Sorrell plans WPP shake-up

16 September 2009

LONDON: Sir Martin Sorrell, chief executive of WPP Group, is aiming to consolidate the back-room operations of some of the holding group's biggest advertising agency networks, as he seeks to achieve "colossal savings for our clients and ourselves."

During the first half of this year, WPP posted an 8.3% decline in revenues, compared with a slide of 8.8% at Omnicom, and 6.6% at Publicis.

The company's worldwide headcount currently stands at 105,000, down by 6% on 2008, and Sorrell has previously warned this figure will fall by a percentage point for every similar drop in revenue.

He now argues there is a need to reconfigure elements of its activity, a move that would be likely to affect networks like Grey, Ogilvy & Mather and JWT.

"We have five [advertising] agencies. It is ludicrous that you don't have a common back office. It is the same business," Sorrell said. 

Moody's Investors Servicedowngraded its rating for WPP to close to "junk" recently as a result of the frailty of the global ad market and the high levels of debt linked to its purchase of TNS, but it did argue the organisation's cost saving efforts were on track.

However, Sorrell stated that, at present, "we aren't doing enough … My ideal is you have one back-office for all the brands within ten years."

According to his estimates, staffing is WPP's largest single area of expenditure, and also one of the few sectors where it has a degree of flexibility.

"The only thing you can adjust is your investment in people. I can't believe we can't improve the way we do things," Sorrell said.

While such a strategy will result in substantial benefits with regard to cost, it is also reflective of the fact there has been a "revolution from the bottom, the world has changed."

More specifically, there is a trend across the industry towards more fluid structures of working, rather than agencies taking on highly specified roles.

"The clients want us to work together, the clients want the best people working on their business," Sorrell said.

"Our people have a loyalty to not only WPP, but primarily to the brand in which they operate."

Indeed, while historically there has been a degree of hesitancy when it comes to agencies adopting a more unified approach, it appears this culture is also being "dismantled".

"The closer to the front lines you get, the more you are in the trenches ... the younger the people are that you talk to, the more enthusiastic they are about these opportunities of working together," said Sorrell.

While the process of driving change across WPP has been "stressful" for those managing and working for the company, Sorrell said "we have to make the adjustments" as the current climate is "as tough as it gets."

The advantage of this situation, however, could take the form of the "intellectual power you have if you get people to work together."

Moreover, WPP's ceo was not in favour of operating fewer agency networks, as, unlike areas like media buying, "there are no economies

Data sourced from Reuters; additional content by WARC staff