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Commercial breakdown

It was a utopian dream: an ad agency co-owned by its hip young staff, where creativity flowed, democracy ruled - and millions were earnt. But then it all went wrong for its 'unofficial' leader, Andy Law. Katy Guest investigates

Thursday 20 March 2003 01:00 GMT
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For a few years after it was launched on 18 October – St Luke's Day – 1995, St Luke's was the hottest news in advertising. It attracted big- name clients – BT, Ikea, HSBC, even the Government – like bees to honey, and won an Agency of the Year award in 1997. The style sections of the Sunday supplements ran stories extolling the virtues of its ultra-designed offices, artists-in-residence and themed "brand rooms". The Harvard Business Review called it "the most frightening company on earth". "What Saatchi & Saatchi was to the Eighties," says the industry watcher Peter York, "St Luke's was to the Nineties."

But it wasn't just the list of swish new clients it had scooped from under the noses of its dinosaur rivals that made St Luke's unique. This little company was going to change the way we all worked for ever. Now, its radical ethos is in tatters and its pioneering leader – who, with somewhat unfortunate timing, has just published Experiment at Work, a business manual in the evangelical style – has been forced to resign. Where did it all go wrong for the weirdest advertising agency in the world?

Picture the employer of your dreams. Walk through the door of its trendy offices in an old toffee factory in central London, and instead of a reception you find the "Hub", run by a group of laid-back "Hubsters". Some have probably just returned from a company-funded week of Indian head-massaging, horse-whispering or parachuting, thanks to the Make Yourself More Interesting Fund. And it's no wonder they're laid-back. Each year, all employees (or "co-owners", as they prefer to be called) are given a small amount of shares. They don't all earn the same salaries, of course, but employee files are open so anyone can see what anyone else earns.

Co-owners are empowered to take time off when they feel they need it, and any tensions (as if!) can be thrashed out at the office ping-pong table – a central fixture. Nobody can be offended by the size of anyone else's office because nobody has an office. Or a desk, for that matter; hot-desking is obligatory. Meetings are held in "client rooms" decked out in company colours – a railway carriage, for example, for the Eurostar account, or a teenager's bedroom to remind you of the target audience of Boots. In your ample time off, you relax in the knowledge that your company is 100 per cent "carbon neutral": any harmful carbon dioxide it produces is offset by its mango farm in India. After a few years, profits are soaring. Hell, you even get on with the council of "Questors" that makes the decisions; if you don't, you elect someone else from among your peers. This was St Luke's.

Seven years after it started, visitors to St Luke's offices will discover a different story. The recession has hit the advertising industry badly and St Luke's has been haemorrhaging clients. BSkyB took its £40m account elsewhere; HSBC and its £10m waved goodbye; and even the prize client, Ikea, on whose behalf St Luke's ordered the nation to "chuck out the chintz", took its bat home – and its money.

Having unveiled a profit of £2.4m in 1999, in 2001 St Luke's was forced to admit a pre-tax loss of £829,000, and staff (sorry, co-owners) weren't taking it well. In February this year Campaign – the advertising industry's in-house magazine – reported that an internal meeting "turned into a very ugly event. Mud was slung, plates were smashed, hair was pulled and arses kicked". There are some uprisings that even ping-pong politics cannot quell.

Also, the company has steadily been losing some of its founding (and guiding) members. The losses of David Buonaguidi and Naresh Ramchandani in 1998 and 1999 were difficult to take, not least because their new venture, a "creative thinking company" called Karmarama, has swiped the precious Ikea account. In 2001, the company's charismatic number two, David Abraham, left to head Discovery Networks Europe.

But the final straw was the departure this month of St Luke's unofficial leader, Andy Law. What happened is likely to become the stuff of legend in the industry in which rivals are already snickering, "I told you so." After a lengthy disagreement about whether to expand the company internationally (Law is fervent about this: something about "the fruiting body releasing its spores around the world") the St Luke's management erupted in an almighty row. Law pulled rank – a rank that, thanks to his founding principles, he did not have. He made his two managing directors, Neil Henderson and Phil Teer, redundant, but they didn't stay redundant for long. One co-owner pointed out that, under the company's co-operative model, no such unilateral decision could be made by an individual. Using the power vested in their colleagues by Law and his co-founders, Henderson and Teer put the matter to the vote and were supported. Law had to quit. The received wisdom is that his departure will do for St Luke's what the death of Trotsky did for Communism.

And the publication of Law's book, his third extolling the virtues of the St Luke's way of working, only makes the story more interesting. It reads like an amalgamation of Douglas Coupland's Microserfs and George Orwell's Animal Farm, written by a computer programme fluent in breathless Silicon Valley management-speak. With blank pages thoughtfully provided for the inspired reader to make notes, the book talks with messianic fervour about "brainstorming", "connectivity", "out-of-the-box thinking" and working "telelogically".

Law, a slightly star-struck figure with a disconcertingly earnest gaze, drags in his famous friends, Dave Stewart of the Eurythmics and Anita Roddick. He describes the democratic convictions at the heart of St Luke's with disarming, if sickening, idealism. He begs the reader to strike an agreement with him: put into practice just one of these methods and you, too, can help to slay the dragon of cynical capitalist interests. "OK," he writes, "I'll give you a lever to change the world." He really believes it. You can only imagine the relief that must have flooded the St Luke's office when he walked out of the door. "Thank God," you can hear them spitting. "Time for a bit of good, old-fashioned negativity for a change."

