PR's six degrees of separation

Some agencies are such fertile breeding grounds that the PR world is like an extended family. Kate Magee investigates the whys and wherefores of who broke away from whom.

(Broken line denotes sister agencies set up by agency) 

What does it take to set up a PR agency? Balls, largely. Experience certainly. A hefty contacts book and a healthy approach to risk, absolutely. And a smartphone. But what of education?

Professional qualifications no doubt enhance one's chances of success, but we were thinking more about the university of life - or rather which agencies had shown themselves to be the proving grounds of the next generation of PR entrepreneurs. It is a given that Procter & Gamble, Unilever, Diageo and Reckitt Benckiser are the professional universities for marketers. But we wondered what were the agency equivalents in PR.

PRWeek has uncovered a set of agencies that had helped to create many of the stars of today and tomorrow along the way.

Our criterion was strict: we counted only the agency the founder had worked at immediately before he or she set up their own business as the mother ship.

Step forward Shine Communications, Freuds, The Red Consultancy, Hotwire, The Outside Organisation and older names that will jog some memories - Valin Pollen, Ludgate and Lynne Franks PR. All these agencies have spawned at least four agencies, many of which are now in the PRWeek Top 150 PR Consultancies table independently.

Many other agencies deserve a mention, including Charles Barker, which sparked Four Communications, The Rowland Company (Lexis), Financial Dynamics, Lowe Bell, Dewe Rogerson (Lansons) and Broad Street (Brunswick). But it was the names highlighted in the following interactives that sparked the largest number of employees to set up their own businesses, rather than become comms directors or join existing agencies.

What is it about this lot that inspires others to go out on their own? Is entrepreneurialism in the water? Is it a mirroring of internal culture or a reaction against it? Is it just coincidence?

Common trends across the agencies are that they are young, independent, smallto mid-sized and are mainly in the consumer PR space.

The sector matters, because consumer PR arguably has the lowest barrier to entry.

A start-up is unlikely to win a £1m brief to run the global press office for a major FMCG brand, but it will win some of the smaller accounts that do not require a large resource to service.

Consumer PR is one of the busiest sectors and has a curious habit of favouring the young and new.

As The Red Consultancy's CEO Mike Morgan says: "Consumer clients actively seek out young, energetic agencies because they feel they are going to get hot new stuff." It is much more unlikely that a corporate affairs director will want to try out a small, inexperienced agency to handle a business' corporate needs.

Size is a major factor, with an absence of big network agencies on the list.

All the agencies are independent and are either still small or were small when the entrepreneurs worked there (Shandwick was still independent at the time most of the agencies launched).

Smaller agencies offer access to the senior team and exposure to all parts of a business. "Proximity to the senior players means you get to see a business end to end and it is not a huge mystique. You get to do things at an earlier stage than if you were at larger firms and realise it's not as hard as you thought," adds Morgan.

Hackford Jones co-founder Simon Jones says exposure was key for him when he was working red carpet events at Freuds: "I got invaluable face-time with artists, journalists and clients at events and created relationships that I would not have done at an agency where I was stuck at my desk."

It also helps if the agency takes staff training seriously and instils an entrepreneurial spirit. "From day one, we make it absolutely clear to people how their work and behaviour can grow the business and make us more successful. Our staff are recognised and rewarded for helping to build things," says Hotwire's group CEO Brendon Craigie. 

Shine Communications' founder Rachel Bell (Broken lines, right, denote agencies that Bell helped fund) agrees. Every employee at Shine has a business objective to go alongside a personal objective, which gives staff insight into how a business is run. "We are transparent about the information we share with the team and that helps breed a business mentality and a sense of ownership within the business," she says.

Working for an independent agency also offers a different perspective on building a business than following orders from on high from a global network.

"We give people a much richer experience that is much less formulaic. We don't have head office targets to hit. It's a living, breathing culture that exists for its own end," says Matthew Freud, founder of Freuds. "Owning and running your own business looks fun, rather than seeing the head of your agency or division browbeaten in a management meeting."

Joining an agency when it is still young and growing offers insight into how to expand a business. Morgan says many of those who set up their own agency after working at Red lived through the period when the agency grew from ten to 30 staff. "That's the period when you learn the most as an agency and it's a training course that you can't buy," he says. "When you join a younger firm, you will have seen it forming itself. It's much easier to see the dynamics that might lead to fast-moving growth and this inspires enormous confidence."

Those who come from a small agency background are likely to be more junior when they leave to set up by themselves than their counterparts at larger agencies. It is often account directors who leave small agencies behind, but divisional heads or MDs who quit larger agencies. Those more senior, large agency background people are more likely to set up smaller consulting operations, often with just one or two members, whereas those from smaller agencies tend to build an agency as if seeking to replicate where they came from.

Arguably the former is a better business model: low overheads, higher potential profit, minimised risk based on experience of running (at least some elements of) a business and understanding the ins and outs of a balance sheet. The latter may be based on the enthusiasm of youth, unfettered by mortgage and other financial or familial ties, with higher risk and in some cases higher potential reward.

Horses for courses 

Craigie believes this split is to do with the type of person different agencies attract. "The decision to work for a large network agency rather than a relative newcomer says something about you as an individual. The type of agency a person chooses to work for is a good indicator of whether they are entrepreneurial. There are a disproportionate number of entrepreneurs in businesses like ours compared with a large agency."

Freud agrees: "We're a welcome home for people who don't necessarily fit elsewhere. People who are less cut out to be cookie-cutter agency people are more likely to have entrepreneurial tendencies."

Of course, there are other reasons than just an entrepreneurial spirit for going it alone, namely disillusionment, a fairer profit share or fleeing from a merger. For example, in the financial agencies - Valin Pollen and Ludgate - departures seem to have been sparked by a sale to a larger agency.

It was also the trigger for Graham Goodkind, group CEO and founder of Frank PR, who left Lynne Franks PR when Ketchum wanted to dispense with the name. "It was definitely the spur to go off and set something up myself," he says. "I had learned a lot at Lynne Franks PR in terms of how to run and, more importantly, how not to run a PR agency.

Lynne had been the classic entrepreneur, starting a great business from her kitchen table and making a lot of money in the process. That was inspiring."

Indeed, confidence is a word that comes up again and again. "Most agencies that have spawned others have been successful and grown every year. People working in our businesses are used to success, and this inspires confidence. They think 'if Hotwire can do it, so can I'," says Craigie.

Tim Trotter, who founded Ludgate and is now chairman of Glenfern, says: "I instilled an entrepreneurial culture at Ludgate, which I like to think led to a 'can do' attitude throughout all our teams and offices. It gave people confidence. Businesses such as Ludgate and Dewe Rogerson demonstrated how you could build successful overseas financial PR/IR consultancies. Individuals eventually left and built their own practices."

Top role models

So it is this confidence and the right role models that inspires entrepreneurs to take the risk of setting up an agency. As Jones says: "We could have fallen flat on our faces. I was on a good salary, so our motives for setting up an agency were not related to money. We did it for autonomy over what we were doing. Freud gave me the confidence to do it. Had I not had seven years of hard grounding and experience, I wouldn't have founded my own agency."

But Freud believes this confidence often does not go far enough, arguing: "An important part of what's wrong with this industry is that people don't place a high value on the work they do. My first account in 1985 was a record business brief, which paid £800 a month. The average record company contract now, nearly 30 years later, is £750 a month."

He adds: "The only advice I have for people setting up their own agency is that you have to charge a premium if you want people to value what you do."

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