The gospel according to St Luke's

Ad agencies are casting off the greedy image of the Eighties and spurning the West End.

If your idea of the archetypal adman is a thirtysomething Porsche- owner with red-rimmed glasses and a pigtail, think again. In an attempt to move away from the advertising ethos of the Eighties, a new generation is struggling to redefine itself.

It doesn't sound like an ad agency, more like a hospital or school. But St Luke's, whose clients include Midland Bank, Boots, Carlsberg-Tetley a0nd BBC Radio 1, hopes to be the first of a new breed. The agency relaunched last month after its 45-strong staff bought the business, formerly Chiat Day, from its US parent, the media group Omnicom. In a bold break with tradition, the agency renamed itself - not after the names of its founding partners but after the patron saint of doctors and artists.

"The main problem with the advertising industry is its value system," says marketing director, David Abraham. "The industry refuses to ask itself what its role in society is. But if you operate in a system divorced from society you talk only to your peers to be congratulated, or to consumers to reinforce ideas you already have. The result is advertising that's patronising or just bad."

His sentiments are shared by St Luke's managing director, Andy Law. "The average age of people in this agency is 29. Their values are very different from those who were advertising "stars" in the Eighties; they want something different." This is why the relaunch of Chiat Day has meant more than a name change. The agency isowned by all of its employees. From this month, each will hold an equal stake in the company. More shares will be allocated every year - until an employee moves on. There will be no outside shareholders.

The aim of this new arrangement is to generate trust and ensure the satisfaction of the shareholders - the agency staff, who will vote in key executives to decision-making roles each year. The agency has introduced a self-assessment system enabling employees to rate their own performance and to set pay levels. "All staff will be expected to assess what they should get against knowledge of exactly how much is in the budget, what experience others in the same job have to merit their pay and the industry norm," Law says.

It seems impossible that such a dream is being realised in an industry known for its ostentation and extravagance. A decade ago, Saatchi & Saatchi was a byword for the excess and materialism of the Eighties, with million- pound salary cheques, opulent offices, pounds 40,000 taxi bills and even a pounds 5,000- a-year bill for flowers. Many claim the recession put paid to all that, resulting in a drastically pared-down workforce and puritan corporate ethic. Not so, Abraham claims: "The Eighties adman is alive and well." This is why staff at Chiat Day chose to dictate their own destiny outside a traditional multinational advertising group.

They are not alone. Two agencies have launched in the past month, each claiming to offer a viable alternative to the traditional approach. "Advertising agencies must fundamentally change to counter growing scepticism about advertising and the advertising business," says John Crowley, the media and communications director of The Hub, "a digital advertising agency".

While the raison d'etre of the traditional ad agency is to make 30-second TV commercials, employing hundreds of staff, occupying plush West End offices, the new-generation agencies must be slimline and flexible, he says. The Hub has a staff of only seven and will draw on a network of freelance talent. It has swapped the delights of Soho for a business zone in Hounslow.

Mike Coughlan, a co-founder of VAM, another new start-up, agrees. VAM has a core staff of five with campaigns created by teams working across the UK via phone link and modem. "Many agencies are considering the merits of virtual creative departments, assuming they can prise their creative heads out of the pub and get them working from home," he says.

Cost-cutting is only part of it. Necessity has forced advertisers to seek alternative means of communication other than traditional campaigns. "Huge budget, all-singing and dancing advertising productions are a thing of the past," Coughlan says. "The days of the monolithic agency are numbered." He points to the number of big players who have started calling themselves "communications consultants", or "strategists".

"Some won't like it. Others won't see the point," Coughlan says. "But it won't be long before they realise the advertising industry they once knew no longer exists." It's less a result of new technology than changing attitudes, as the advertising industry comes to terms with a sobering truth: adapt, or die.