usurp the responsibilties of the operating companies," Axelrod is at pains to point out. "It's just that, when it comes to talent management, we're uniquely qualified."

Axelrod is just as uniquely qualified to ask about the growing preoccupation with work-life balance, you might think. She and her investor husband have two sons aged six and three. Yet she's invariably at her office on New York's Park Avenue by 6.30am with at least a 12-hour day stretching ahead of her.

Managing her life is difficult but not impossible, she says. But she's candid enough to acknowledge that there are often tough calls to be made.

"I don't think it's possible to have it all," she declares. "Anybody who has a demanding career and a personal life will always have to make difficult and sometimes painful trade-offs. You have to deal with it - but you can make it work if you're thoughtful about scheduling things and managing your calendar in a sensible way." Much depends on your professional environment, Axelrod believes. At McKinsey, the company's consulting expertise bred an understanding of the importance of managing one's personal as well as one's professional life.

At present, Axelrod's professional life is dedicated to helping Sorrell fulfil his vision of stimulating the existing talent and finding the best from the outside to take WPP group companies to a higher level. "What's happening is good for our company and for our people," she says. "It's a win-win situation."

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