SORRELL: He's not number one any more and now he's talking recession, so what's his masterplan? - When he speaks, the City takes notice. Sir Martin Sorrell, WPP's tough-talking chief, tells Claire Beale his views on recession and his future plans

"It's a bathtub." Sir Martin Sorrell is emphatic. It's an

uncharacteristically creative description for what has become the

subject of the moment, recession, though the grandeur of Claridges is

not exactly the sort of place one can really discuss economic hardship

with any degree of conviction. Particularly since any breakfast with

Sorrell is pitted with interruptions from tanned, bespoke-suited

businessmen swapping self-satisfied bonhomies. "Playing cricket in the

south of France next month Martin?"



Still, recession is top of the menu and forget pussy-footing around with

words like downturn or slowdown. Sorrell says this is, "net, net", a

recession and it's bathtub-shaped. "You have the tap end, which has a

sharp decline at the beginning, then you get the corrugated bit at the

bottom with lots of ups and downs and then at the other end there is a

gradual incline."



The question, of course, is how long before we can rest on the gentle

curve of the upturn? "Ooo, I think it's going to last for some time. And

I think this time next year we'll be moaning about the fact that it's

still here." When he made similar predictions in a recent Royal

Television Society speech, 22p was knocked off the WPP share price, so

seriously does the City take Sorrell's economic views. Sorrell, though,

displays the confidence of a man who knows his enemy - knows not only

the shape of the recession, but where it began (Australia, post-Olympic

Games), how it has spread (it started in the technology, media and

telecommunications sectors and although it has reached the old economy

now, it's much more patchy there) and how to cope with the effects.



And despite the fact that WPP no longer sits almighty as the world's

largest communications group, Sorrell says the company is in some ways

better insulated than it was the last time things got tight. "We have

considerably less debt, we have fewer earn-out commitments, our business

is very much stronger and we have more in the way of flexible costs.

But, you know, I think it's going to be quite difficult." Of all WPP's

businesses he says public relations and public affairs have been the

worst hit, followed by branding and identity, healthcare and specialist

communications. Advertising and media investment management is the

second least affected, "probably more resilient than we thought it was

going to be", while information and consultancy has been "very

resilient".



It is this spread of disciplines, this wider business base, which

Sorrell concedes should help make the slump a bit easier to ride.

"There's no geographical insulation now, there's nowhere to hide.

Everything is globally linked. But, functionally, having a broader

business base, you can survive better."



Yet with this broader base come other issues, which Sorrell might have

hoped to have a little longer to sort out before recession hit. Getting

the structure of WPP right, particularly after the acquisition of Young

& Rubicam last year, is a major preoccupation. But then it's also an

opportunity to have a bit of a dig at the opposition: "I think the

biggest issue facing IPG, Omnicom and ourselves is how we run our

businesses structurally. You can see it with IPG post-True North.

There's an attempt to try to 'organise' things and form partnerships

that have no logical basis whatsoever other than you have a collection

of businesses and a collection of names like alphabet soup that you have

to try to piece together.



There's no strategic logic to it, it's sort of attempting to put a

strategy in place after the event." Sir Frank Lowe, perhaps the most

obvious victim of IPG's attempts to deal with these issues, might

agree.



"I think some of the peregrinations that IPG is going through at the

moment - and will go through - are emblematic. The biggest issues for

WPP, Omnicom and IPG will be are these companies too big, are they well

run, are they integrated? There's actually quite a lot of resistance

from people who say 'I don't want to be part of a big group'. You saw it

in the reaction to The Partnership with people saying 'I don't want to

be part of a nice neat little organogram, I want to be part of something

that means something'."



It's really quite charming, this knack Sorrell has for slagging off the

competition as though his comments are so reasonable and sensible that

they're motivated by nothing more than common sense. Take his views on

how WPP sits among the big three holding companies. "We have a totally

different philosophy from Omnicom or IPG. For right or wrong, we're

added-value-focused on clients and our people." It's a cheeky thing to

say, of course. And it would be a bold John Wren or John Dooner (the

heads of Omnicom and IPG respectively) who argued that WPP was wrong to

focus on adding value to clients - although how successful the

organisation has been in delivering on this promise is a matter of

debate.



If WPP is focused on adding value, then that has to be delivered

coherently across a range of its services and, while it might claim to

have tackled integration more effectively than its two key competitors

... well, that's not saying much. WPP is still far from acting as a

unified whole, an emporium of communications services. Some of its key

staff find this unbearably frustrating, others clearly relish causing

the frustration.



Partly this is down to Sorrell's own management style. He is much more

likely to make his views felt and then sit back and wait for his staff

to get the picture than knock heads together and force through a

politically sensitive issue. So Sorrell was talking about pooling WPP's

media brands into a global network, MindShare, years before the agencies

involved actually pulled their fingers out and lit the touchpaper. And

the MindShare management was left to fight most of the battles required

to get the creative agencies on-side alone. Even now in the US MindShare

and J. Walter Thompson are at odds over the future of Ford Motor Media,

which spends well over $1 billion a year on media and yet which

resolutely sits within JWT rather than MindShare.



Sorrell has refused to take sides, even though the issue threatens to

undermine MindShare's positioning. "It's up to Ford to decide," is all

he will say, though he does promise: "If clients want integration of any

of our businesses, they'll get it."



But partly, too, it's that Sorrell - like his competitors - is so often

held to ransom by key staff who have client relationships by the

balls.



