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Forward To The Future

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Last May, Saatchi & Saatchi Advertising Worldwide was carefully scripting the announcement of its hire of a new worldwide chief executive. A month earlier, the parent Cordiant PLC had revealed its surprise demerger plans. Now Saatchi wanted to follow with a move aimed at burnishing its future-the recruitment of a well-connected executive from the packaged-goods industry, someone who hopefully would end years of instability in its top management ranks and cement its key account relationships.
Only there was a hitch. Before the agency could release the news on Kevin Roberts, the word had leaked in his homeland of New Zealand. From Down Under the rumor spread quickly to London and to the U.S., swirling around the trade press and agency offices. A press release and internal memo were hurried into print. But they were rushed out before several key Saatchi executives could be informed, leaving them to wonder just when the merry-go-round would ever stop. One creative director in New York smashed up his Hudson Street office when he heard about the hire after the fact.
The fumbled announcement on Roberts seemed to dredge up memories of the problems that had plagued Saatchi & Saatchi through the 1990s: a press leak that swept through the media; a scramble to notify top managers and clients; yet another executive change in a long line of executive changes. While Roberts optimistically spoke of joining the agency at "the end of the beginning," Cordiant's demerger plan has led some pundits and analysts to predict the beginning of the end for Saatchi & Saatchi, the agency founded as a London creative boutique by the Saatchi brothers in 1970.
Despite the awkward start, Roberts insists he and the agency are now on sound footing as they prepare for the demerger. A down-to-earth 47-year-old, Roberts has spent his first several months at the agency lining up resources on the shop's two major global clients, Procter & Gamble and Toyota. He and Robert Seelert, the current Cordiant chief executive who will become ceo of the new Saatchi PLC holding company, are both from the client side of the business. Roberts, in fact, had never worked in an ad agency before joining Saatchi. But they both speak the language of marketers, and they are determined to bring a new level of goal-focused management to an agency that has sorely lacked a consistent direction.
Aware of his outsider status, Roberts is quick to play up the Saatchi heritage. He constantly invokes his goal of making the agency the "hottest ideas shop on the planet." He's willing to try new initiatives to get there. In early October, for instance, he hosted a virtual press conference from Saatchi's London office to announce the Saatchi & Saatchi Award for Innovation in Communication. Sitting in his shirtsleeves, flanked by a panel of judges that included former astronaut Buzz Aldrin and performance artist Laurie Anderson, Roberts spoke to the media and Saatchi offices around the world, via teleconference and an Internet simulcast. The high-tech show went off without a hitch as Roberts described how the annual $100,000 prize would go to the "innovation in communication" that "helps improve, revolutionize, or make possible communications between individuals, groups, companies, nations-or even planets."
If the award seems more akin to the wiring of the solar system than to advertising, so be it. The gesture was meant to give Saatchi an image boost, a reminder that the agency still has a leading role to play in creating worldwide impressions, even as it has slipped from the top ranks of agency networks.
"People say the assets of an agency go down the elevator. That's bullshit," declares Roberts. "The asset is your brand name. We have one of the most famous brand names in the ad business. The equity of Saatchi & Saatchi is that it's a creative shop." Yet Roberts becomes impatient when the conversation dwells too long on history. "In 1996, we were agency of the year at Cannes; it was our creative zenith. But it got lost because everybody was talking about Cordiant, the brothers and Bates. So it's back to the future-but we never left it."
With the agency splitup set to take place at year's end, following the shareholder vote next week, Roberts is impatiently looking forward. A former rugby player, Roberts regards advertising as another contact sport. The first time he visited the Saatchi office in Torrance, Calif., he walked around the halls carrying a baseball bat, swinging it as he talked with the staff. "It made an impression," says one executive in attendance. His destruction of a Coke machine in Toronto, where he was chief executive of Pepsi-Cola Canada, is another anecdote in his Rambo Roberts persona. And in a pointed move to "knock down the walls" at Saatchi's New York headquarters, he took over the 16th-floor offices of Ed Wax (who will become Saatchi chairman emeritus next year) and replaced the walls with full-length glass partitions. "He's kind of a Paul Hogan type," says an executive at a Saatchi affiliate. "He's brought a lot of energy and commitment to a place that needed it." Says Roberts, "We can't wait for our December demerger. It's the first day of the rest of our lives. And I certainly won't spend the majority of my time navel-gazing."
What the new chief executive will look over is a company with estimated annual revenues of $611 million, nearly 5,000 employees in 160 offices around the world, and pockets of excellence mixed with potholes and question marks. Saatchi & Saatchi PLC will include separate PR, corporate identity and media buying units (Zenith, which will be co-owned with the Bates spinoff), but it's the agency network, Saatchi & Saatchi Worldwide, that generates the bulk of revenues and sets the tone.
