Sorrell's Nominated Replacement Vs New Broom -- Did WPP Get It Right?

We could all probably feel a little sympathy for Mark Read this morning, as the day after he was officially appointed CEO saw him have to present and explain some fairly lacklustre results.

The takeaway is that revenue is down just over 2% but was up just over 2% of the past quarter. Hence, there is some room for optimism that better times are ahead. Mark Read is talking about "green shoots," but also promising to take a closer look at the US operations -- an area that the company feels is underperforming. 

It's a tough official entry into the new role he has unofficially held for the past few months. It probably didn't help that Sir Martin Sorrell was quick to tell Campaign that those past few months looking for a new CEO were a "waste of time." To be fair, although there are probably some sour grapes at play, Sir Martin has a very good point -- and, let's face it, is a major shareholder. 

It's almost certain that what Sir Martin Sorrell says is correct and that the succession of Mark Read was already lined up in the spring, and that Andrew Scott -- now named COO -- and Read would run the show as a "twosome." 

The delay is curious and will prompt observers to consider whether WPP was serious when it looked around for a replacement CEO, or whether it simply went through the motions. I think everyone reading this will have at some stage attended a job interview or been contacted about a potential opening that turned out to be just a case of meeting protocol while an internal candidate was appointed. 

What adland thinks is fairly irrelevant, however. Perhaps WPP really did have a good look at external candidates, and maybe they just ticked the right boxes before making an announcement they could have made official months ago.

The more worrisome aspect for WPP is that revenue is still down and when the City was asked this morning what it thought of the new plan, the answer was immediate. WPP's share price slumped 7.5%. At around lunchtime, it had recovered slightly to be oscillating at around 5% down on its opening value. WPP is still a stock that has lost a third of its value in just over a year. 

Mediatel probably got it right today when it referred to WPP being in limbo. The new CEO appointment could have been made several months ago, but instead the company carried on with a provisional CEO -- and its share price, although it showed peaks and troughs, is in much the same place that it was when Sorrell decided to go.

Is Read going to turn things around? Who knows? But appointing from within the person Sorrell selected to take over from him, if anything bad were to happen, suggests that WPP thinks a continuation is called for -- and that things will generally work out for the best without the need to bring in new blood. 

And this is pretty much what we have. Disappointing results with a slight cause for optimism have led to another dip in the share price. 

Tellingly, Sorrell pointed out in his Campaign comments today that Ford was mentioned as a client by WPP, but is actually up for review. This underscores the precarious nature of the mega-deal with the mega-brands that have realised they are a media agency's cash cow and are now demanding greater transparency and better rates. 

Whoever took over WPP would have to face up to this inconvenient truth, and to be honest, whoever presented today's results would have to talk about clients and billings that reflect this drive to better value and thinner margins. So it's only fair to spare Mark Read from being judged until another year's figures are in the bag.

Whether WPP is right and things can go on under Sorrell's nominated replacement -- or whether someone from the outside was needed who was ready to take tough decisions, having not been involved in the group's previous growth plans -- will remain to be seen. What we do know is that clients have turned and margins are being squeezed, so even if WPP carries on as usual, the market is moving on and awaiting the holding companies' responses.

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