Book-Reader-Assist/library/Ogilvy on Advertising/Chapter-04-How-to-run-an-advertising-agency/Chapter-04-source-text.md

Ogilvy on Advertising — Chapter-04: How to run an advertising agency

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4 HOW TO RUN AN ADVERTISING AGENCY Running an agency requires midnight oil, salesmanship of the highest order, a deep keel, guts, thrust and a genius for sustaining the morale of men and women who work in a continuous state of anxiety. It is popularly believed that advertising attracts neurotics who are naturally prone to anxiety. I don’t believe this. What happens in agencies is enough to induce anxiety among the most phlegmatic people. The copywriter lives with fear. Will he have a big idea before Tuesday morning? Will the client buy it? Will it get a high test score? Will it sell the product? I have never sat down to write an advertisement without thinking THIS TIME I AM GOING TO FAIL. The account executive also has reasons for anxiety. He represents the agency to the client, and the client to the agency. When the agency goofs, the client holds him responsible. When the client is bloody-minded, the agency blames him. The head of the agency also has his worries. Is such-and-such a client going to fire you? Is a valuable partner going to quit? Will you make a hash of the new business presentation on Thursday? Make it fun to work in your agency. When people aren’t having any fun, they don’t produce good advertising. Kill grimness with laughter. Encourage exuberance. Get rid of sad dogs who spread gloom. What kind of paragons are the men and women who run successful agencies? My observation has been that they are enthusiasts. They are intellectually honest. They have the guts to face tough decisions. They are resilient in adversity. Most of them are natural charmers. They are not bullies. They encourage communications

upwards, and are good listeners. Many of them drink too much, and read little except office paper, in which they drown. With few exceptions, they are decent people, and worth knowing. It wasn’t always so. When I first arrived in New York, some of the agencies were headed by bastards and phonies. One of the most agreeable things about running an agency is that all your accounts are in different industries. In the morning you discuss the problems and opportunities of a client who makes soap. In the afternoon it is a bank, or an airline, or a manufacturer of medicines. But you pay a price for this variety. Every time you see a client, you have to be sufficiently briefed on his business to give relevant advice. When I was the chief executive of my agency, I always took home two briefcases, and spent four hours reading their contents. Not much fun for my wife. Next to homework, my worst enemy was the telephone. I was usually 25 return calls behind. Agencies are breeding grounds for sibling rivalry. Will Cadwallader get a corner office before Balfour? Why did you invite Pennypacker to lunch instead of Morgan? Why was Sidebottom made a Vice-President before Winterbottom? The agency I know best has two Chairmen, three Presidents, two Managing Directors, eight Executive Vice-Presidents, 67 Senior Vice-Presidents and 249 Vice- Presidents. You might suppose that nobody would take such nonsense seriously, but they do. Giving out the titles reminds me of Louis XIV: ‘Every time I give someone a title, I make a hundred people angry and one person ungrateful.’ What can you do to keep sibling rivalry under control? You can be fair, and you can avoid playing favorites. Said Dr. William Menninger: ‘The executive is inevitably a father figure. To be a good father, whether it is to his children or to his associates, requires that he be understanding, that he be considerate, and that he be human enough to be affectionate.’ If Menninger had been into transactional analysis, he would have added that the best fathers are ‘nurturing’ rather than ‘controlling’. Laymen assume that if you work in an advertising agency, you produce advertisements. The fact is that 90 per cent of the staff don’t. They do research, they prepare media plans, they buy space and time, they do things loosely described as ‘marketing’. And about 60 per cent of them do clerical work. In most agencies there are twice as many account executives as copywriters. If you were a dairy farmer, would you employ twice as many milkers as cows? Friction between copywriters and account executives is endemic in all agencies. Copywriters traditionally regard account executives as brainless bullies. I know a few account executives who fit this stereotype, but most of them are