And within the network, the U.S. operations remain the biggest challenge. New York is where the original Compton Advertising and Dancer Fitzgerald Sample never quite meshed; for years, the agency has had a revolving door of top managers and client account shifts. The New York office claims $1.5 billion in billings, nearly double those of the next biggest outpost, London. But profits have been scarce, due to several waves of restructuring, high real estate costs and fat severance payouts.
The agency did get a psychological and financial boost early in 1997 with its capture of the $100 million Delta Air Lines account. The win healed some of the wounds opened by the loss of a flagship client, British Airways, to bitter rival M&C Saatchi. The airline will allow Saatchi's long-suffering creatives in New York, who have plodded through mostly packaged-goods assignments, to spiff up their reel.
Even with such wins, the U.S. is vitally dependent on Saatchi's second-largest client, Procter & Gamble, which provides 11 percent of worldwide revenue. A one-time P&G executive (he tended to Pampers, Crest and other brands in the Middle East and Africa), Roberts has taken a direct hand in running the account. Although Saatchi has been winning P&G assignments around the world, it has struggled lately in the U.S. At P&G's request, Saatchi New York resigned the $80 million Helene Curtis business in 1993 to avoid a conflict with P&G's Head & Shoulders. After giving up the office's most profitable account, the agency quietly hoped for a make-good. It never came. Saatchi also was tapped to handle a P&G test assignment to consolidate all of its print media buying at one agency. The agency passed the test successfully, but P&G then held a review for a single shop to handle the $180 million print budget. The assignment went to Leo Burnett in January. In March, P&G fired another warning shot across the agency's bow when it moved the Ivory account-handled by Saatchi and predecessor Compton for decades-to Grey Advertising.
The trouble spot now is Tide, the agency's biggest Procter assignment in the U.S. With 1996 billings of $60 million, the leading detergent brand claims 43% of the U.S. market. Earlier this year, Saatchi was unable to sell through new work on Tide to P&G brand managers. Roberts went to work on the business with Gary Moss, the agency's worldwide account director for P&G. "It's a test with P&G, and Roberts has eagerly stepped in," says a Saatchi source. "P&G is a great client, but they are cold-blooded. They want the top dog, the ceo involved, because they know he can deliver."
Roberts admits the agency "took a bruising on Ivory" and that "confidence dipped" with its loss and the Tide creative stalemate. But he predicts Tide will have a record year in market share and sales volume, with the agency driving that performance. "Tide has the potential to become like Coca-Cola or Nike in the U.S.," he boasts. "It just needs a little top spin."
To add firepower to its Procter unit, the new Saatchi holding company will put former Wells Rich Greene BDDP chief executive Ken Olshan on its board in 1998. "It's clear that both Bob [Seelert] and Kevin are from the client side of the business," explains Cordiant chairman Charlie Scott, who will also serve as a non-executive director on the Saatchi board. "So we felt we should add a U.S. advertising man to the board to have a well-rounded team of executives. It also helps that he's familiar with P&G." Olshan's more cerebral, analytical approach to the client should mesh with Roberts' brash confidence. Seelert says the agency's P&G relationship "is on a huge uptick since Mr. Roberts checked in. I absolutely expect Saatchi & Saatchi to get additional business from P&G."
Besides winning P&G assignments in different product categories, Roberts also wants to gain more worldwide assignments from Toyota, its largest client with 15 percent of revenues. Just before the demerger meeting, Roberts shook up his management team on the West Coast, moving Scott Gilbert, co-chairman of Team One Advertising, Saatchi's agency on the Lexus account, to chief executive of Saatchi & Saatchi Pacific. That office has run Toyota's U.S. business; its head, Joe Cronin, was freed to work as worldwide account director on Toyota.
The Japanese carmaker could be the key to Saatchi's ultimate fate, even more than P&G. Because of P&G's strict conflict rules, Saatchi is seen as an unlikely takeover candidate by either of the major U.S. holding companies or WPP Group. Instead, some analysts point to Japanese agency Dentsu as a likely suitor. Dentsu shares Toyota as a client and for years has been seeking, with no real success, to build a strong foothold in North America.
The relationship between the two agencies has been wary. When Dentsu won an advertising assignment for Toyota trucks in Canada a few years ago, Saatchi went on red alert, convinced Dentsu was making a play for the U.S. business. "We've been concerned for a long time about not letting our guard down and allowing Dentsu to get a [U.S.] project," says one Saatchi executive. "This could be their chance." Says another Saatchi manager: "If Dentsu can't beat us, they'll buy us. I don't put it past them." Saatchi recently scored a coup on the account, breaking a major new campaign themed "Everyday" after years of trying to get client approval of the rethink.