If Sorrell fulfils his ambition of driving client relationships across a

range of WPP businesses, then this will arguably become less of a

problem.



For the moment, though, it remains a very real issue.



"Our biggest problem is the enemy within," Sorrell concedes. "The

challenge is to get people to operate as seamlessly as you can. I'm

philosophical about it, but I get very upset when people don't work

together because I think the power of what we've got is so great when we

put it together.



You tear your hair out when people sit in their little box and refuse to

co-operate or when they fight with one another.



If people look at us and say 'My God, they've got MindShare, they've got

The Media Edge (Y&R's media brand), they've got Kantar. God, if they put

that little lot together they'd blow everybody away', then we have to

think about that."



Integration is clearly a major mission for Sorrell but his brands'

creative credentials still nag away on his to-do list. "One of our big

objectives is to improve the creative quality of all our businesses, not

just our advertising business, and that's still something we have to

work on." He's happy with the positioning of his four (yes, don't forget

Red Cell, though you could be forgiven for doing so) creative networks.

"Ogilvy has got its brand stewardship offer together very powerfully,

it's highly integrated and the creative profile of the agency is very

strong and getting stronger. I don't think either Thompson or Ogilvy get

the recognition they need, though Ogilvy gets more recognition. I think

Thompson still has to convince people externally that it's as strong as

it is. Y&R is more silo-driven - a bit like the McCanns offer, but more

powerful because of the strength of the brand.



Red Cell focuses on the very large markets and I think there's a major

opportunity there to take the middle-ground positioning that everyone

else has vacated. Leagas Delaney has shown how difficult it is to occupy

that territory, but their problem is that they're doing deals with the

wrong people."



Sorrell has held his own acquisition talks with Leagas - "I don't think

they're particularly interested" - so where is he looking now for

acquisitions?



"There is room for us to buy someone else, though it comes back to that

management issue - at what point in time is 'a lot' too much? I'd like

some time to think through what the best organisation is, rather than

get involved in some frenetic buying spree.



But that doesn't mean we don't continue to buy more medium-sized

companies.



We've just got to think carefully about our structure and continue to

strengthen our four agency brands."



In truth, he's still very much concerned with bringing Y&R into the

fold, or "digesting" it, as he puts it. When he took on the business

Sorrell says he felt pretty comfortable with about $1.3 billion

of Y&R's $2 billion revenues. "The $700 million in the

advertising empire I have felt historically less comfortable with. But

they've made some good appointments, some real changes, and I think

things have stabilised. Hopefully, externally people won't notice much

difference now that Y&R is part of WPP. It will still be Y&R, but more

so. I would hope that the proposition is clearer. The important thing is

to focus on the strength of the individual brands within the Y&R group

and provide some integration mechanism. I hope what you'd see from a Y&R

group point of view is a more cohesive and integrated offer than you've

seen before." He adds that he expects Y&R to make a significantly larger

return than WPP's average cost of capital (about 9 per cent) within the

next four or five years.



The acquisition of Y&R put WPP back at the top of the global rankings

for a short time, before IPG hit back with the True North deal. Does

being number one matter to him? "No, it's not overly important. What's

important to me is that the business is as strong as ever. With the deal

we ended up improving the quality of our business."



One acquisition Sorrell seems to have been toying with is that of

Tempus, Chris Ingram's media network in which WPP holds a 22 per cent

stake. Havas has just laid a £425 million deal on the table and

Sorrell, miffed, is doing his sums, preparing a response - which could

be a counter-bid. Over breakfast, though, before the Havas offer is

announced, Sorrell says: "I do think there are a lot of people inside

Tempus who think that it would be an extremely good idea to get together

with parts of WPP. Tempus itself spent an enormous amount of time

talking to Y&R and TME and there is a tremendous industrial logic to

Tempus and TME getting together." Sorrell has also talked to Aegis about

swapping the Tempus stake for Aegis shares, but insists: "Looking at

Aegis is not top of our agenda. I think we'll just bide our time and see

what happens."



Nearer the top of his agenda is building on WPP's existing relationship

with Dentsu, through the old Dentsu/Y&R association. "I think that was

an abused relationship, Dentsu's move into BCom3 upset Y&R and Y&R's

move into WPP upset Dentsu. So we're working hard to build the

relationship again. I'd love to grow our relationship with Dentsu."

Doing so could prove crucial if Sorrell is to achieve his ambition for

greater geographical parity across WPP businesses. The US accounts for

45 per cent, Europe for 35 per cent and Asia-Pacific for 20 per cent;

his ambition is a third, a third, a third - and Japan and China are key

targets. Similarly, he wants more functional parity so that only a third

of WPP's business is in advertising and two-thirds is outside.



Along with fighting the recession and integrating Y&R, these long-term

strategic goals are, Sorrell says, the things that keep him awake at

night.



"When you've founded a business I think your attitude is very different.

It's very much part of me and I worry about it as I would worry about my

family." He's taken to insisting that WPP is a parent company, rather

than a holding company, and admits that it is important to him how his

staff view him, "though my image is not something I work particularly

hard at; I think actions speak louder than words".



Perhaps, then, there is a tender side to Sorrell, although colleagues

down the years would argue the point. If he does have a softer

under-belly then it may be a certain insecurity, a fear of failure,

despite his tough talking. "I do tend to focus on the bad bits," he

admits.



"I have been described as a serial pessimist." It's hard to imagine

Sorrell fretting in the small hours, but then that's recession for you.



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