Modern convention has it that the really valuable attributes for the up-to-date FD are strategy, creativity and value creation. So it comes as a refreshing change to hear an FD talk about his role in terms of being the traditional “safe pair of hands”.
Jerry Wales, FD of advertising agency M&C Saatchi, makes no bones about it. There’s plenty of creativity around his office (situated amongst the copy-writers and designers), but his job is about creating a sound financial foundation on top of which the “artists” can flourish. “Like a football team you need a good goalkeeper and you need a good goal scorer, and one can’t cope without the other,” he says. “Whether we like it or not, making money is the objective of an advertising agency and therefore there is a role for someone to manage that whole process.”
In a company where the main value-creators might spend hours doodling, fixing their skateboards or meditating, understanding this distinction is important, and it’s hard to imagine any business less suited to the 1990s obsession with cost-cutting than advertising. “Here we have some of the best in the world at their job so it would be wrong for me to try and compete,” Wales explains. “I try and do my job to the same high standards that they have to do theirs, and in that respect my job here is the same as an FD in any other organisation.”
Of course, M&C Saatchi isn’t just “any other organisation”. The agency was formed in dramatic circumstances in 1995 when the industry’s most famous pairing, brothers Charles and Maurice Saatchi, left the company they founded in the 1970s after a bust-up with institutional shareholders in the US. Given this history, it’s not at all surprising that Maurice and his team were keen to run their new domain their own way. As a private company, there are no external shareholders and institutional investors to satisfy; and in Wales, they have an FD who clearly appreciates the value of sound, low interference financial management.
Interference by non-creatives
“Some of the bad things (at Saatchi & Saatchi, the brothers’ original agency) were interference by non-creative people, whether that be (David) Herro (the Chicago-based fund manager who originally called for Maurice’s resignation) or finance directors that were running the business,” Wales claims. “I’m not quite sure of Charlie Scott’s role, but he was a finance director who became chief executive and I remember very early on that Maurice wasn’t very happy about the contribution of finance directors.
So he wanted financial management which was sympathetic. He wanted someone who worked as a member of the team, improving the quality of the advertising, not simply improving the quality of the balance sheet – for finance not to be a department.”
That’s not to say Wales just keeps his head down. As we pose him for photographs, most of the passers-by in the agency pause to say “hi”, and most have a well-chosen witticism for the FD. “I hope this is creating shareholder value,” quips the almost unbelievably youthful joint chief executive Moray MacLennan as he walks past.
The personal touch
In a company of just over 230 staff (15 in finance), the personal touch is far easier to manage, but the fact that Wales sits in amongst the advertising people rather than with his finance team is testament that non-interference is a very different concept to disinterest.
“I would rather be in the agency knowing what is going on, hearing the problems, being able to deal with them and also for them to see my frustration,” he explains.
“When I lose my rag they know what it is about and it is amazing how helpful they can be if they just live and breathe my problems in the same way as it is helpful if I live and breathe their problems. It means that we execute our jobs in a much less confrontational way. What I want is that when people walk through the front door they think, ‘How can I improve our advertising today?’
“That’s the hardest part,” Wales continues, “working out how we do our job in the most effective way without hindering what we – as in the agency – are here to do, which is that kind of wacky creative stuff which we as finance people think is a bit uncontrolled and a bit … not quite right, actually.”
The strength of the relationships within the agency is crucial, and that seems to apply as much to the connection between the “support” functions and the creatives as between the creatives themselves. M&C was forged in a degree of adversity, and it continues to be a close-knit tribe under the leadership of its charismatic chief: Lord (Maurice) Saatchi.
“This business is owned by some of the most high-profile people in advertising who have been used to running one of the biggest advertising groups in the world,” Wales points out. “I don’t know if it’s a question of the best simply finding it easy to succeed but Maurice and his partners are a group of people who present challenges in such a way that you have no alternative.” There’s a story (sadly apocryphal – Wales can’t confirm it) that when M&C took over the lease for its swanky Golden Square headquarters and ordered a refit, a colleague questioned Maurice on the wisdom of such a large outlay during the agency’s start-up phase. “One way to succeed,” replied Saatchi, “is to have to.”
Such is the influence of the ennobled company figurehead that Wales even uses him as a shorthand for the management team. “I use the word Maurice to refer to a group of people, not simply Maurice the person,” he clarifies.