When asked about any overtures from Dentsu, Roberts says with typical aplomb that "we don't want to buy them at the moment." Then he adds, "We're not having any discussions with them. Nor do I plan to." Says a Dentsu official: "At this time, there are no plans whatsoever to acquire or joint venture with Saatchi & Saatchi or Bates."
So Toyota will be another critical test drive for Roberts' stewardship. The agency did win a big launch assignment for Toyota in Brazil, and Seelert has assured investors and clients the company will beef up its network in such fertile new ad markets as Latin America and India. Roberts is also drawing up a list of target clients he'll personally go after to broaden Saatchi's roster. High on the list are beer, sneaker and beverage accounts in the U.S. and abroad. "He'd love to get an assignment from Anheuser-Busch or Miller," says a Saatchi U.S. executive.
From a geographic perspective, Saatchi's Asian operations are the fastest-growing-and the biggest drain on cash. Its ongoing Asia Pacific revenues grew 11 percent in the first half of 1997, to $42 million, but the region produced a loss of about $2.6 million. Meanwhile, the British home base continues to maintain its high creative standards and post solid financial results. In the first half of 1997, Saatchi U.K. netted $7.4 million on $53 million in revenues, by far the best operating margin in the network.
Much of the credit for the U.K. health goes to Jennifer Laing, a veteran of the Saatchis' rise to prominence who left the agency and then was lured back in 1994. After overseeing London, she was moved to New York at the start of 1997 to be chief executive of Saatchi North America. (Her immediate predecessor, Alan Bishop, in turn moved back to London to be chairman of Saatchi U.K.; Derek Bowden in Europe and Patrick Pitcher in Asia round out their regional chief executive lineup.)
The latest in a string of New York, North American and worldwide managers based on Hudson Street, the 47-year-old Laing has emphasized sharpening the creative product in New York and strengthening the culture. Shortly after her arrival, Laing polled the office's 500 staffers on everything from their ideas for future growth to their health plan. "The survey said the staff would appreciate some stability," notes Laing. "And they deserve it."
Her initial moves have included a plan to reunite the creative department on one floor; the creatives are currently divided into five groups in separate areas. She hired Avi Dan from Ryan Drossman & Partners to get the agency into more pitches, and she's looking to add specialists for retail and telecommunications accounts. Rather than defend the accounts of wandering clients such as Bell Atlantic, Laing has resigned them. And Saatchi is also starting to beat some top competition in reviews; it won the $20 million Motrin business from Johnson & Johnson after a shootout with Ammirati Puris Lintas."When I arrived my first priority was on existing clients," Laing explains. "But you always need to extend your portfolio-the sexy news is always the new business win." Laing's companion, Tony Dalton, also came with her from London to oversee the agency's interactive unit and to launch Saatchi Vision, which will oversee non-advertising disciplines.
Even with the advances, Laing acknowledges the difficulty of getting the New York office to believe a "new way" has truly arrived. "The people who have been here a while have heard it all before. You have to do more to demonstrate to them that it's real." The gradual fadeout of many older Compton and Dancer executives is also helping the process along.
One of Laing's next key decisions will be finding a new creative leader. Stanley Becker, vice chairman and chief creative officer in New York and a 27-year veteran of the agency, is likely to retire next year. A blunt manager who has headed the creative departments at Saatchi's New York, Toronto and Torrance offices, Becker echoes many Saatchi staffers when he gives his outlook on the Cordiant split. "I'm tired of being merged, demerged, immersed, demersed," he says. "I didn't get rich on the last one and I won't get rich on this one. I just want to do ads."
Indeed, most executives who have weathered the Saatchi storms of the last decade would like to have a few calm, productive years. Before the agency plunges into its next round of empire-building-and it will have to expand its reach into emerging global markets and build up resources in marketing services categories -it needs to reassure staffers they will be made to feel secure. "We've been through a lot over the last 10 years, and it's produced tremendous bonding," says Bishop. "Now that we're in control of our own destiny, the last thing we want to do is give it up."
The destiny means the Saatchi name must be recreated, as a single, truly unified brand around the world. Whether the solo route can be profitable and attractive to the multinational clients Saatchi seeks is the challenge for Roberts and his team. If the group stumbles as it has in the past, with management turmoil and account upheaval, the glow of independence could be brief. "They won't have the resources to compete unless they can learn how to grow and be more profitable," says Bob Huntington, a managing director at AdMedia Partners in New York. "And they haven't shown they can do that."
On the other hand, a resurgent Saatchi could be a welcome prod to the agency business in the U.S., where the top holding companies increasingly control the industry turf. If anything, Saatchi has a chance to show its upstart heritage can be a threat. "Great agency brands can always make it. And Saatchi is still a great brand," notes one of the holding company executives. "If they choose to go head to head with us, they'll be in trouble. If they choose to refocus themselves on their strengths, they'll survive."