For Mark Read’s WPP recovery plan to succeed, he will need to unite two parties behind his vision – the company’s shareholders and its staff. Since his strategy involves laying off some 3,500 of the latter, that task will be a formidable one.
A 4% boost to WPP’s share price in the wake of Read addressing investors this week suggests he's got the backing of the market – for now. But within WPP’s own walls, the chief executive's plan to turn the holding company into a ‘creative transformation’ business has met with a more restrained reception.
“We were relieved,” says one ad agency staffer, speaking on the condition of anonymity. “We were expecting that we might be merged so there was a sense of relief, but now it’s sort of dawned on us and most people are worried about the cuts.
“There’s a general sense – [because of] the hiring freeze and no pay rises – that people aren’t being put first and we’re expected to go with it, but no one is feeling incentivised. On the other hand, there is a complete understanding things need to change to ensure our survival and that a shakeup is needed.”
Another employee, who has held five different jobs within the group, acknowledges something had to give. “I’ve been here a long time. One of the big things that has prevented us from competing is not taking the investment in tech seriously. Now we are focusing on commerce and tech as fundamental pillars, I hope this will change.”
'A people business'
At an investor day in London that had the feeling of an upfronts event on Wednesday (12 December), WPP big hitters including Karen Blackett and Lindsay Pattison took to the stage to praise Read’s new direction. Jon Cook and Debbi Vandeven, who run the recently merged VMLY&R, eulogised about the company’s new-found spirit of collaboration.
Michael Frohlich, the watching Ogilvy UK chief, described the mood as an “exciting new energy”.
Coming off stage at the end of a marathon six-hour presentation that was peppered with bombastic showreels, Read told The Drum WPP’s “people are positive about the future”. He said of the plan's reception: “The leadership we’ve shared it with have received it well and we’ve sent everyone else an email and have been quite careful."
But one of the media analysts present, Alex de Groote, thinks Read’s challenge is greater than he’s letting on.
“At the end of the day, in spite of data and everything, it's still largely a people business,” he tells The Drum. “And every job loss is a potential revenue generator gone. It's a very tricky balance to strike for Read in terms of cost-cutting versus revenue generation, between satisfying shareholders and potentially disturbing the creative fabric of the group.”
The litmus test of North America
Although Read wouldn’t elaborate on where the thousands of job cuts and 200 office closures needed to make annual savings of £275m will come from, de Groote thinks it is staff in the struggling North American agencies that will feel “the carrot and the stick”: the carrot being a sharply improved incentive plan for the winners; the stick being yet more restructuring for the losers.
“The real issue is the performance of the group in North America where the revenue trends are quite sharply negative and have been for a while,” he says.
“The issue is whether somebody like Mark Read is able to solve those problems. It’s nearly half of the group’s profits. It's where nearly all the world's biggest advertisers are based. It’s where [predecessor, Sir Martin] Sorrell's personality was appreciated.
“If North America can be turned around over the next 18 months, then WPP has a rosy tomorrow. If it can't, I find it very hard to imagine it will still exist in 18 months' time.”
Watching on from the US, the Forrester analyst Jay Pattisall – who has called for WPP to “dissolve” the bulk of its of agency brands – offers a lukewarm appraisal of the strategy. “The thinking behind it to be a more simplified organisation, to have fewer agency brands and to put data and technology at the centre of the business are all needed and appropriate for WPP to change,” he says.
“But I don’t see tangible examples of this in the announcements or investor presentations. The one exception is [chief technology officer] Stephan Pretorius’ reorganisation and consolidation of WPP’s tech stack, which appears to be underway and set to continue in 2019.”
One of the actions Read is taking is a £15m investment in “new creative leadership”, primarily in North America. He also pledged that 1,000 staff will be hired to offset some of the job cuts. The investment for this talent drive will be raised from the cost cuts, but on who’ll be making way for the new teams to arrive, Read would only say: "It’s broadly across the company and we’re focused on the parts of the business that are more challenged financially."
He added that the company would be "talking to" those affected by the cuts before the year is out.
This won’t be much of a comfort for staff going into Christmas wondering what the future holds. But there was some evidence that Read is sensitive to the consequences when in Wednesday’s investor Q&A he winced at one banker’s use of the term “natural wastage”.
He conceded that the company already has a “high” staff turnover and employs about 2,000 people a month to maintain its circa 130,000 strong workforce. Which of those staff buy into the new WPP, and which aren’t even given the chance, remains to be seen.
Reporting by Cameron Clarke, Katie Deighton and Jen Faull