Why thinking small is big in advertising

A new world order has swept through the advertising industry, so does it pay to think 'small' rather than 'big', Alex Benady asks.

If you were fortunate enough to be working for Bartle Bogle Hegarty last year, the morning of 6 September would have seen you wake up in the pampered precincts of the Doral Resort, a five-star golf and health spa in Miami, to begin celebrating the agency's 25th birthday.

After showering in a marble bathroom the size of Texas, you would have walked downstairs to join your colleagues for breakfast. All 850 of them. Basically, the entire workforce from BBH's six offices worldwide.

You would then have spent the next three days having golf lessons, beauty treatments and inspirational talks, before the finale - a two-hour performance by the New Wave band Blondie.

"The weekend was fabulous, the attention to detail was astonishing. It was fantastic to discover that the people from our Singapore office and Latin America were just like us," one staffer enthused afterwards.

Back in the UK, a new order in the British advertising industry was ushered in two weeks ago. Billings figures from Nielsen revealed many of the long-established "big" names in advertising have been overtaken in size by agencies, most privately owned and all independent, which are thought of as small or, at least, "smaller".

M&C Saatchi is currently the third-largest agency in the land, with billings of £263 million, nearly half as big again as Saatchi & Saatchi, its biggest rival, which came 14th. WCRS was sixth, bigger than Rainey Kelly Cambell Roalfe/Y&R. Delaney Lund Knox Warren & Partners at 13th lies just behind Ogilvy. There's only £5 million billings' difference between Grey and Fallon, while Leo Burnett and TBWA\London are out of the top ten. But BBH is now the fourth-largest agency in the country, with billings of £260 million, making it bigger than JWT.

It looks like something is going on here. Could it be that BBH's all-staff birthday bash, and its heady new position near the top of the billings table, are in some way related? Or, to pose a more general question, does having a "small feel" equate to success in the advertising industry these days?

Perhaps, perhaps not. It might be a case of over-interpreting the figures, Martin Jones, who is from the intermediary AAR, says.

"Be wary. There is a danger in mistaking a story for a trend here. This phenomenon is based on a handful of giant retail account moves. WCRS has Sky; BBH has Vodafone; Mother has Boots; and Fallon has Asda. So, a handful of account changes may be skewing perceptions," Jones warns.

Nonetheless, senior management at BBH is quite clear that it does see the Miami caper as a plank in its ongoing attempts to try to maintain a certain intimacy in its burgeoning network.

"We worry about the effects of growth, and if it means we will grow blander. We now have 410 people in our London office. I no longer know everyone here, let alone in the network. So the trip was important in creating a sense of belonging and improving cultural alignment," the worldwide chief executive, Simon Sherwood, says. He does decline, however, to reveal just how much the little staff outing cost. But it seems unlikely that it was much under £1 million. How could such a sum be justified?

"Easy," Sherwood says. "This is the stuff of agency folklore and legend. It will contribute to a feeling of shared goals among all the staff in our network, and it will continue paying back for years to come."

Spending hundreds of thousands of pounds to feel small again? It's one of those paradoxes like Picasso taking decades to learn to paint like a child again, or Marie Antoinette dressing up in designer rags to play at being a milk maid on her toy farm.

But really, it's just a measure of how important "feeling small" is perceived to be to succeed in the industry.

Advertising, though, has always had a fundamental problem. If you are good, you grow. But if you grow, you run the danger of losing what made you good in the first place. As the US ad man Jay Chiat once put it, the key question for all agencies is: "How big can we get before we stop being good?" But Andrew Robertson, the chief executive of BBDO Worldwide, which has 17,000 staff in 287 offices, speaks for a great many in the industry when he says: "I think it is only by behaving small that you get to be big."

The problem, Nigel Nicholson, an evolutionary psychologist and professor of organisational behaviour at the London Business School, says, is that advertising may be the model of a modern creative industry. But even in the sophisticated world of communications, people perform best in traditional social structures that have evolved over millions of years.

"There is an instinctive side to organisational size, so unless companies are careful about their structures, the requirement for profits and growth can be at odds with how we function best as human beings," he reveals.

According to Nicholson, we perform best in teams of between five and seven people, and tribes of about 150. This is the largest size of operating unit that allows for a sense of community to be retained, although it can also be achieved by breaking up larger groups into units this size.

"The successful groups throughout history and geography, whether they are tribes, jazz bands, sports teams or businesses, tend to have certain characteristics," Nicholson says. "You need diversity in skills, experience, personality and style. Then you need a strong and clear common purpose. And you need a high degree of informality with little status differentiation."

This is immediately recognisable as the description of a start-up. The idea of the "start-up" has become a sort of prelapsarian idyll, and is regarded by many in the industry as the acme of excitement, energy, focused creativity and entrepreneurialsim.