So when did all the good intentions turn sour? Almost from the start, some say. "Even right from the beginning there were huge rows," Ramchandani says with some exasperation. You get the impression he's slightly sick of hearing about the utopia that wasn't St Luke's. "For three months after we set up there were fights about who should get how many shares. And that sort of thing was happening all the time. It was like a treacle of greed, it was horrible." It's a far cry from the official philosophy, in which "fear, greed and ego" were banned.

And that's not the only place where Ramchandani's experience of the company differs from the gospel according to St Luke's. "All the stories you read about the vision and the utopia, they're just not true," he told me. "It was a lot more conventional on the inside than it appeared from the outside. The claims were wrong, nonsensical. The company was very tightly controlled by one or two people at the top. There were experiments, but not nearly to the extent people think. They tried to revolutionise advertising, but they turned St Luke's into the worst thing advertising does: spin."

Perhaps most surprising are Ramchandani's memories of Law. While Law appears to see himself as a sort of Apple Mac-literate Moses, leading his people out of the slavery of employment persecution and into a promised land of mango farms, ping-pong and limitless time off, to Ramchandani he was a self-obsessed Svengali. "Andy is the reason I left," he says. "I didn't like the way the company was going. Our brand ended up being put higher than the clients', and that's not the way it should be."

That may sound harsh, but it could explain the exodus of clients from St Luke's. Ramchandani's suspicions are backed up by clients for whom St Luke's' great claims ended up in nothing short of embarrassment. Take the Daily Express, for example. When the newspaper signed St Luke's up for a campaign, in its wisdom, the agency decided the ad would be a play on the word "Express", and had actors dressed in trainers chase a lookalike of the editor, Rosie Boycott, around the office. The commercial was voted Turkey of the Year, but they were unabashed. At an Express management "away day" shortly after the campaign bombed, Abraham used his after-dinner speech to inform senior Express staff that the paper was on its way out. "Let's face it, guys," he told them cheerfully, "you're fucked." When Boycott told Abraham and Law that their remarks had caused offence, they were still unrepentant. Soon afterwards, the agency was sacked. The only surprising thing is that it lasted so long.

Back at base, all was not well in the toffee factory. Henderson and Teer had been promoted to allow Law to pursue his own interests elsewhere – namely an independent media company called Artist Network that he had set up with Dave Stewart. Co-owners were muttering their discontent at his hands-off approach. "Andy spent most of his time doing international consulting and writing his book, so Phil and I have been running the company since last April," confirmed Henderson recently. Law's constant fervour for international expansion was also a bone of contention among those who wanted to concentrate resources on the recession-hit London branch.

Law's methods sound hard to swallow. There is an anecdote in his latest book that describes a meeting between Law and some colleagues. He had been explaining the need for constant change: if something works, he was trying to convince them, you must still do it differently next time. "Why reinvent the wheel?" one of them asked him. "Or the vacuum cleaner?" he responded. "Or CDs, or the motor car, or banking, or TV?" You can see where some of his theories have come from, but taken to their natural conclusions they are exhausting. "You have to do things that seem unnatural," he preaches. "They should, in theory, often be disliked." The trouble comes, of course, when 100 co-owners, each of whom has been given a voice, cannot agree on what they dislike. "Chaotica" is Law's cute term for his ethos, but fundamentally, it's just chaos.

So what has become of the St Luke's "experiment"? "There's always a paradox between strong leadership and working as a co-operative," Law muses, now, as if his sudden unemployment has been his first chance to consider this contradiction. "There is also a problem with reconciling the way the company is owned with trying to expand." He has just learnt these things the hard way. But would he do the same things again, knowing what he knows now?

"I'd probably be a little bit more dictatorial if I did it again," he admits, tellingly. "And yes, the share system is a problem. You'd have to be a very special person to join the company at a senior level on the same shares as a receptionist." It's not rocket science. But for a man who claims to believe in "the positivity of human nature", Law has had to swallow a few nasty truths. His forgetting to use the word "Hubster" in that last sentence says it all.

Back at the Hub the beleaguered co-owners are dusting themselves off, blending another fairly-traded fruit smoothie and preparing to confront this latest change. The St Luke's dream, however, is looking a bit battered. "It's important to remember that we're co-owned, not co-run," stresses Teer. "Along with the chaos we need quite rigorous systems. We're not a co-operative." He's said to be looking again at the shares system. Four legs good, two legs better?

Meanwhile, all over adland the pin-striped traditionalists are chuckling the chuckles of the victorious. The dreamer who believed in co-operatives and the power of human nature has been struck down by the forces of cynicism, and all is right in the hierarchical world of advertising. As one boss says: "Something that was invented as an antidote to office politics has been brought down by office politics." Another is even less sympathetic: "It's very difficult to run an agency along the lines of a kibbutz."

Whether St Luke's now dismantles the ping-pong table, cancels all paternity leave and uses the Make Yourself More Interesting Fund to buy shares in a tobacco plantation remains to be seen. But it would be an interesting conclusion to the co-ownership experiment if the co-owners went into their meeting on Monday morning and voted just to be employees, after all.

'Experiment at Work' by Andy Law is published by Profile (£15)

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