sensitive and well educated. Account executives are apt to regard copywriters as irresponsible prima donnas. Some are. HIRING Success in running an agency depends on your ability to hire men and women of exceptional talent, to train them thoroughly, and to make the most of their talents. The most difficult people to find are those who have the capacity to become good copywriters. I have found that they always have well-furnished minds. They give evidence of exceptional curiosity about every subject under the sun. They have an above-average sense of humor. And they have a fanatical interest in the craft of advertising. I used to think that nobody could write good advertising before he was 30. Then one day, on a visit to Frankfurt, I asked to meet the author of an exceptionally good campaign. She was 18. I marvel at the ability of some copywriters to keep their creative juices flowing year after year. George Cecil wrote the American Telephone advertising for 40 years, and wrote it well. It is a tragedy of the advertising business that its best practitioners are always promoted into management. I was infinitely more useful to my clients when I wrote copy than when I was Chairman of the Board. • • • When someone is made the head of an office in the Ogilvy & Mather chain, I send him a Matrioshka doll from Gorky. If he has the curiosity to open it, and keep opening it until he comes to the inside of the smallest doll, he finds this message: ‘If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.’ Even when you find someone who is better than you are, you won’t always succeed in recruiting him. Among those I have failed to recruit are Helmut Krone, the great art director; Shirley Polykoff, of Clairol fame; and a young account executive called Bart Cummings who went on to become head of the Compton agency. I have always tried to hire what J.P Morgan called ‘gentlemen with brains’. Did he mean gentlemen in the snobbish sense? I think so. The debt owed by the United States to Roosevelt, Dean Acheson, Averell Harriman, Robert Lovett, John J. McCloy, the Rockefeller brothers and many other aristocrats has not be sufficiently acknowledged. I have been particularly lucky with alumni of St Paul’s

and Harvard, notably my partners Esty Stowell and Jock Elliott. But I have also been lucky with gentlemen in the wider sense of the world. Brains? It doesn’t necessarily mean a high IQ. It means curiosity, common sense, wisdom, imagination and literacy. Why literacy? Because most communication between agencies and clients is in writing. I don’t suggest that you have to be a poet, but you won’t climb the ladder very high unless you can write lucid memoranda. I persuaded two of my partners to write a book on the subject. I commend it to you.* Look for young men and women who can one day lead your agency. Is there any way of predicting the capacity to lead? The only way I know is to look at their college records. If they were leaders between the ages of 18 and 22, the odds are that they will emerge as leaders in middle life. Make sure you have a Vice-President in charge of Revolution, to engender ferment among your more conventional colleagues. CROWN PRINCES Spot the comers on your staff, and plan their careers. Royal Dutch Shell has found that the most reliable criteria for selecting what they call Crown Princes are these:  

1. The power of analysis.
2. Imagination.
3. A sense of reality.
4. The ‘helicopter quality’- the ability to look at facts and problems from an overall viewpoint.   John Loudon, the distinguished former head of Shell, believes that when it comes to picking people for senior jobs, character is more important than any of these qualities. Dare I confess that I have come to believe in graphology as an instrument for assessing character? It is regarded as fakery in the United States, but is widely used in French business. Before accepting my offer of marriage, my wife had my handwriting analysed by two graphologists. Their reports were consistent – and accurate. Promote from within or hire from outside? ‘Mr. Morgan buys his partners,’ said Andrew Carnegie; ‘I grow mine.’ In the early days of Ogilvy & Mather, shortage of cash obliged me to pay peanut salaries. ‘Pay peanuts,’ says Jimmy Goldsmith, ‘and you get monkeys.’ I chose not to promote my monkeys, but to fill

senior openings from outside, with stars like Esty Stowell, Jock Elliott and Andrew Kershaw. Even a mature agency with a pool of potential leaders does well to refresh its blood by occasionally hiring partners from outside. WHO NOT TO HIRE Never hire your friends. I have made this mistake three times, and had to fire all three. They are no longer my friends. Never hire your client’s children. If you have to fire them, you may lose the client. This is another mistake I have made. Never hire your own children, or the children of your partners. However able they may be, ambitious people won’t stay in outfits which practice nepotism. This is one mistake I did not make; my son is in the real estate business, secure in the knowledge that he owes nothing of his success to his father. Think twice before hiring people who have been successful in other fields. I have hired a magazine editor, a lawyer and an economist. None of them developed an interest in advertising. And never hire your clients. The qualities which make someone a good client are not the qualities required for success in the agency business. I have made this mistake twice. OFFICE POLITICIANS The hothouse atmosphere in agencies can cause outbreaks of psychological warfare to rival university faculties.* The politics became so vicious at Milton Biow’s agency that he was forced to close down. I know of seven ways to squelch them:  

1. Fire the worst of the politicians. You can identify them by how often they send you blind copies of their poison-pen memos to their rivals.
2. When somebody comes to your office and denounces his rival as an incompetent rascal, summon the rival and make the denouncer repeat what he has just told you.
3. Crusade against paper warfare. Make your people settle their fights face to face.
4. Start a luncheon club within the agency. It turns enemies into friends.
5. Discourage poaching.

