Saatchi AT 5

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Exactly five years ago, Maurice Saatchi was readying his pitch for British Airways' $90 million worldwide account, with just a handful of staff working from the makeshift office of his still-nameless new agency in London.

His acrimonious, high-profile departure as chairman of the Saatchi & Saatchi Co. holding company in January 1995 had set off a tug-of-war over U.K. clients and staff and an avalanche of short-lived lawsuits between the old and new Saatchi agencies.

Winning the British Airways business from his former agency was crucial, both to establish immediate credibility and to form the cornerstone of an international network, the only one started from scratch in the last five years.

"The BA pitch dictated the basic infrastructure, with offices in the U.K., the U.S. and the Far East," said David Kershaw, one of M&C Saatchi's five partners. "It had to be real incredibly quickly."

It wasn't easy. All of Maurice Saatchi's new partners except his brother, Charles, were sidelined for the new agency's first six months by non-compete clauses in their contracts with Saatchi, prompting Maurice to lug lifesize cardboard cutouts of three partners -- Mr. Kershaw, Bill Muirhead and Jeremy Sinclair -- to the pitch.

FINDING A PARTNER

To be a contender, he needed quickly to find an international partner to provide media and other services. But an irate Procter & Gamble Co., blaming him for the turmoil at Saatchi & Saatchi, blocked its other three global networks from allying with Maurice. He finally signed up Publicis, whose CEO, Maurice Levy, willingly joined the pitch team along with executives from Publicis' Optimedia media buying unit.

In a stroke of luck, Tim Duffy, the British Airways account director at Saatchi & Saatchi, was able to make a fast switch to Maurice's side of the pitch when the agency rashly fired Mr. Duffy, voiding his non-compete clause, rather than waiting for him to quit.

"It became like the Black Hole of Calcutta," Mr. Duffy recalled of the tiny temporary office. "You expected to find someone crushed at the end of the day."

Fortunately, he said, British Airways wanted only a strategic pitch, not a full creative presentation.

Five years after that first international victory, M&C Saatchi employs about 535 people and had estimated 1999 billings of $600 million worldwide. And Maurice Saatchi, a pariah to his Saatchi & Saatchi shareholders five years ago, is now Lord Saatchi.

M&C is a peculiarly lopsided network. Nearly half its offices -- Auckland, Melbourne, Sydney and Wellington -- are in four cities in Australia and New Zealand. The others are in Hong Kong, London, Madrid, New York, Singapore and, bizarrely, Fiji.

From the beginning M&C Saatchi's most insurmountable problem has been its failure to win over the U.S. market.

"This is a very tough market," said Marty Cooke, hired last April as M&C Saatchi's executive creative director in New York. "It's important for M&C to crack the U.S., and New York is the key."

SUCCESS IN LONDON

In London, the network's home and biggest success, M&C has been catapulted into the league of top agencies -- with U.K. billings for 1999 of more than $360 million, up almost 20% from the previous year -- and gained a reputation for both arrogance and creativity. Last month, local trade magazine Campaign named M&C Saatchi its agency of the year.

Most of the U.K. business is local, but the agency is doing international work for several dot-coms, including European online bookseller BOL and Rover, M&C Saatchi's first car account.

By applying "brutal simplicity of thought" and "creative hard sell" -- two favorite M&C catchphrases -- the agency finally won Rover's $50 million U.K. account after a persistent three shots at the creative work. The international assignment, worth about the same amount, followed early this year.

"We were not in the lead," said Moray MacLennan, M&C Saatchi's joint chief executive. "The client said our creative work was excellent but wrong. The second time it was excellent but not right. We went away and did more, and the third time he said it was excellent and right."

Rover, likely to lose over $1 billion this year and rumored to be up for sale by German owner Bayerische Motoren Werke, won't be an easy client. The first commercial, depicting a Rover as part of a giant pinball machine, is airing now.

WHISKAS ASSIGNMENT

In another tough assignment, Mars tested M&C Saatchi with its declining Whiskas cat food brand in the U.K. An imaginative commercial aimed at cats themselves ran around the world, but the agency lost the account in a Whiskas international realignment at BBDO, Duesseldorf. In return, M&C Saatchi has been given a still-secret Mars new-product development project.

