The new management team at WPP — Executive Chairman Roberto Quarta and Joint Chief Operating Officers Mark Read and Andrew Scott — conducted their first earnings-related Q&A with analysts and investors today following the release of the company’s first-quarter results.
On several occasions during the Q&A, the executives said that after listening to client concerns for the past two weeks, they now realize that WPP needs to be significantly faster and more agile in the way it works. “Building new customer experiences” is a priority for many clients, Read said.
“It’s the creative parts of our business that are most challenged structurally,” Scott said. Lindsay Pattison, the company’s chief transformation officer, acknowledged that at least some of company’s creative shops were “behind” structurally. “Clients want deeper relationships with fewer suppliers,” she said. What has changed recently, she added, is greater demand for “flexibility in the framework,” which can boil down to a client “just wanting access to the best people.”
To address that, Pattison says she is looking at models that include “smaller centralized core teams and embedded teams with clients.” And some clients want and need help developing “single tech spines.” “We’re continuing to re-invent as we go along,” she said.
WPP has also consolidated its 4,000-person operation in Shanghai and is considering exporting that model to other regions to help facilitate the integration that clients are looking for. Also on the table is embedding more teams directly into client operations.
Many clients are under pressure as well, Read noted. And many are reassessing their approach to marketing. The holding company is looking at potential “structural changes” that will allow it to better adapt to changes that marketers are making, he said.
Quarta told analysts and investors in a face-to-face meeting in London that both Read and Scott are “fully empowered” to reassess the company’s strategy, and to implement changes “as approved by the board.” Read is focusing on clients, operating companies and people, while Scott addresses commercial management and optimizing the holding company’s portfolio of assets.
While it is premature to discuss asset sales, Quarta insisted that “the starting point is not a break-up” of the company, given the integration demands of clients.
Scott will taking a hard look at the firm’s entire portfolio with a sharp eye on its numerous minority stakes in outside firms to see whether it still makes sense to retain all of those assets as currently structured. Some wholly owned assets are also being reevaluated.
Some analysts have speculated that selling Kantar could improve the company’s financial position, although Read noted that some clients value the consumer insights that the division provides. “Kantar is an important source of data but not the only source of data,” he said.
When asked about the exact nature of the allegations and investigation that led to the departure of former CEO Martin Sorrell earlier this month, Quarta said the company isn’t required to disclose details and has no intention of doing so. “Martin resigned, he was not terminated,” said Quarta. He added that the investigation had concluded and Sorrell was informed of what that investigation had found in terms of the misconduct allegation made against him.
The board had not yet decided what, if any, action to take against Sorrell before he decided to resign, Quarta said. As to the specific misconduct that was alleged, “we consider it a matter of privacy.”
Read noted that he has had conversations with the holding company’s major clients over the past two weeks and that none of them said they planned to make changes as a result of Sorrell’s departure. That said, some are in the process of reviewing their assignments -- including WPP’s largest client, Ford. That review is largely a global creative assessment (excluding China) and does not include media for now.
Read noted that the auto industry is under “tremendous pressure.” and that at least two other big auto firms are conducting similar reviews, including Volkswagen. “We’ll put our best foot forward” in the Ford review, he said.
One area where Sorrell and current management view things differently is the impact of big consulting companies on the advertising business, which Sorrell largely dismissed. “WPP and consultants are starting to complete,” Read said. And the company needs to better understand the services they bring to the table that clients value.
“Clients want new skills in data and technology,” Read said. “We can do that.” More investment is planned in those areas.
Read also acknowledged that Facebook and other Silicon Valley giants are striving to deal with clients in more direct ways. But recent data and privacy issues reinforce the company’s position that clients need agencies as “an independent source of advice.”
The company is looking at new models that address speed, agility and simplicity and will continue to look at opportunities to streamline operations as it did last year with the merger of media agencies MEC and Maxus.