1. Don’t play favorites.
2. Don’t play politics. If you practice the fiendish art of divide et impera, your agency will go up in smoke. DISCIPLINE WORKS Insist that your people arrive on time, even if you have to pay them a bonus to do so. Insist that telephones are answered promptly. Be eternally vigilant about the security of your clients’ secrets; indiscretion in elevators and restaurants, the premature use of outside typesetters, and the display of forthcoming advertisements on notice boards can do grave damage to your clients. Sustain unremitting pressure on the professional standards of your staff. It is suicide to settle for second-rate performance. Above all, insist that due dates are kept, even if it means working all night and over the weekend. ‘Hard work,’ says the Scottish proverb, ‘never killed a man.’ People die of boredom and disease. There is nothing like an occasional all-night push to enliven morale – provided you are part of the push. Never leave the bridge in a storm. St Augustine had this to say about pressure: ‘To be under pressure is inescapable. Pressure takes place through all the world: war, siege, the worries of state. We all know men who grumble under these pressures, and complain. They are cowards. They lack splendor. But there is another sort of man who is under the same pressure, but does not complain. For it is the friction which polishes him. It is pressure which refines and makes him noble.’ I have to admit that I have sometimes found the pressure unbearable; my own fault for frittering away so much time on things which lead nowhere. It is a good idea to start the year by writing down exactly what you want to accomplish, and end the year by measuring how much you have accomplished. McKinsey imposes this discipline on its partners and pays them according to how many of the things on their lists they accomplish. LEADERSHIP I have had unique opportunities for observing men who manage great corporations – my clients. Most of them are good problem-solvers and decision-makers, but few

are outstanding leaders. Some of them, far from inspiring their lieutenants, display a genius for castrating them. Great leadership can have an electrifying effect on the performance of any corporation. I have had the good fortune to work for three inspiring leaders – Monsieur Pitard, who was my boss in the kitchens of the Majestic Hotel in Paris; George Gallup; and Sir William Stephenson of British Intelligence. There has been a lot of research into leadership. It is the consensus among the social scientists that success in leadership depends on the circumstances. For example, a man who has been an outstanding leader in an industrial company can be a flop when he goes to Washington as Secretary of Commerce. And the kind of leadership which works well in a new company seldom works well in a mature company. There appears to be no correlation between leadership and academic achievement. I was relieved to learn this, because I have no college degree. The motivation which makes a man a good student is not the kind of motivation which makes him a good leader. There is a tendency for corporations to reject executives who do not fit their conventions. How many corporations would promote a maverick like Charlie Kettering of General Motors? How many advertising agencies would hire a 38- year-old man whose curriculum vitae read: ‘Unemployed farmer, former cook and university drop-out?’ (Me in the year I started Ogilvy & Mather.) The best leaders are apt to be found among those executives who have a strong component of unorthodoxy in their characters. Instead of resisting innovation, they symbolize it – and companies cannot grow without innovation. Great leaders almost always exude self-confidence. They are never petty. They are never buck-passers. They pick themselves up after defeat – the way Howard Clark of American Express picked himself up after the salad oil swindle. Under Howard’s indomitable leadership, the price of American Express shares increased 14-fold. Great leaders are always fanatically committed to their jobs. They do not suffer from the crippling need to be universally loved. They have the guts to make unpopular decisions – including the guts to fire non-performers. Gladstone once said that a great Prime Minister must be a good butcher. I saw the head chef at the Hotel Majestic fire a pastry cook because the poor devil could not get his brioches to rise straight. This ruthlessness made all the other chefs feel that they were working in the best kitchen in the world. Some men are good at leading the multitude – whether it be the labor force in their company, or the voting population in their country. But these same men are

