WPP to reduce headcount by 3,500, aims to spend US$400m on restructuring

WPP will spend £300 million (approximately US$400 million) over the next three years for restructuring purposes, in a bid to deliver estimated annual savings of £275 million (approximately US$350 million) by the end of 2021. According to WPP, approximately half of this amount will be reinvested in the business.

WPP is also intending to make a gross headcount reduction of 3,500, which is approximately 2.5% of its global headcount.

This comes as the network aims to incorporate a simpler, improved offer designed to capture the opportunities of a changing marketplace, and a streamlined structure built around the needs of clients. The list of restructuring includes the integration of VML and Y&R, and Wunderman and J. Walter Thompson, closure of unsustainable operations, right-sizing and disposal of under performing businesses, as well as establishing a consistent shared service infrastructure to support 30 countries over the next five years.

According to WPP, the creation of VMLY&R, Wunderman Thompson, as well as the alignment of its US healthcare agencies with integrated agency partners and the elimination of the subholding company WPP Health & Welnness, allowed it to raise £704 million (approximately US$890 million) to reduce debt. Moving forward, as part of the strategic review, WPP will become a more client-centric organisation, have fewer, more integrated companies equipped to adapt to the changing market, as well as further integrate at a country level to leverage its strengths in individual markets. The move comes as WPP aims to shift away from being “too unwieldy, with too much duplication”.

The strategic review also includes additional investments in creativity, technology and talent to boost WPP’s proposition to clients and drive top-line growth. This strategy reflects WPP’s new vision to become a creative transformation company, bringing together creativity and expertise in technology and data with the purpose of building better futures for employees and clients.

(Read also: WPP reportedly on hiring freeze until early 2019)

WPP believes its most competitive advantage is its creativity, making it special and differentiating it from other professional services firms. It plans to invest an incremental £15 million (approximately US$19 million) for the next three years in creative leadership, with a particular focus on the US. It also plans to accelerate and promote its technology and data capabilities as “clear sources” of competitive advantage for WPP.

To implement the new plan, WPP formed an executive committee drawn from both corporate and company leadership, which will review its incentive arrangements to align with the strategy. The committee will also champion a culture across WPP characterised by the values of openness, optimism and a commitment to extraordinary work. The network said it developed this “competitive positioning” by consulting employees and clients, and is being supported by a refreshed brand identity created by Superunion’s global CEO Jim Prior and Landor’s CEO Jane Geraghty.

Read during an investors’ webcast that the team wanted WPP’s identity and brand to reflect the people inside the group and the work that it is doing, as well as WPP’s new culture. The brand refresh hopes to put highlight the values of openness, optimism and extraordinary.

WPP’s future offer will cover communications, experience, commerce and technology. According to WPP, each of these areas is critical to success for modern clients and bringing them together will enable it to better serve clients. The communications function focuses on advertising, content, media, PR and public affairs, and healthcare, while the experience function reflects the growing need of clients to create new brand, product and service experiences. Meanwhile, commerce allows WPP to expand its growing omnichannel commerce business and its work with brands to help them succeed in marketplaces such as Amazon and Alibaba. Lastly, technology highlights WPP’s work with both CMOs and CIOs to build and operate marketing technology that supports their consumer and customer facing activities.

WPP also said it has received “numerous unsolicited expressions of interest” with regards to the Kantar business. Previously, Mark Read (pictured), CEO, WPP decided to put Kantar up for sale, with the board approving a formal process to review the strategic options that will “maximise share owner value”. Proposals will be evaluated on their financial and strategic benefits, with an announcement most likely due in the second quarter of 2019 if a transaction is agreed upon. WPP will still retain a significant minority interest and strategic links with Kantar.

According to Read, the restructuring of business will enable increased investment in creativity, technology and talent, enhancing WPP’s capabilities in the categories with the greatest potential for future growth, as well as improve its offer and create opportunities for clients.

“This investment will drive sustainable, profitable growth for our shareholders. We describe our approach as ‘radical evolution’: radical because we are taking decisive action and implementing major change; evolution because we will achieve this while respecting the things that make WPP the great company it is today,” Read added.

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