What Is Martin Sorrell Up To?

Sir Martin Sorrell is an interesting guy. An innovator, in many respects, as when first to establish a foothold in China (successfully), or creating holding company solutions for some big clients, like Dell (largely unsuccessfully). Now it seems that he is tinkering with the structure of his company, WPP, again. AdWeek just highlighted a stellar financial performance in 2010, but also noted, "In an interesting detail to the earnings release, WPP underscored its strategy is to continue to have variable staff costs—incentives, freelance and consultants fees—as a “significant" proportion of total staff costs and revenue in order to have flexibility in dealing with revenue volatility, economic slow-down and recessions. In 2010, there was a significant increase in the ratio of variable staff costs to total staff costs, rising to 13.4 percent and as a proportion of revenue, rising to 7.8 percent, representing the highest ratios for the last 10 years. Even as profits rose 16 percent, headcount declined in 2010. At the end of the year, on a like-for-like basis, the average number of WPP employees fell 4.2 percent to 101,387 from 105,849 in 2009."

Is WPP easing itself into a business model that would rely more heavily on freelancers? As agency compensation is declining it is quite likely that agencies will attempt to control their biggest expense - their labor cost.