often miserable leaders of a small group. Good leaders are decisive. They grasp nettles. Some of them are very odd characters. Lloyd George was sexually chaotic. General Grant, who won the Civil War, drank like a fish. On November 26, 1863, the New York Herald quoted Lincoln as saying: ‘I wish some of you would tell me the brand of whiskey that Grant drinks. I would like to send a barrel of it to my other generals.’ Winston Churchill was another hardened drinker. He was capricious and petulant. He was grossly inconsiderate of his staff. He was a colossal egotist. Yet his Chief of Staff wrote of him: ‘I shall always look back on the years I worked with him as some of the most difficult and trying ones in my life. For all that I thank God that I was given the opportunity of working alongside of such a man, and of having my eyes opened to the fact that occasionally such supermen exist on this earth.’ I do not believe that fear is a tool used by good leaders. People do their best work in a happy atmosphere. Ferment and innovation depend on joie de vivre. I am indebted to Charlie Brower of BBDO for his amendment to the 13th chapter of St Paul’s first Epistle to the Corinthians: ‘A man who spendeth his life gathering gold for the United States Treasury and has no fun, is a sounding ass and a tinkling idiot.’ The great leaders I have known have been curiously complicated men. Howard Johnson, the former President of MIT, has described it as ‘a visceral form of spiritual energy which provides the element of mystery in leadership’. I have seen this mysterious energy in Marvin Bower of McKinsey, Ted Moscoso of Puerto Rico, and Henry Alexander of Morgan Guaranty. The most effective leader is the one who satisfies the psychological needs of his followers. For example, it is one thing to be a good leader of Americans, who are raised in a tradition of democracy and have a high need for independence. But the American brand of democratic leadership doesn’t work so well in Europe, where executives have a psychological need for more autocratic leadership. That is one of many reasons why it is wise for American agencies to appoint locals to lead their foreign subsidiaries. It does an agency no good when its leader never shares his leadership functions with his lieutenants. The more centers of leadership you create, the stronger your agency will become. There is an art in being a good follower. On the night before

a major battle, the first Duke of Marlborough was reconnoitering the terrain. He and his staff were on horseback. Marlborough dropped his glove. Cadogan, his chief of staff, dismounted, picked up the glove and handed it to Marlborough. The other officers thought this remarkably civil of Cadogan. Later that evening, Marlborough issued his final order: ‘Cadogan, put a battery of guns where I dropped my glove.’ ‘I have already done so,’ replied Cadogan. He had read Marlborough’s mind, and anticipated his order. Cadogan was the kind of follower who makes leadership easy. I have known men whom nobody could lead. Most of the great leaders I know have the ability to inspire people with their speeches. If you cannot write inspiring speeches yourself, use ghost-writers – but use good ones. Roosevelt used the poet Archibald MacLeish, the playwright Robert Sherwood and Judge Rosenmann. That is why he was more inspiring than any of the Presidents we have had since, with the exception of John F. Kennedy, who also used outstanding ghost-writers. Very few chief executives are good on their feet. Whoever writes the speeches, the CEO delivers them atrociously. Competence, however, can be learned. All major politicians hire experts to teach them the art of delivery.* The man who said the wisest things about leadership was Field Marshal Montgomery: ‘The leader must have infectious optimism, and the determination to persevere in the face of difficulties. He must also radiate confidence, even when he himself is not too certain of the outcome. ‘The final test of a leader is the feeling you have when you leave his presence after a conference. Have you a feeling of uplift and confidence?’ ALCOHOLICS It is reliably reported that seven out of every hundred executives in American business are alcoholics, and it is reasonable to assume that the proportion in your agency is at least as high. By alcoholic, I mean somebody whose drinking seriously interferes with his family life and his performance in the agency. He is on the way to losing his job, wrecking his marriage and dying of cirrhosis. Your alcoholics may include some of your brightest stars. The problem is to identify them, protected as they always are by their secretaries and their colleagues. Invite the alcoholic’s wife to join you in a surprise confrontation with