“There is something about those people staying together (after leaving Saatchi & Saatchi), there is a co-dependency. Maurice understands the value of the people who work for him – he knows he can’t do it alone.”
Nevertheless, it was Maurice’s vision which established the agency and got it through the early years. At the beginning – before Wales’s arrival – the salaries of £2m and zero revenue might have made lesser people question the wisdom of going it alone. “I am fortunate that I am working with some of the very best in the industry, who have been successful for 20 years,” Wales says. “That gave them pretty good odds that they were going to be successful. I mean, this was a premier league team going out to play …”
Bought in after consultants
Wales was brought in after a period when the finances at M&C had been run by consultants. Maurice and the team wanted the right degree of experience for the role and Wales, then FD at notoriously laid-back and funky New York agency Chiat/Day, was an obvious choice. Shortly before he was approached, Wales had been involved in a clash of business styles at Chiat/Day.
This had lead to the London arm of the agency breaking away to found St Luke’s, still one of the most innovative agencies in London thanks to its flat structure and ultra-relaxed environment. Jay Chiat had sold the agency to advertising giant Omnicom, and rather than be gobbled up, the London team had decided to negotiate a settlement which would leave them in control.
A spark of mischief
It was on a visit to London that a head-hunter approached Wales and suggested he chat to the Saatchis. “What was going on with Maurice wasn’t high profile in the States, and when I came back to meet them, I overslept the interview so I missed it,” recalls Wales. He had vague notions the Saatchi empire would be highly corporate, and a radical departure from the Chiat/Day job, so wasn’t even that keen to explore the post. “I thought, ‘Thank God I’ve got away with that,’ but they still said, ‘Come in when you’re ready,’ so I popped in when I wasn’t prepared, and I saw something in their eyes, a spark of mischief that said these people will be successful.”
Teamwork, relationships, creativity – these are the factors that define success in any modern business. But even more than in most knowledge-based organisations, advertising agencies rely on a small band of individuals to keep clients happy. In a small-ish agency – albeit one with a huge reputation – such as M&C Saatchi, the danger of assets walking out the door are always apparent. The fact that the agency was itself created by such a walk-out only emphasises the point.
“There’s an understanding that it’s all for one, and one for all, and if individual components leave, it is not in the interest of the others,” Wales says. “So everyone has to work together and not just to produce great advertising, but to work together to make sure that the team stays together. If you don’t have that kind of culture then yes, your assets are going to walk out of the door.”
While he was at Chiat/Day, Wales was invited to be part of a team put together by founder Jay Chiat to consider what the advertising company of the future ought to look like. Given that he’d worked for some time in offices where a suit was considered a major faux pas (even at M&C Saatchi, he tends not to wear one) and there were no desks, his involvement was less surprising that it might be. But in true advertising style, the committee – whose product was dubbed the “Chrysalis Project” and which later formed the blueprint for St Lukes – was less than straightforward.
“When we all turned up at a hotel in Los Angeles, most people thought, ‘Right: in three days’ time we are going to have this answered, we are going to have everything written and we are going to present to Jay,'” Wales remembers. “But Jay’s view was that we were going to spend at least a year with it and from that he did not expect a conclusion. His definition of a plan was not something that could be written down and then followed, it was something which sets out way points that you could get to and then re-evaluate what you do next. We do a huge amount of planning, but it doesn’t end up as something restrictive.”
M&C Saatchi wasn’t built on the Chrysalis Project model, but Wales values this lesson about planning – a lesson adaptable to any business situation. “Maurice and Charles wouldn’t have written a plan that said, ‘We will have a fight with the shareholders,'” he notes. “But they did have a set of criteria which guided them and allowed them to then go on and do different things – which I think is the essence of planning.”
The other key relationship that dictates the financial success of the business is that with the client. Although fantastically successful given its youth (it has just won Campaign’s Agency of the Year award), M&C Saatchi still only has 40 clients. That means each relationship must be nurtured and maximised (the latter is especially important because an advertising agency will typically only take one account from each industry sector to avoid any conflict of interest). But it also makes life simple. With a small number of clients “there is no excuse for not knowing where you’re about to go”, Wales insists.
