Opinion: Perspective - There's more to an agency's health than finances

In the post-Enron world of corporate health checks, the ad industry embraced the new spirit of obfuscation with gusto. The Sarbanes-Oxley rule, introduced in 2002, has provided a welcome cloak behind which to hide any useful pointers on whether agencies are actually translating their clients' billings into robust incomes and margins. After a couple of years of gruelling recession, Sarbanes-Oxley has come in very handy.

Gone are the days when some agencies pursued confident transparency, revealing their income data. Now there is a reticence, sanctioned by the US ruling that effectively restricts companies from revealing non-audited figures. But for an industry that prides itself on payment by fees and/or results and where margins are perpetually under siege, gauging the success of an agency business - rather than the size of its clients' wallets - is harder than ever.

So Willott Kingston Smith's annual Agency Performance League (p28) presents one of the best pictures now available of business health (rather than the chief executive's PR nous or talent for over-optimism). There are caveats, of course. The records filed at Companies House do not provide a fully transparent window on corporate rosiness, particularly for some of the local offices of the global networks. And the nature of filing means it's impossible to compare like with like since reporting dates span several years (two agencies that have experienced financial issues - McCann Erickson and Leagas Delaney - had not filed accounts since 2001 by the time this report was compiled). Even so, the results are fascinating, not least for the portrait they paint of the newer ad agencies.

Many of the more recent start-ups are often accused of launching with a ready-made sell-by date and of taking a cynical approach to building an agency business, though it's ridiculous to criticise any business for having profitability and earnings at the top of its agenda.

But as the WKS report suggests, the maturing independents are enjoying higher profits, healthier incomes and often higher salaries than their holding company-shackled counterparts. Fallon (admittedly now part of Publicis), Delaney Lund Knox Warren, Miles Calcraft Briginshaw Duffy and Mother all score well on revenue and profitability and their staff appear to enjoy the benefits through higher salaries.

Now you don't have to rely on the WKS figures to be able to contrast this with the presiding spirit at some of the bigger, networked agencies. Lunch a few agency chiefs and you'll find a common sense of ennui. So many of the entrepreneurs who lent the UK market the colour, energy and verve that made it a world centre for advertising passion and excellence have sold their businesses. Now they find themselves ground down by the pressures of relentless cost-cutting, procurement-savvy clients and overseas paymasters.

Of course, the domestic pressures of school fees, divorces, second families and eye-watering mortgages are often enough to ensure they're not contemplating retirement quite yet. But nor are they all invigorated or motivated or excited by their jobs.

Back at the independent owner-managed agencies, the relative freedom to take risks, reward talent and create a culture focused on people and clients rather than stock market performance or global cost controls is tangible. Of course this will probably be translated into handsome sell-out deals at some point down the line but their current robustness and energising cultures are signifiers of corporate health that not even Sarbanes-Oxley can mask.


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