her husband. Start by telling him that all present are devoted to him. Then say how worried you are about his drinking. His wife and his children are about to leave him, and you are about to fire him – unless he does what you ask. A reservation has been made for him to enter a treatment center that very day. Most alcoholics agree to go. It takes a week for the center to dry them out, and another four weeks to rehabilitate them. On returning home, they must go to daily meetings of Alcoholics Anonymous for at least a year. This procedure works in about 60 per cent of cases. I have seen it salvage some valuable people of both sexes. If you would like further advice on the subject, consult the nearest chapter of Alcoholics Anonymous. WRITTEN PRINCIPLES Marvin Bower, who made McKinsey what it is today, believes that every company should have a written set of principles and purposes. So I drafted mine and sent them to Marvin for comment. On the first page I had listed seven purposes, starting with Earn an increased profit every year. Marvin gave me holy hell. He said that any service business which gave higher priority to profits than to serving its clients deserved to fail. So I relegated profit to seventh place on my list. Do you think it childish to use a set of written principles to guide the management of an advertising agency? I can only tell you that mine have proved invaluable in keeping a complicated enterprise on course. PROFIT AND ALL THAT I do not fancy myself as a financial wizard, but I have learned a thing or two from my partner Shelby Page, who has presided over the finances of Ogilvy & Mather since the first day. The average profit in agencies is less than 1 per cent after taxes. If you chisel on service, you can make more than that, but your clients will leave you. If your service is too generous, your clients will love you, but you will go broke. Size and profit are not the same thing. In 1981, Ogilvy & Mather made more profit than an agency which bills twice as much. Agencies add new services the way universities add new courses. Nothing wrong with that if you also discontinue services which have outlived their relevance. To keep your boat moving through the water, keep scraping the barnacles off its bottom.

Seven of the 12 biggest agencies are public companies. Their share prices have increased 439 per cent during the last ten years, compared with 37 per cent for Standard & Poor’s 500. Many security analysts still believe that agencies are a poor investment. Not so Warren Buffett, one of the most successful investors in the world. He has taken substantial positions in three publicly held agencies, and is quoted as saying, ‘The best business is a royalty on the growth of others, requiring very little capital itself … such as the top international advertising agencies.’ If you read the advertising columns in newspapers, you get the impression that the agency business is dangerously unstable. The reason is that the newspapers only report movements of accounts from one agency to another. Yet only 4 per cent of total US advertising changes agencies during a year. The 25 biggest agencies in 1972 are, with only one exception, the 25 biggest today, 11 years later. Eight of the top ten are in their fifth or sixth generation of management. Only Ogilvy & Mather has its founder still on board. HOW TO GET PAID You will have to choose between the traditional commission system and the newer system of fees.* The fee system has four advantages:  

1. The advertiser pays for the services he wants – no more, no less.
2. Every fee account pays its own way. Unprofitable accounts do not ride on the coat-tails of profitable accounts, which is the case with the commission system.
3. Temporary cuts in clients’ budgets do not oblige you to cut staff.
4. When you advise a client to increase his advertising, he does not suspect your motive.   I pioneered the fee system, but I no longer care how I get paid, provided I make a reasonable profit. In 1981, the average net profit of American agencies was 0.83 per cent of billing. Does that strike you as unreasonable? When a client frets about the price of his agency’s services, he ends up getting a low price and poor advertising. WHAT TO DO WITH YOUR PROFITS

First, you have to pay 52 per cent corporation tax. If you distribute what is left as dividends, your shareholders have to pay a further 40 per cent as income tax. When they spend their dividends, they have to pay sales tax. The Government has taken 73 cents out of every dollar you made as profit. Some agencies have invested their profits in ventures outside their competence – an insurance company, a travel agency, a retail chain, a fish cannery, a motion picture company, even a small oil company. Not surprisingly, they all burned their fingers. (I resisted that temptation.) The current fad is to invest part of your profit in buying other agencies. Beware! Agencies are seldom for sale unless they are in some kind of trouble. Perhaps you give their key people five-year contracts, because you think their clients would vamoose if they retired. But their ways are not your ways and the friction can be abominable. Are there more sensible ways of investing your profits? I know of three:  

