Ethics Earns Big Profits for London-Based Ad Agency
Talk about a dream coming true: St. Luke' s ad agency in London began as a kind ofdreaming, abstract exercise in imagining the advertising agency of the future. At thetime, in 1992, St. Luke' s was still the London branch of the Chiat/Day agency. Londonstaffers Andy Law and David Abraham had joined the agency' s task force on the future,the Chrysalis Committee, where they conjured a vision of an ad agency as a force for goodin the world. In the coming millennium, they believed, businesses would be judged not byproducts alone, but by their " Total Role in Society." The agency would helpclients design this TRS. Law and Abraham spent hours musing on a new model forbusiness - where employees would no longer be nobodies, where the focus would be on" stakeholders" rather than stockholders - and they put these visions on paper.
When the group presented its findings to Jay Chiat, he hit the roof. The committee wastoast. But the dream lingered.
Fast forward to 1995: Andy Law has received a call from Jay Chiat, announcing he' sselling Chiat/Day to Omnicon. Law' s task is to discard as many employees as he can.And he wants none of it. Before long, his London colleagues are joining him in a massmutiny: the London office is breaking away. They call clients, finding them happy tofollow the mutineers. And Chiat, once again, goes ballistic.
As Law recounts the tale in his new book, Creative Company: How St. Luke' s Became' the Ad Agency to End All Ad Agencies' (John Wiley & Sons), what began then was" a fight that would go all 15 rounds and which would take a staggering 10 months tocomplete." In T-shirt and jeans, Law met with Fred Meyer - the chief financial officer of Omnicon Worldwide - presenting his reasons for spurning the merger " like asoapbox agitator trying to stir a crowd." At his home, late at night, Law tookcountless anguished calls from colleagues urging him to embrace the merger. " I dreamtone night that a large black Mercedes had pulled up outside my son' s school andwhisked him off," he wrote. " ' We have Tom,' a Slavic voice said.' Sign the deal and merge, or else!"
But Law and Abraham stood firm - and they remained determined to break away ethically.In the end, both Jay Chiat and Fred Meyer supported them. As Law said in a recent phoneinterview, Chiat became " the genie spirit" helping to smooth the deal through.And Meyer designed the generous deal, by which Law and cohorts bought the London branch:for one dollar, plus a percentage of profits for seven years (with an option to buy itoutright for $2 million, roughly one times revenue).
At last the London office was free to follow its dreams. The mutineers renamed theagency St. Luke' s: the patron saint of creative people. And they took as theirpurpose, in Law' s words, " to elevate the human spirit, to offer the opportunityfor personal transformation."
They set about turning St. Luke' s into a democracy - where ownership is free, aguaranteed right, like the right to vote. Shares are distributed to all employees equallyeach year. Any employee may run for the six-member governing body, the QualifyingEmployee Share Ownership Trust (QUEST). When they run, employees write " manifestos," Law said. " Some even have campaign managers."
There are no secretaries at St. Luke' s, but there are " hubsters," whofunction like air traffic controllers, keeping track of folks - since there are no desksand no fixed working hours. The free-form office is arranged around clients, each of whichhas its own room. And then, of course, there' s the Chill Out Room, where employeesmight be found getting a massage or sleeping.
" It' s mad, it' s a mess, it' s untidy," Law said. And it works. Inits second year, St. Luke' s was named Agency of the Year by the British trade journalCampaign. Its billings grew from $35 million in 1995 to nearly $200 million now. Clientfees climbed from $2 million to $8 million. And employees went from 32 to 110. " Wehave the lowest staff turnover rate in the business, the best client retention, andmargins around 23%, which is fabulous," Law said. And all that is achievedwith high salaries and generous benefits (like ten weeks time off after five years, orsix months paid maternity leave).
St. Luke' s has been chosen for an end-of-millennium Business Ethics Award, for wehope it does represent the agency of the future - and a model of employee ownership for thefuture: where ownership is not a paternalistic gift from on high, but a right employeesthemselves claim.
Contact: Andy Law, Chairman, St. Luke' s, 22 Dukes Rd., London WC1H9AB, United Kingdom. Phone 0171-380-8888; fax 0171-380-8899. E-mail email@example.com.
Copyright 1999 Business Ethics magazine