KEEPING THE SAATCHI IN SAATCHI

FEUD YIELDS CREATION OF NEW-BIZ GURU POST

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It was the day several Saatchi & Saatchi Co. executives feared either Chairman Maurice Saatchi or Chief Executive Charles Scott wouldn't survive.

On March 29, the eve of a meeting of Saatchi's full 10-member board, six outside board directors met secretly in a central London hotel. There, in an arduous meeting that lasted into the evening and resumed the next morning, the directors grilled Messrs. Saatchi and Scott individually about how they saw their future roles.

Just days before, Saatchi's outside board directors -- including leading U.K. businessman Sir Peter Walters and Robert Louis-Dreyfus, Mr. Scott's predecessor as chief executive -- had less formally sounded out a few Saatchi clients, staff and investors. Their question was who should run the company: Mr. Saatchi, the man who brings in the business and keeps clients happy, or Mr. Scott, the one who controls the purse strings and is the clear favorite of the company's bankers and investors.

When the board finally convened, to the surprise of some, both executives emerged unscathed and still employed. It's unclear whether both were finally deemed indispensable or whether the directors simply couldn't figure out who to fire. And no one involved in those meetings would comment.

But the board issued the most remarkable statement: "Following consultation with shareholders, clients and employees, the board has resolved that the interests of the company are best served by the continuation of Maurice Saatchi and Charles Scott in their present roles as chairman and chief executive, respectively."

This carefully worded announcement was the closest the company came to acknowledging the strange behind-the-scenes battle that had raged for several months.

The feud became public in early March in a stream of newspaper stories about Mr. Scott's poor performance, believed to have been instigated by Mr. Saatchi. Those abruptly ended with the board meeting, and the feud between the two men ostensibly ended. But the tension is still palpable.

"Charlie Scott has the naive belief that a truce is a truce. But Maurice is still scheming," said a veteran Saatchi watcher.

Moreover, during the marathon meetings, the board revived an idea of Mr. Saatchi's that had been rejected last year: add a top advertising executive at the holding company level responsible for revenue generation. It's hoped the new hire will also act as a buffer between Messrs. Saatchi and Scott.

Those two, however, are both said to view the new executive "as someone to bond with and help them get rid of the other guy," said an agency executive within the Saatchi network.

Perhaps most tellingly, the company won't say whether the person hired will report to Mr. Scott or Mr. Saatchi, a key indicator of who is winning the power struggle, nor whether both men must approve the hire.

The reason, the company said, is because "the precise nature of the [new executive's] role has not yet been defined."

That role is to clearly address Saatchi's desperate need for new business, but some people believe one of Mr. Saatchi's motives in wanting to create the new position could be to find a successor to Mr. Scott, perhaps sooner rather than later.

Others say if the new executive does a good job as "rainmaker," that could leave Mr. Saatchi without his main function. And in that situation, would a cash-strapped Saatchi want two highly paid executives with the same job?

"It could be the job from hell or worse, or it could be a platform from which to create a cohesive direction and campaign for Charlie Scott's job," said one insider.

Although the company stresses the candidate could be from within, Saatchi watchers believe an American will be hired since it's the U.S. that needs the most help.

It's there the Saatchi networks-Saatchi & Saatchi Advertising Worldwide, Backer Spielvogel Bates Worldwide and Campbell Mithun Esty-have been hemorrhaging billings and been unable to replace the accounts lost.

One U.S. executive who's believed to have already turned down the job is Larry Light, said to be Mr. Saatchi's favorite candidate. A former U.S. Ted Bates Advertising executive, Mr. Light built up a strong relationship with Bates client Forrest Mars of M&M/Mars and is now president of Arcature Corp., a Stamford Conn.-based consultancy with a client list believed to include both M&M/Mars and Maurice Saatchi.

Mr. Saatchi's second choice, Charlotte Beers, is taking a pass. Mr. Saatchi is once said to have named one of his biggest management errors as failing to persuade Ms. Beers to join Saatchi two years ago over WPP Group's Ogilvy & Mather Worldwide, where she is now chairman-ceo.

