Dentsu International’s pursuit of a more conscious consumerism

This interview is part of the Inside the Mind of the CEO series, which explores a wide range of critical decisions faced by chief executives around the world.

In the early months of the pandemic, when businesses around the world were scrambling to keep pace with the speed of change, Wendy Clark found herself on the sidelines. She had resigned from her role as CEO of ad agency DDB Worldwide in February 2020 because she was about to take a new post as chief executive of the global marketing and advertising network Dentsu International (which runs Tokyo-based Dentsu Group’s agency operations outside of Japan). Clark was unable to start her new position until September 2020 due to a noncompete clause. Having to watch both companies confront unprecedented challenges without being able to participate was among the most difficult experiences of her career. But it also gave her time to reflect, to talk to industry experts, and to prepare for her next challenge: leading a 45,000-plus-person organization, headquartered in London, that operates in 144 markets and represents some of the world’s biggest brands, from her home office in Atlanta.

Clark, 51, is no stranger to hard work. She earned a bachelor’s degree in English from Florida State University in 1991 and entered a job market strained by a recession. Determined to get her foot in the door despite limited options in advertising, she took a job as a receptionist at a small agency. Over time, she worked her way up to senior marketing and advertising roles at AT&T and Coca-Cola before joining DDB Worldwide in 2016. She came to the agency world with a deep understanding of what clients want and need. This understanding helped inform her decision to launch a major transformation initiative upon joining Dentsu International, to enhance the company’s ability to provide integrated solutions. Her efforts have shown results: after nine quarters of revenue declines, the company reported sustained growth during the last three quarters, ending 2021 with organic revenue growth of 9.7%. It also achieved its long-held operating profit margin target of 15%, a year ahead of plan, resulting in an operating profit of ¥88.9 billion (US$772.8 million) for FY21.

But long-term, sustained success goes well beyond financial performance and must extend into the employee proposition, company culture, and competitive positioning. To that end, Clark has pursued a substantial environmental, social, and governance (ESG) agenda. She set aggressive decarbonization targets, which include reducing the company’s absolute emissions by 90% across its value chain by 2040, and is a member of the World Economic Forum’s Alliance of CEO Climate Leaders, a group of chief executives advocating for bold climate action. As Clark explained in a recent interview with strategy+business, her industry must play a critical role not only in helping companies evolve what they sell to include more sustainable products and services but also in shaping consumer behavior to encourage more conscious consumption.

S+B: What motivated your decision to launch a major transformation initiative?
CLARK: In September 2020, we announced our plan to go from 160 disparate brands to six global leadership brands, plus Dentsu as the seventh—and that we would take a little more than two years from the time of announcement to accomplish this transformation. It was an effort that needed to be driven locally: not every brand is in every market, and not every brand means the same thing in every market. We set the completion date, we set the brand construct and architecture, and then we empowered our local market leaders to execute.

Our transformation is critical. The company was facing challenges coming into the pandemic—the pandemic was like a second punch. By 2019, the company had acquired over 100 new acquisitions in a five-year period. We found ourselves with the resulting complexity of many disparate entities and, frankly, a cost base weighed down by these entities, and many duplicative roles. At one point, we had 250 people with the title “CEO.” We were at a point where we needed to rationalize and accelerate integration of these great acquired capabilities to meet the demands of the marketplace—which values growth, speed, agility, and efficiency. We had to transform the business to become a network that provides integrated, end-to-end solutions, and does so with an enviable combination of being idea-led, data-driven, and tech-enabled.

For example, we are helping our clients to engage consumers in more meaningful and valuable ways. There’s not one client I talk to that is not undergoing a data transformation in some form right now, driven both by the increasing sophistication of consumer identity and understanding and by being fully compliant about regulation, consumer privacy, and the appropriate use of data. Consumers’ expectations are that brands are smarter. If I’m giving you my data, I expect you to engage me so that I see what I want and not what I don’t want or what doesn’t apply to me. The good news is that increased legislation and governance will benefit everyone, because when people commit themselves and their data to brands that earn it, it creates a synergistic relationship of shared value.

S+B: How have you kept the transformation’s momentum going?
CLARK: We were transparent with our organization. We didn’t want to see endless years of change, but we had an opportunity to transform to be able to deliver more of what clients want. One of the things we said repeatedly as we started this journey was, “We will become disciplined businesspeople who do what we say we’re going to do.” That’s one of the most important things I felt that we could teach our leaders and our people—that good businesspeople have great discipline. They set targets, and they deliver on them.

We’ve just completed our 2022 version of what we call our “plan on a page.” This is an important management tool encapsulating everything we want to achieve this year on a single piece of paper. The plan includes the six levers of our business: our people, our clients and partners, our work, our social impact agenda, our financials, and our transformation. Then we have four to five priorities for each of those six levers, and four to five metrics against each priority. It’s an accountability document. We have 45,000-plus people in our organization, spread across the world. The message to each is: if you can’t find what you’re working on here on this document, ask your manager if you should be working on it.