1. You can open branch offices in other cities or other countries. This has the advantage that you don’t inherit other people’s mistakes, and you preserve your own ethos, pure and undefiled. The disadvantage is that your start-up costs cannot be capitalized, so they reduce your earnings per share.
2. You can buy the building which houses your office. Young & Rubicam did this in New York two years ago.
3. You can build a reserve against a rainy day. On Wall Street they regard this as lunacy, but when times get hard, the lunatics may survive longer than their more adventurous competitors.   A new gimmick is to acquire agencies and leave them to their own devices, even allowing them to compete with you in new business contests. One of the giant agencies has become little more than a holding company for a miscellaneous collection of independently operated subsidiaries. FORTUNES The agency man who made the largest fortune was Albert Lasker of Lord & Thomas (now Foote, Cone & Belding), followed by Ted Bates, Jim Mathes, Ray Mithune and Cliff Fitzgerald. I estimate an average of about $20,000,000 each. Some people have made fortunes out of selling their agencies to Interpublic, including David Williams, Tom Adams, Al Seaman and Hagen Bayles; my guess

is that they averaged about $6,000,000 each. The admirable Bill Marsteller probably made more than that when he sold his agency to Young & Rubicam, as did the senior partners in Esty when they sold to Bates, and the senior partners in Compton when they sold to Saatchi & Saatchi. Ed Ney, the head of Young & Rubicam, is the only present-day head of an agency who has built a large nest egg without selling out or going public. However big the egg, Ney is worth every penny. FIVE TIPS

1. Never allow two people to do a job which one could do. George Washington observed, ‘Whenever one person is found adequate to the discharge of duty by close application thereto, it is worse executed by two persons, and scarcely done at all if three or more are employed therein.’
2. Never summon people to your office; it frightens them. Instead, go to see them in their offices, unannounced. A boss who never wanders about his agency becomes an invisible hermit.
3. If you want to get action, communicate verbally. If you want the voting to go your way at meetings, go to the meeting. Remember the French saying: ‘He who is absent is always wrong.’
4. It is bad manners to use products which compete with your clients’ products. When I got the Sears Roebuck account, I started buying all my clothes at Sears. This bugged my wife, but the following year a convention of clothing manufacturers voted me the best-dressed man in America. I would not dream of using any travelers checks except American Express, or drinking any coffee but Maxwell House, or washing with any soap except Dove. As the number of brands advertised by Ogilvy & Mather now exceeds 2,000, my personal inventory is getting complicated.
5. Never allow yourself the luxury of writing letters of complaint. After my first transatlantic voyage I wrote to my travel agency complaining that the service on the Queen Mary was slovenly and the decoration vulgar. Three months later, we were on the point of getting the Cunard account when they happened to see my letter. It took them 20 years to forgive me and give us their account.

When you are appointed to head an office in the Ogilvy & Mather chain, I send you one of these Russian dolls. Inside the smallest you find this message: If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.

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ARE EACH SHALL

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Wanted by Ogilvy&Mather International Trumpeter Swans In my experience, there are five kinds of Creative Director:

1. Sound on strategy, dull on execution.
2. Good managers who don't make waves...and don't produce brilliant campaignseither.
3. Duds.
4. The genius who is a lousy leader. 5.TRUMPETER SWANS who combine personal genius with inspiring leadership. We have an opening for one of these rare birds in one of our offices overseas. Write in inviolable secrecy to me, David Ogilvy, Touffou, 86300 Bonnes, France.

When I advertise for Creative Directors, I make it clear what I want.

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A ‘visceral form of spiritual energy’ characterized these great leaders. Top to bottom: Marion Bower of McKinsey, Ted Moscoso of Puerto Rico, Henry Alexander of Morgan Guaranty.

When I got the Rolls-Royce account, I followed my rule of using the client’s product. Other Rolls-Royce owners have included Rudyard Kipling, Henry Ford I, Ernest Hemingway, Woodrow Wilson, Charlie Chaplin, Baden Powell and Lenin. Mine lasted 22 years. Notes * Writing that Works, by Kenneth Roman and Joel Raphaelson, Harper and Row, 1981. * When Senator Benton left the Benton & Bowles agency and joined the University of Chicago, he found the politics much worse. * Read Speech Can Change Your Life by Dorothy Sarnoff, Doubleday, 1970. * A commission is paid to the agency by the medium – print, television, radio – in which the agency has bought space on behalf of its client. Under this arrangement, the agency finances services to its clients out of commissions, rather than charge fees direct to the client.