He knows and likes Ms. Beers from his efforts to recruit her and admires her strong relationship with mutual client Procter & Gamble Co. But despite problems in her own camp, Ms. Beers said she's committed to O&M and not considering any Saatchi offer.

Today, Saatchi's problem appears to be the lack of a real strategy. "Be No. 1" worked while Saatchi was the world's biggest advertising organization, from 1986 to 1989. "Avoid bankruptcy" was the mission Mr. Louis-Dreyfus and his then-finance director, Mr. Scott, undertook when they joined the company in January 1990.

Mr. Louis-Dreyfus got Saatchi through its worst financial problems with a major refinancing and cost cutting drive but, unfortunately, the expected economic recovery that was to solve the revenue generation problem failed to materialize.

"Robert didn't think through what came next," said one former Saatchi executive.

What came next was that Saatchi, with $1.4 billion in worldwide gross income, fell from fourth to fifth in Advertising Age's ad rankings for 1993, just behind Dentsu.

Absent a new spark of interest by either of the Saatchi brothers to run the company on a day-to-day basis, the new executive will need great new-business skills, finesse with clients and, most importantly, a clear focus. Maurice has been active at various times in acquisitions, new business and visiting clients, but Charles never even held a title until he became honorary president upon resigning from the Saatchi board last December.

"Maurice and Charles dreamt the dreams and provided the framework and sense of direction," said a former Saatchi executive. In the early days, "Maurice went to pitches because there were no [other] employees; [later] he drifted off because he had bigger fish to fry."

What ad industry executives say Saatchi needs is its own Phil Geier, a holding company figure who can create distinctive brandlike identities for separate agency networks and spread clients among them as Mr. Geier has done as chairman-ceo of Interpublic Group of Cos. Mr. Geier, for example, was one of the few admen Mr. Louis-Dreyfus admired in an industry he generally disparaged as full of inflated egos.

At Interpublic, Mr. Geier has shown a talent for new business and has been able to get Coca-Cola Co. into all three Interpublic networks. He can also sometimes offer an unhappy client a different kind of network to keep the business from leaving the group altogether, a skill Saatchi could certainly use.

One former Saatchi executive remembered Mr. Geier some years ago stealing back the Black & Decker Europe account within hours of Saatchi winning it from McCann-Erickson Europe. While Saatchi executives were on a plane home to London from the winning pitch in Frankfurt, Mr. Geier persuaded a top U.S. Black & Decker Corp. executive that he would lose control of his European subsidiary if he let it switch ad agencies at will. The Black & Decker man picked up the phone and canceled the change.

"It was terrible," the ex-Saatchi executive recalled, "but it was brilliant."

LONG HARD HAUL
1988
Pre-tax profits peak at $207 million.

1989
Pre-tax profits slump to $33 million; cost-cutting starts. Saatchi ranks no. 2 behind WPP Group in Ad Age's world's top advertising organizations.

1990
January: Robert Louis-Dreyfus and Charles Scott join as chief executive and finance director. Charles and Maurice Saatchi agree to halve their salaries to $468,000 each. Consulting division is sold off in pieces. Pre-tax profit of $54 million.

1991
April: Life-saving recapitalization proposal completed, involving conversion of $366 million in Europreference shares to ordinary shares, removing option to redeem them for cash; rights issue; extension of bank loans.

July: Charles Scott unofficially designated Mr. Louis-Dreyfus' successor with promotion to new position of chief operating officer. Pre-tax loss of $87 million; operating margins sink to 2.8%.

1992
Pre-tax loss on paper of $900 million due to new accounting laws, reflects overpaying for past acquisitions.

Saatchi slips to No. 4, behind WPP, Interpublic Group of Cos, and Omnicom Group, in Ad Age's top advertising organizations ranking.

1993
April: Robert Louis-Dreyfus leaves to run Adidas; Charles Scott becomes chief executive.

December: Charles Saatchi leaves board of directors; becomes honorary president. Pre-tax profit of $29 million.

1994

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