"We halted 15 years of decline and slightly increased volume and value for Whiskas," Mr. MacLennan said.

In Asia, M&C opened its doors on the eve of a devastating recession yet managed to thrive as other agencies cut back. Regional Asian billings of $56 million in 1996 grew to $140 million in 1998 and to $187 million in 1999, when revenue reached $20 million.

After a five-year roller-coaster ride of sky-high staff turnover and new-business lows, the U.S. path is looking smoother, with stable management and four new accounts totaling $35 million in billings won in January.

"We made a mistake, and employed the wrong guys," said Bill Muirhead, who ran Saatchi & Saatchi's North American operations before joining M&C Saatchi as a founding partner, initially based in New York. "The guys there now are going hell for leather for new business."

REVAMPING IN THE U.S.

With relations between London and New York at a low ebb, M&C Saatchi hired Robert Fletcher, a former Saatchi & Saatchi manager in Europe and Asia, in mid-1998 as executive chairman to completely revamp the U.S. agency. President Brent Bouchez and David Page, the executive creative director, left in September 1998, and select accounts they had brought in, such as the estimated $10 million Rally's Hamburgers, followed. Tim Carlisle, director of client services, departed for McCann-Erickson Worldwide and so did M&C Saatchi's $10 million WorldSpy account.

Mr. Fletcher installed a new management team, plucking Mr. Cooke from Merkley Newman Harty, where he was chief creative officer, to become executive creative director in April 1999. Jim Meyer, executive account director on D'Arcy Masius Benton & Bowles' P&G business, had joined several months earlier as president-chief strategy officer.

"We are just way beefier strategically and deeper creatively," Mr. Meyer said. "We are in effect a start-up with the advantage of a well-thought-out point of view of what we're going to do."

One significant change is the strengthening of the New York agency's ties with its London parent. "We are now an M&C office," Mr. Meyer said. "I don't believe there was much of a reliance [before] on the M&C principles."

In fact, 70% of the New York agency's staff of 35 has changed in the last year, he said.

UNFRIENDLY TERRITORY

The problem is not exclusive to M&C Saatchi. The U.S. and Britain are not kind to each other's agencies. Wieden & Kennedy struggles in London (although year-old Fallon McElligott does well there), and Deutsch has been poised to enter London for a year. The U.K.'s Leagas Delaney bypassed New York to open in San Francisco, and Bartle Bogle Hegarty procrastinated for years before taking the plunge in New York.

M&C Saatchi's slow U.S. growth has triggered speculation that the agency might do some kind of deal to become bigger in the American market. The partners deny they floated a recent story in the U.K. press that a 49% stake in M&C Saatchi could be for sale.

"It's not surprising that people approach us all the time," Lord Saatchi said dismissively. "It's just a normal part of life."

"We get approached quite often and always listen, but everyone is really excited about how things are going," agreed Tom Dery, Sydney-based executive chairman-Asia Pacific for M&C Saatchi. "Each office in Asia has done well in its own right; there's no debt, we have cash and are re-investing in growth. It might be a benefit in the U.S., though; investment could be a help there."

One of the most striking features of M&C Saatchi is that the agency has a genuine start-up culture, a radical change from the acquisition mania and dreams of global domination that fueled Maurice Saatchi's downfall as chairman of a publicly held Saatchi & Saatchi. The difference is fascinating because, by and large, the same people have built both companies.

AVOIDING ACQUISITIONS

Acquisitions simply aren't part of the new corporate culture. Nowadays if M&C Saatchi executives want to add a new country or business, they start it themselves or find willing partners for a joint venture. M&C Saatchi took a 50% stake in successful U.K. media shop Walker Media as a start-up and owns stakes in direct marketing, sponsorship and other companies. And the company has just started eMCSaatchi as an e-commerce and Internet marketing consultancy in London, New York and Sydney.

"There's no need for it," Lord Saatchi said. "Last time, there was a big strategic problem. A big local agency, no matter how big and well thought of, would sometimes lose an account because it wasn't aligned. We thought there was a strategic imperative to go on a quest to create a global network. We thought a very big iron door was closing in front of us and we had to go through it. This time, we don't have that need."

