In St Luke's we trust

An ad agency that espouses jobs for life? And a share in profits? It sounds too good to be true. But at the hierarchy-free St Luke's a social conscience is a must. Sceptics read on.

When St Luke's opened for business in London in October 1995, it seemed like a Utopian dream come true. Imagine, a totally democratically run advertising agency in which every member of staff - yes, everyone from receptionist to managing director - was given shares. There would be minimal hierarchy, no personal desks (or even offices) and staff would participate in all decision-making: from what colour to paint the walls to pay rises. That was the theory. As the dust settles following St Luke's first annual general meeting, the practicalities are breaking through.

But first, the story so far. Eighteen months ago, St Luke's managing director, Andy Law, and David Abraham, marketing director, negotiated a deal on behalf of their colleagues to buy out the agency from its former parent, US agency Chiat/Day. Chiat/Day was merging with Omnicom, the US marketing services giant - a move the London staff were unhappy with. A deal was struck and the new company, St Luke's, was born.

"We had all grown up in an industry which, in one way or another, had pissed us off," Abraham explains. The revolutionary structure was a rebellion against convention. "The way agencies remain extremely hierarchical, coercive and exist only to benefit shareholders you never meet or owners with little direct involvement. The serf mentality. The creative director reading his newspaper while staff queue at his door. The huge layers of staff, all aspiring to the next rung up the ladder." Phew! Abraham gives a "Well, you did ask" smile and adds: "So we created a corporate structure to match our ideals."

It was a radical departure from the ego-driven world of advertising. For a start, no directors' names on the door - St Luke is the patron saint of creativity. And no hoards of chiefs bossing around a few indians. "We have an almost flat hierarchy - there are apprentices, and there are practitioners," he explains.

Pay is not equal, although differentials are narrower than in other agencies. Performance reviews work both upwards and downwards, with everyone saying how much they think should be awarded. There are no fixed working hours (although there are regular meetings), and people can even work from home. No one has a secretary. And the only offices are client rooms, around which all work on a particular campaign is conducted. Each of these is themed - a "method advertising" approach resulting in an Ikea zone, a mocked-up Midland Bank area and a mini Clarks Shoes shop.

Then there was the agency's social and environmental commitments. Success was to be defined by more than just profit. "It would also involve our role in society, our role in people's lives and whether we were developing as a business in a socially positive way."

Fast forward to the present, and St Luke's business performance in its first financial year has been impressive if modest by industry standards - it is handling total advertising business worth more than pounds 40m; earnings are around pounds 4m. It has won a string of new business including Clarks, United Distillers and Ikea on top of inherited accounts like Midland Bank, Body Shop and BBC Radio 1. As a result, the staff is now 70. There are, however, teething pains.

"Creativity is difficult to manage," Abraham explains. St Luke's response may have been to break down traditional structures and encourage greater flexibility, but there is a downside. "Working without a formal structure presents pressures - ambiguity is stressful. Many people complain their boss has 'kept them down'. But when you're given a blank sheet of paper, it's very different." Lucinda Chiesman, a former receptionist and now office manager, agrees: "You can feel alone if you have a problem. It's down to you to find the solution."

Democracy also has its limitations, it seems. Despite starting out with minimal structure, new teams and committees have had to be introduced to all decision-making. The company was co-operatively run from day one by an elected body called a Quest, which acts as both "conscience and thermostat". Another body, called Treasury, oversees finances. Views and votes are lodged at regular agency meetings. However, new groups have been introduced to manage day to day running and monitor the quality of the agency's ads.

Clutter is another concern. When no one has their own space to care for, inevitably things get messy. Then there's pay. Not everyone wants their salary displayed publicly. And there have been disagreements over whether bonuses should be paid to staff or put back into the agency. Which brings us on to personal differences.

When people are unable to overcome a problem, such as inappropriateness for the job or a personality clash, or when an agency loses business, the typical response is fire some staff. St Luke's policy is to offer a six-month reprieve to try out a new role or work with a different team. If this fails, a further six months is granted to find a job elsewhere. So far, no one has been forced to leave. But resolving conflicts remains an issue, Ms Chiesman observes. "Because there is no hierarchy, you can find professional distances aren't kept in disagreements." Which will undoubtedly have to be addressed as St Luke's continues to expand - another worry.

"A major concern is to what extent this will dilute our culture," Neil Thompson, finance director, explains. The bigger the agency gets, the more profitable it becomes. Good news for the employee shareowners. But at what point does adland's despised fat-cat mentality kick in?

While small, St Luke's can enjoy the luxury of turning down the tobacco advertising pound. Or deciding not to pursue 80 per cent of the enquiries from other advertisers they receive. Or dedicating itself to a particular type of work. It's all about compatibility, says John Grant, planning director. "We're not about shiny, hollow advertising. We want our work to move people - to take them somewhere. We may work in a wacky culture, but we're not producing wacky advertising. Some is very serious. It's not about superficial styles."

Take campaigns like the one for Boots make-up, which focuses on how women feel rather than on how they look. Or for Eurostar, with a contemplative Eric Cantona musing on the meaning of life.

Or Ikea's "Chuck out the chintz" - you may loathe what one commentator described as "the trivialisation of women's lib", but you remember it. Undoubtedly, creative advertising is more positive than cheap repetitive ads in which two women are astonished by a household cleaning product. "There's still far too much of the latter around, and it's environmental pollution - degrading and patronising," Abraham believes. Which is why, in the future, he hopes St Luke's can attract more clients involved in social activities, like health or transport. Not for the feelgood factor achieved by the token "good cause", but to get involved with "something that really matters".

The advertising agency with a social conscience. Now there's an interesting idea. Sceptics, however, should beware: Ms Chiesman has some words for you. "It really does sound too good to be true - why would anyone give me a stake in an advertising agency? But they have. The idea is to have a job for life. That's because all this is ours, we'll walk that extra mile to make it work," she says. "I've never worked in a different office. And I'm not sure now that I could"n