By the second quarter of 2021, we returned to growth, and in fact we saw our highest organic revenue growth in nine quarters and achieved our 15% operating margin target for the first time in six quarters. And we accomplished this a year ahead of when we originally said we would. Still, I’m paid to worry, to never be quite satisfied. Muhtar Kent, our CEO when I was at Coca-Cola, calls it being “constructively discontent,” and I think that’s a good way to put it. I am always going to push a little harder. The best definition of leadership I’ve heard is “the careful balance of hope and reality.” I will always be honest with the organization about the realities—and many of our realities, by the way, are increasingly positive—but I’m also going to inspire us to achieve our full potential.

S+B: At the same time that your organization has returned to growth, you’ve been grappling with workforce trends such as the “great resignation.”
CLARK: The “great resignation” had a deep impact on our business and on our clients’ businesses. The challenge for us as a service company is that our clients count on us. We’re often the last line of defense. I had clients coming to me asking, “Can you second employees to us?” And there was the issue of the incremental weight of the business on the people who were filling the gaps of those who left while we replaced roles. I worried about them, as well.

If we could have foreseen this trend, we would have made some timing changes in terms of personnel and resources shifts. We would have further accelerated technology investments; we would have accelerated automation more. Those accelerated investments are under way now, but it’s all a little bit of hindsight being 20/20. Still, broadly, we’re seeing attrition levels return to January 2019 levels. That said, we all have significantly more to do to work in different ways to align with the expectations of millennials and generation Z.

S+B: Has this shaped your approach to employee engagement?
CLARK: Make no mistake, the “great resignation” is a reappraisal of leadership. It is a great reckoning on how we’re leading our companies and whether we’ve really thought about the lived experience of working at our companies. I have never felt a more profound sense of my “duty of care” toward our people.

Despite the trend of high attrition within our industry, in our most recent people survey—which was at the end of 2021—we achieved our highest employee engagement in four years. This is no small feat, and I give our leaders an incredible amount of credit. One of the highest-scoring attributes in our survey was “connection to my leader/connection to my manager,” and that’s tricky to do when working remotely. In the 18 months that I’ve been here, I’ve met roughly 100 people in-person in the organization. This is coming from someone who was on a plane every week of her career meeting people. It’s an astonishing change to how we must now lead.

Our survey also revealed a nice improvement in our clarity of strategy. Although we certainly have more work to do, we really amped up our internal communications and increased everyone’s accessibility to leadership. I do a monthly call with the entire organization—anyone can join and ask any questions they want, and they can do so anonymously. I’ve gotten some incredibly tough questions, which I answer, even when I have to admit that my answer may not be perfect or necessarily what some people may want to hear.

S+B: What effect has this transparency and openness had on your culture?
CLARK: I think we have taken the temperature down on some of the issues that have been particularly hot. For example, there have been ongoing debates around remote work. We’ve been clear about our adoption of a hybrid model, with no mandatory return to the office, except where certain roles require it. People continue to feel jittery, so we just need to keep repeating that we are committed to modern ways of working. Of course, there are things we can do from the office that we can’t do from our homes. I look at this as a marketing job—to create massive FOMO of what’s going on at the office to draw people back, rather than forcing them back.

Of course, transparency is critical in our client relationships, as well. If you do not trust your agency, they will not be your agency for long. Across a network our size, with 11,000-plus clients, we handle industry competitors in most categories. It is existential for us to have systems, protocols, and governance that provide 100% security and confidentiality of client information. I’ve been unequivocal about the values and integrity expected of leaders in our company. Those are the expectations that, as the CEO, I make nonnegotiable. It goes back to the notion of being disciplined businesspeople who do what we say we’re going to do. I often quote Indra Nooyi on integrity. She says that integrity is a yes or no question. You have it or you don’t—there’s no such thing as being 90%. This is our unyielding expectation of our people at Dentsu.

S+B: What is the role of ESG strategy in attracting and retaining talent?
CLARK: Dentsu’s longstanding vision is very clear: we exist to create a better world—for our people, for our clients and partners, and for society. We fundamentally believe in our ability to create growth from good, both for ourselves and for our clients. This is critically important, if not nonnegotiable, to our people, certainly to millennials and gen Z, who now comprise the majority of our workforce—our median age is 32. They’re built-in advocates within our organization.

Our social impact agenda is one of our greatest strengths. We’re the first holding company in our industry to announce a net-zero 1.5-degree plan. We’re the first holding company to use 100% renewable-sourced energy in all our markets. And we’re one of only seven companies in the world to have a deep decarbonization target, eliminating 90% of emissions by 2040, that is validated and accredited by the Science-Based Targets initiative.

S+B: How is the imperative to address the climate crisis changing the way you engage with clients?
CLARK: Many of our clients, being the world’s biggest companies, participate in the same forums that we do, such as the [global corporate renewable energy initiative] RE100. I also sit on the World Economic Forum’s Alliance of CEO Climate Leaders with many of our clients—for example, Ikea, Heineken, and Coca-Cola. We’re participating and working together.

Moreover, we fully recognize that we are part of our clients’ supply chains and therefore contribute to their Scope Three emissions, so we need to run our business in a way that helps them achieve their own decarbonization goals. This is increasingly part of the discussion with procurement teams—and it is now part of every pitch we make.