It is what every bloated agency claims to be reconstructing when it relaunches with a new management team. It is what every smaller unsuccessful agency claims is its USP. And it seems to be a common characteristic of the agencies that are seen as hot, with powerful new-business records.

The emphasis has to be on the feeling of being small or an aspect of being small, rather than actually being small. Objective evidence suggests that size in itself confers no particular business advantage either way.

"There is certainly no evidence that small agencies are any more creative than larger agencies. Just that good agencies will always be attractive to clients," Jones observes.

And data from Willott Kingston Smith shows that when it comes to business performance, big is as good as small. The top ten agencies have higher gross income per capita than fourth quartile agencies, for instance. On the other hand, they spend more per capita on wages - an average of £66,000 versus £47,000. So, overall operating profit margins are more or less the same, averaging around 12 per cent for big and small agencies, Mandy Merron, a partner at WKS, says.

"It is clear the bigger agencies have much more impressive productivity statistics than their small, independent, counterparts. However, there is no clear link between size and profitability. While smaller agencies can react more quickly to changes in the market, they tend to be more reliant on small numbers of clients, and, as a result, are less robust with their fees. There is also a tendency in the smaller agencies to over-service these key clients."

She goes on to say that there is some evidence to suggest that particular specialist niche or regional agencies can generate higher margins than the less specialised or London-based shops can.

And it is here that the truth lies. Clearly "feeling small" is nothing to do with size. Rather, the common characteristic of agencies such as BBH, Mother, Fallon and Wieden & Kennedy is that they are all in a niche. Not a geographical niche, but an attitudinal niche. "They have personalities and values, they are not afraid to polarise," Jones says. "Often, the personality is just that, an expression of the values of a few individuals in the agency."

But a fundamental aspect of these personalities is that they are not driven by a short-term need for profit growth. Explaining the success of BBDO, a subsidiary of Omnicom, Robertson says: "The key thing is to be driven by something other than the desire to be big. Profit must be the outcome of doing your job well, not the main objective."

Neil Christie, the managing director of W&K, agrees. "We made a loss for the first six years. If we made a profit but did bad work, I think we would have failed."

Once you've got past the evolutionary psychology, the management theory and the accounting statistics, it all boils down to that familiar of concepts: brand. While advising clients that their very existence depends on clear branding, agencies have been notoriously reluctant or just unable to create clearly differentiated brands for themselves. Usually on the grounds that, if they have too clear an identity, they may preclude themselves from large swathes of client business.

The latest Nielsen rankings expose that thinking as myth.


- Neil Christie, Managing director, Wieden & Kennedy

Agency culture is key. Do not let it be defined by clients. You are useful to them because you are different. So don't bend over too much. We turn away more business than we accept if there is no cultural match.

Being privately owned allows you to take a longer-term view. We made a loss for six years running, before turning in our first profit.

It is people, and not processes, that matter. Have values and transmit your culture clearly.

- James Murphy, Founding partner, Adam & Eve

Create cross-disciplinary teams and let them have sole ownership of campaigns. The idea of spraying a brief across six teams is classic mistaken big agency thinking. The most brilliant work I have been involved with was always produced by tight teams.

Create a tight, cohesive small management team of just four or five people. It creates more focus and a more familial atmosphere. The policy of "my door is always open" is not good enough. Agency leaders should be visible. You need to be out there walking the floors. Agencies are not about having a Brahmin class. It's a craft business.

As you increase in size, try to avoid creating cliques and departments. Create gangs, not groups. In the most productive relationships, the client is always part of the gang.

Embrace the chaos. Systems should allow for a certain lack of control; that's where creativity flourishes.

- Andrew Robertson, Chief executive, BBDO Worldwide

Over-communicate. Maintain a maniacal focus on your purpose.

Be very clear about the people you hire, so you don't gradually end up diluting your culture. Appoint only the best. Never ever take on someone who describes themselves as a "pro-active results-oriented team player".

Make your principals principles.

- Simon Sherwood, Worldwide chief executive, Bartle Bogle Hegarty

We don't want absentee landlords here. Keep all the senior people client-facing. It's an important way of staying connected to the business and people who run it.

As organisations grow there will always be bureaucratic creep. Install short, flat management structures.

Make sure everyone in the company is plugged into a very clear set of values.

- Magnus Djaba, Director of development, Fallon

We try to be collaborative and not territorial. So everyone involved in an account can make a contribution at any point.

Agency netball teams and away days are nice. But if the only time people feel part of the team is outside the agency, then you have a problem.

- Will Orr, Managing director, WCRS

Create an entrepreneurial culture by distributing ownership. Everyone here can take their bonus as share options.

Don't worry about growth. Focus on doing things well and growth will follow.

- Professor Nigel Nicholson, London Business School

Large organisations exist to gain economies of scale and greater efficiency. But this is at odds with the playfulness and waste needed for creativity. To reconcile the two, many larger organisations create "skunkworks" - small creative islands off the management leash.