(Or, as Lord Saatchi told a U.K. trade magazine dramatically, "Insecurity and paranoia were behind our drive for world leadership." He still gets asked the global domination question a lot).

This time, a handful of hub offices is enough, and expansion is limited carefully to one new office a year for five years. The last opening was a tiny Madrid shop in October, run by a Spaniard known simply as Carlos.

AMBITIONS IN SHANGHAI

This year, a more ambitious office in Shanghai, an Asian advertising hot spot, is slated for the third quarter, according to Ian Thubron, M&C Saatchi's CEO in Hong Kong. In preparation, M&C Saatchi has already hired away Richard Lee, the former deputy managing director of DDB's Shanghai office, and Joseph Liu, who ran D'Arcy's P&G business for Greater China.

And for international clients such as British Airways that need on-the-ground service in more countries, the two Maurices -- Saatchi and Publicis' Levy -- still work together.

"In the old days, we had to build a global network to survive," Lord Saatchi said. "The Publicis alliance is an original solution to that problem."

Denials of global ambition aside, during M&C Saatchi's early years speculation was rife that the Saatchi brothers were plotting to retake the Saatchi & Saatchi network. Even now, mischievous stories appear in the U.K. press about once a year concerning Maurice's supposed plans to buy back his former agency, to the fury of Saatchi & Saatchi executives. The M&C Saatchi partners profess innocence; they can't imagine where these stories come from.

It's unclear how profitable the flagship, global British Airways account is. One Optimedia executive said, "it covers a lot of overheads." Mr. MacLennan insisted the agency would not take an unprofitable account.

With no corporate debt or public shareholders to answer to, the partners make decisions around a square table in their big, white, open plan office that takes up the entire top floor of the agency's headquarters. And Maurice's partners have protected themselves from any misguided acquisition fits by the seemingly reformed character.

"Under the shareholders' agreement, any major decisions must be unanimous," said Jeremy Sinclair, an M&C Saatchi partner who started his career 30 years ago as a copywriter at Saatchi & Saatchi.

`HIS MORNING JOB'

A long table runs along one wall and serves as a desk for Mr. Sinclair, at one end, and Lord Saatchi at the other, with Charles Saatchi in the middle. Messrs. Kershaw and Muirhead work at a similar table against the opposite wall. Charles Saatchi really does come to the office most days, Mr. Sinclair said, especially now that his only child, Phoebe, attends kindergarten in the mornings. "We're his morning job."

The partners' office is airily spacious and comfortable, but far from the solitary splendor that five years ago raised the ire of Saatchi & Saatchi shareholders against Maurice and his lavish management style. Ironically M&C Saatchi's seven-floor Golden Square building, re-built around a huge atrium, is on the same Soho square where the Saatchi brothers opened their other agency in 1970. That building now houses Havas Advertising's WCRS.

LORDLY DUTIES

At the moment, Lord Saatchi spends about 40% of his time on lordly duties in politics, acting as the opposition Conservative Party's spokesman on economic issues in the House of Lords. Newly svelte, he is proud of losing a dozen pounds in the first two weeks of a diet. Mr. Sinclair attributed his partner's weight loss to an "espresso and cigar diet."

Although billings are bigger in London, M&C's Asian offices are pulling in international as well as local accounts. A global print campaign breaks in March for Hong Kong-based Mandarin Oriental Hotel Group, using celebrities, such as model Elle MacPherson. who proclaim "I'm a fan," in ads that include the Asian hotel chain's well known oriental fan logo. The business also has led to a U.S. assignment from Mandarin. M&C Saatchi's first global ads broke in January for the New Zealand Tourist Board account.

"Getting more global accounts is an issue we're keen to address by hook or by crook," said Huw Griffith, CEO of M&C Saatchi's Singapore office.

One early win was Alfred Dunhill's luxury goods business for Asia.

"We chose them because they have the right balance between entrepreneurial flair and transparent business management practices as regards costs and fees," said Charles Brian-Boys, regional marketing director of Alfred Dunhill, Hong Kong. "My only complaint about the network is that they're useless golfers, which is a worldwide trait as far as I can tell."

His quite serious advice: "They should work on the golf."

Contributing: Normandy Madden and Laura Petrecca.

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