CLOSE-UP: LIVE ISSUE/ST LUKE'S - St Luke's survivors to fashion a more 'mainstream' culture

A boardroom shake-up is to change St Luke's way of working, writes Mark Sweney.

In the early decades of the last century a new political model called communism emerged. At the time the model held hope and caught the imagination, but infighting broke out and somewhere in the heat the model lost its way.

Although comparing the rise and fall of the communist state with that of the London ad agency St Luke's is more than a little navel gazey, the shock ousting of Andy Law and Kate Stanners last week does highlight some parallels.

A new management order has been voted in, with the joint managing directors, Phil Teer and Neil Henderson, taking over. This pair now faces the mother of all tasks: updating the St Luke's culture to a model that will attract new clients and keep existing staff happy.

Law, a founding partner and chairman, and Stanners, the deputy chairman and a former creative head, were key figures in building St Luke's formidable reputation in the mid-90s. In a masterstroke of irony, Law's downfall came as a result of the co-operative management structure that he founded.

Over the past few months, a schism developed over the future strategy of the agency, latterly involving international expansion. Law, and his plans for international growth, was in one camp, opposing Henderson and Teer who wanted to concentrate on domestic issues.

In a now-infamous behind-closed-doors showdown, Law is understood to have attempted to fire the pair. However, Neil Thompson, the agency's finance director, is said to have stepped in and pointed out that under St Luke's co-operative model, no such unilateral decision could be made by an individual.

Henderson and Teer were given breathing room to gather support for their political position in the agency, and, a month later, St Luke's board said goodbye to Law and Stanners. In the friendly style St Luke's has become famous for, there was little mud-slinging from either party. So how did the agency find itself in this position?

In 1995 when St Luke's launched, it was shortlisted for Campaign's Agency of the Year. The next year it took the accolade, and a new agency model was born. It was a breakaway from Chiat Day, which had sold to TBWA, and adopted many of the former agency's more radical features, such as hot-desking.

The co-ownership model and the moniker St Luke's, a collective name in an era when the norm was to display the names of the partners above the door, were a response to dissatisfaction with the status quo in advertising.

St Luke's stood out as new and innovative. And over the years, it has maintained high creative standards, with groundbreaking work for the likes of Ikea, Clarks and BT.

It also made much of its "partnerships" with clients, attempting to advance its position from being a simple supplier. It worked: St Luke's attracted the kind of clients that bought the kind of work the agency believed in.

In the mid-90s only HHCL & Partners brought anything similar to the table.

However, innovation begets imitation and within a few years the approach became almost boring. But instead of moving on, St Luke's appeared to become self-obsessed.

Dave Buonaguidi, a former creative director at St Luke's from its launch until 1998, says: "The problem was that the most important client in St Luke's became St Luke's. It was almost like family or household politics."

Although the agency has a board, its co-operative model meant there was a power vacuum and a perceived egalitarian hierarchy resulted in petty issues dragging the agency's momentum down - most famously an all-staff referendum on which cereal to serve in the agency cafeteria.

The emerging problems were embarrassingly broadcast on a Channel 4 fly-on-the-wall documentary, which showed staff vociferously arguing over topics such as the moral issues surrounding receiving flowers for overtime.

Buonaguidi and the fellow creative director Naresh Ramchandani's departures in 1998 and 1999 respectively were an early sighting of cracks beginning to show. But it was the loss of David Abraham, a co-founder, to Discovery Networks in 2001 that raised the most questions about the direction of the agency.

Abraham has consistently denied he quit because he could see things were going pear-shaped (his departure came in the same year as Sky and HSBC pulled their combined £50 million accounts). He says he was motivated by an ambition to get into entertainment TV.

Having been Law's heir apparent, Abraham's departure meant that Henderson and Teer were shunted into the agency's senior management. With a much more orthodox approach to business, the pair's promotion represented a distinct change in direction for the agency.

While Law was distracted by his work for the Artists Network and writing his new book, pointedly called Experiment at Work, Henderson and Teer have gradually been changing the culture of the agency - they've had to.

Facing financial losses, defecting clients and the recession head on, there's no time for rhetoric.

"Phil and I have been running the agency for a year and have been here a long time. There won't be wholesale changes. Andy talks a lot about going into things in an unplanned way to plunge into the unknown, to try things out. We are keen on innovation, such as programming and online, but doing it in a more planned way," Henderson says.

"We made the decision to invest in glue London, Campaign's New-Media Agency of the Year, and taking a stake with the best people is the most sound way of being at the forefront of that market."

In client terms, the agency now relies heavily on BT, for which it developed the current broadband campaign. Henderson is confident of BT's continued support, but others believe BT to be nervous about St Luke's dependence.

Change is overdue at St Luke's. It was the zeitgeist, but other successful launches have stolen that mantle, Mother being the most obvious example. With Henderson and Teer at the helm, most expect a more conservative approach from the agency.

However, Henderson says: "There are good things about being mainstream, such as client handling, but in no way will you see an a less innovative or radical approach to campaigns. It's not Andy Law generating that stuff."