In fact, last year, a prospective client asked me personally in the middle of a pitch (that we won) if we would accelerate our net-zero commitment. It shows you how wired companies are to the proposition, and how their consciousness of carbon emissions and the need to drive change has grown. I was able to say yes to that client, as we had already accelerated our plans but hadn’t announced it publicly yet.

I don’t plan to be here [as CEO] in 2040, so I’m making a commitment for the next leader. And I think to myself, “Is that a fair thing to hand over to someone else?” It’s my plan, but I fully know I’m not going to be here to see it achieved. But I quickly realized that we’re doing the next leaders a favor, because it puts the company on the trajectory toward a regenerative future—we’ll go from net zero to circular to regenerative. And I don’t see a future for our company without doing this. It’s existential to the planet, and therefore it’s existential to our company, too.

S+B: Where are you focusing your sustainability efforts?
CLARK: The biggest contributor to our direct emissions is our energy use, because we have offices around the world. That was our first focus, which we are continually addressing through our renewable energy commitment and through our future-of-workplace strategy. As with many service-based businesses, our supply chain and air travel are big sources of indirect emissions, because we’re a people-facing organization with clients across the globe. We’ve made a public commitment to reduce our emissions from flights by 65% by 2030. That’s about behavior change, investment, and solutions our supply chain can develop for and with us. Of course, ultimately, we won’t achieve net zero as a society without making changes as individuals. So, we’re also helping our 45,000-plus people understand the issues and options they have in their daily lives—whether it’s decisions about energy use at home, the cars they drive, avoiding food waste, and so on.

Beyond our own organization, we need to focus on the work we do with our clients and how we can create consumer behavior change. Some of the most crucial work that we’ll do in the coming years is to create consumer demand around different and more sustainable ways of living. The UK Climate Change Committee found that nearly two-thirds of the transition to a net-zero world will come from individual consumer behavior change. We need to help our clients drive these changes through their products and services and to create demand among consumers for these more sustainable products and services.

S+B: What sorts of obstacles have you confronted?
CLARK: The greatest misunderstanding about our industry’s role in consumption is related to the common refrain, “You guys just help sell stuff.” And isn’t that at the cornerstone of what advertising is—selling more stuff to more people? That’s why we need to move toward conscious and mindful consumerism, and to help our clients understand that.

We also need to think about our clients. With increasing representation of millennials and gen Z, as I already mentioned, our people won’t work on things they don’t believe in. They are outspoken about not working for brands and companies that do not have a commitment to sustainability and social purpose. We do our best work when we have a values connection with our clients. When a company has a stated ambition, with measurable accomplishments and milestones toward that ambition, if it is investing in progress, and they want and are asking for our help, we need to help them. Our people want to run toward the world’s most pernicious challenges, not lean away from them.

That’s one reason that a group like the Alliance of CEO Climate Leaders is so interesting, because you have leaders participating from across industries, including, for instance, steel companies and chemical companies. These are leaders facing unprecedented challenges in the transition of their business that will cost untold billions, but it’s a transition they are committed to making. We want to be help advocate for, and create the right conditions and outcomes for, that transition to happen.

S+B: You’ve also set public targets around diversity, equity, and inclusion.
CLARK: Inclusion and fairness are critical aspects of achieving society’s net-zero transition—a just transition is one where we bring everyone with us. Similar to the topic of data transformation, there’s not one client conversation we have where diversity, equity, and inclusion are not crucial in discussions and plans. We hired chief equity officers in all three of our regions so they could be closer to the business to drive change. We then announced concrete, external targets to hold ourselves accountable. By 2025, we will be gender-equal at all levels of the company, including my direct reports. So, not just in the aggregate but taking it level by level. This is important, because in all organizations that I’ve been a part of, there’s a drop-off of women the higher you go in leadership roles. Similarly, for the US, by 2025 we will be 30% BIPOC. (We are running ahead of this plan, achieving 29% currently.)

To support our global gender equality targets, we started a development learning experience that we call “Path of Tabei.” Junko Tabei was the first woman to summit Mount Everest, and the Seven Summits, the highest peaks on every continent. We identified 60 high-potential female leaders for a yearlong development learning experience to accelerate their advancement within Dentsu at the senior leadership level. We’re creating similar development experiences in partnership with our business resource communities and groups to support our BIPOC goals (in the US).

S+B: How do you think about these ambitions in the context of the transformation you’ve undertaken?
CLARK: First off, I’m aware that none of this will be enough. For example, there are hidden inequities in our business that need more attention. Historically, our industry has tended to operate in expensive urban centers: New York, London, Paris, Hong Kong, Singapore. It’s economically challenging to live in cities like this when you’re entering the workforce. Now that we know how to work from home, geographic location is less important, and you can live in places that are less expensive—which can help improve our socioeconomic diversity.

More broadly, we must widen the aperture of whom we’re inviting into our company and make sure we are truly a place for everyone. When we do this, it creates an employee experience that is much richer, and it makes our work definitively better. Just like with our sustainability agenda, I don’t think we can be bold enough in embracing this type of change.