But surely this makes for ulcer-inducing moments: an account director can re-pitch to a client and return either with £20m-worth of business or empty-handed. Wales, perhaps thanks to years in the advertising business, seems to think it’s not all that bad. He tells the story of a US agency (where the contracts are much bigger – in the $100m range quite frequently) in the 1970s that had lost a big piece of business. Lay-offs and closures were in the offing. “The bank is getting pretty heavy at this point, with several bankers in a meeting with the agency,” Wales recounts. “And there’s a phone call, Joe goes out of the room and then comes back and says, ‘You can all go now, we’ve just won American Express.’ It is heart-stopping, but it’s also exciting.”
With the advertising world still hugely fragmented – no agency in the world commands more than 5% of any market – the opportunities for growth and change are numerous. M&C Saatchi has grown around 20% in each year of its short existence, and can compete with the huge multinationals such as WPP and Cordiant (owner of Saatchi & Saatchi) not only thanks to its cachet, but because size is immaterial.
Globalisation has affected the way clients roll out campaigns, but that just means one agency may end up producing a global message, rather than one tailored for segmented markets. Sadly, it usually means little or no extra revenue, since the creative process is almost the same regardless of how widely or frequently an advert is used.
M&C Saatchi is coping with this by diversifying. The sponsorship arm (developed out of the company’s relationship with Gallaher, which has seen its tobacco advertising options slashed) is a growth business; eMCSaatchi will help clients develop their on-line messages; and the brothers have renewed their relationship with Christine Walker, founder of the Zenith Media media buying house, which is part of Saatchi & Saatchi. This last move is important: making ads for a global market may be fixed cost, but buying the global media time could be a massive money-spinner.
Wales stresses that expanding M&C Saatchi is easy because the people running it have worked with admen across the world. “We are not driven to acquire in the same way as other companies. We have been most successful where we have gone into business with people who are friends, or with previous colleagues,” he says. “The Saatchi empire was a big one, and there were lots of people who had worked with (current M&C people).”
The company has a handful of overseas operations to cover its client base, but Wales is cagey when it comes to talking about the specifics of future deals – although he does suggest that M&C Saatchi has some definite plans. That may be acquisition, and although flotation stories inevitably follow the Saatchi name, Wales points out that the whole point of setting up as M&C was for the agency leaders to control their destiny, not hawk it out again to shareholders. Nevertheless, he’s clear on the number one financial objective of the partners: pay down the debt.
As to his personal objectives, Wales says: “As a financial director you spend your life trying to maximise someone else’s value and we should apply those same techniques and principles to our own life and our own careers and our own futures. My experience has taken me towards having fun and being good at being a finance director. When we step outside of that, we step into an area where we are no longer required, we become something else. Then you are the first person to go. You are an expert in nothing.”
Ironically, however, Wales doesn’t even have an accountancy qualification – although his reasons are impeccable: “I’ve skirted it for 25 years; but I guess throughout my career I’ve wanted to commit to my work rather than to qualifications.” Now that really is a safe pair of hands.
Name: Jerry Wales
Education: “Left school after A-levels to become a boat builder. Got cold and hungry, came back to London.”
Qualification: “Studied ACCA to level 2. Decided work was more fun than study. Not to be recommended.”
1975-78: Marketing accountant, BP
1978-84: Campaign planning strategist, Avon cosmetics
1984-86: Financial controller (business development), Aidcom International
1986-88: Financial controller, Horner Collis and Kirvan
1988-95: Finance director, Chiat/Day (1988-93 in London, 1993-95 in New York)
1995-present: Finance director, M&C Saatchi
Wales reflects: A love for the sea took me initially to all things boats. But recession and VAT at 25% on luxury goods meant that boat-building was an effective means of maintaining a slim figure. I joined BP as part of their graduate intake in 1975 and that took me into their marketing finance function – the rest is history. I didn’t plan to reach this point; plans are there to be rewritten.
Wales on success: All we can do is do the best we can. That’s not a metric. I have this view of life and it says you only work hard if you do something wrong. You can only do things brilliantly if they’re easy. Why do we work hard? We should be working easy – then we like doing the extraordinary things.
Wales on e-commerce: I walk around the building and see people connected up to the Internet all day long. What they are doing I don’t know, but there is no doubt that it has fundamentally changed the way we do things – and we are only at the beginning. In a year’s time we will have a whole new set of circumstances.