Mike Connaghan tries to dispel STW staff fears of job losses and mergers with memo

Anyone who has worked through similar situations (particularly involving WPP) knows that Mike’s comments have been heard again and again only to be followed by major job losses. His words are a virtual cut & paste of every merger I’ve been through. No group buys another to keep things the same. What would be the point? Merge, purge, slash costs & staff and ramp up performance targets for those left behind is just a business reality. I feel sorry for those about to encounter it all but it will happen to them more than once in this industry. Good luck to everyone!

Thanks for all this coverage, Simon.

Any chance of an ‘explain it to me like I’m five’ for us non-industry folk to comes to grips with it all?

More comments please. I need to know how to feel about this.

Fred and Confused,
most of the changes will be felt in the senior management ranks with a change in reporting (information, style and frequency) and more specific and likely agressive growth targets (this is what many people refer to when being negative about WPP). in all liklihood pending on your current exec team this may or may not filiter down to you, good executes protect and insulate staff allowing them to get on with their job, bad executes will poorly delegate and place pressure on staff for short term results and they themselves loss focus on ensuring a mid to long term plan that will ultimately drive both.
There should also be some upside though as many companies have flourished under WPP so it should not been seen as all doom and gloom, and as Mike highlighted international and network opportunities are a reality.
My advice is change is always good for learning, even bad expereinces can you teach you valuable lesson. Be open, be prepared and willing to accept and adopt change, dont pre judge and give it sometime.
Mike is many things but one of his outstanding attributes is that he is straight shooter and a no bullshitter, it should be great ride so run with it.

You wouldn’t spend all this money merging this large group of companies into a revised asx listed company just to keep the status quo. Clearly there is value seen in merging the group, otherwise the deal would have fallen over.

ASX savvy is correct. And to quote p.17 of STW’s own announcement – http://www.asx.com.au/asxpdf/2.....y5jpr6.pdf

“Operating Efficiencies – Local management oversight with acute margin focus and driving integration of services across the group
Total estimated cost savings $7.9m”

“Acute margin focus” sums up 2016 for employees.

As someone who has been through it with WPP, they will demand 20% efficiency improvement across the board, multiple mergers ( which DOES mean redundancies at all levels ), etc. The reason for merging is simply efficiencies, it is what the market wants to see, just like any business. This whole spiel about growth and opportunity is the usual facade that is put up. For the Managing Directors in the group, expect comp ratios to be less than 50.

$2.8 million savings in IT and shared services over 3 years, per the ASX document.

There may be some challenges ahead for Finance and IT staff.

I see it differently.

All this, ‘WPP didn’t buy it just to let it stay the same, they bought it to make changes’, spirited words conjuring up images of a Cowboy played by Will Ferrell riding in with his WPP cowboy hat, screaming into each office as he breaks through the doors ‘Im here to f**k s**t up’ is just rhetoric. It is baseless.

WPP bought this for one reason, and one reason only: it makes sense financially. For years everyone has known this was inevitable. It’s just been a matter of finding the right time for both parties. What goes into that, the ‘right time’? Share price, premiums, the projection for share price over next year, what the global market is doing (note, WPP has a lot more to consider than just STW). I’m sure waiting to see the Omnicom + Publicis merger happen, and then falling out, affected the time line of such a big acquisition.

So no, WPP didn’t buy in just to make sweeping changes. They bought in because it made sense to their global business.

And all perceived changes, cut downs, ‘efficiencies’ if you will, coming to fruition will come down to if it’s good for business. And all in all, STW is not doing terrible, so WPP won’t change things for the sake of change.

And with STW coming off a bad year, and MC saying ‘it’s not good enough’, share prices not being what they once where, change were coming anyway. I think there’s an argument that changes coming from WWP-merger won’t be as full on if the merger HADN’T happened. At least in the short term, as WPP needs to assess everything before making drastic changes, whereas an STW fiefdom knows what needs changing and could strike straight away. (This is an argument that could be made, not one I necessarily believe, but is as valid as all the ‘run for your lives’ comments).

I haven’t been MC’s biggest supporter in the past, but I think his email is honest, straight forward and doesn’t dodge anything. Cuts haven’t been mentioned in the deal, why would they? That’s such a short term issue, and not really a tabling point when discussing such a giant merger.

And like he insinuated, if your company is performing, you should be ok. WPP won’t want to disrupt any products doing well, because it’s now their money. ‘Dont fix won’t ain’t broke’ is a truism for a reason. And those who arn’t performing, I believe they were going to face changes/mergers/realignments from STW anyway. We know STW is a little embarrassed and looking to make changes. I think they have stalled on that a bit because of these negotiations.

IMHO in 3 years time, we’ll look back and see there wasn’t such a drastic change to most. There will be a fe mergers along with job cuts, but that won’t affect many people. These statements, ‘expect 20% cuts throughout the entire STW portfolio’ is rhetoric and baseless. I think some businesses will actually grow.

The biggest impact in 3 years time, IMHO, is putting a half to Asian expansion. Which again, won’t affect a lot of people currently.

What about those outside ANZ right now, in STW companies? If we’re being honest, I don’t think even MC knows right now how it’ll all turn out. But if they’re doing well individually, no need to kill them off. WPP just doesn’t need to cannibalize itself in what is a big focus for them atm. That’s the only reason Sir MS use to criticize STW for doing it in the first place, and a big point to coming in and buying up STW now.

Outside of that, IMHO, 95% chance if you’re in an STW company, in ANZ, beneath the management, there will be no change to your work life anytime soon.

*NOTE I have no connection to STW or WPP.

What’s sad is just how good Aussies have now sold another industry overseas

is it possible that this could actually mean that MC and STW actually get more power out of this…end up running WPP in this part of the world?

Time for a reality check here. There are two primary reasons why STW got to the point where they were, frankly, bought out.

One – STW purchased all kinds of agency outfits just to grow scale. That business model was already dysfunctional – read Photon. Two – STW’s timing of Asian agency/client business acquisition was far too late, cost too much and contributed greatly to STW’s financial plight. Along with massive overheads spent on trying to prop up 80 odd unprofitable rats and mice outfits here.

Sir Martin was smart enough to see what was happening, bided his time and then got it right. The rest is window dressing.