Saatchi loses the big idea

The most famous name in advertising has known better days, but the agen cy will probably survive this week's boardroom wrangles, Rhys Williams reports strap across widthy

Lansdown House stands on the south side of Berkeley Square in Mayfair. It is a brute of a building, but impressive - granite and marble-fronted, with a palm-filled atrium the size of an aircraft hangar. The headquarters of the Saatchi brothers' g lobal communications empire may have occupied only the top floor, but at the time their name was above the door in three-foot letters. Symbolism was all.

Six months ago, their company crippled by debt and losses, they decamped back to Charlotte Street, the modest home of the agency. Charles stepped down last year to spend more time with his art collection, while Maurice was yesterday fighting a boardroom bid to oust him. There was even a proposal to have their name removed from the holding company's title.

Saatchi & Saatchi has been seen as the archetypal Eighties phenomenon: astonishing growth fuelled by borrowing, followed by meltdown when the recession hit. But the company did more than reflect its times. It played a huge part in defining them. After all, its advertising helped to carry the architect of the era, Margaret Thatcher, to power.

Charles and Maurice were born in Baghdad, the second and third sons of a wealthy Iraqi Jewish textile merchant. Sensing trouble for the Jewish population following the Second World War, the family moved to north London. After an unremarkable school career at Christ's College, Cambridge, Charles became an advertising copywriter.

In 1967, he and an art director, Ross Cramer, set up a consultancy, and produced an advertisement about birth control for the Health Education Council. It showed a man with a bulging stomach, and the headline: "Would you be more careful if it was you that got pregnant?" It was arresting, direct and the template for the decade to come.

The consultancy was launched as a fully-fledged agency three years later, minus Cramer but with Charles's younger brother, Maurice, on board. Charles was the quick-witted, quick-tempered visionary with a reputation for direct, visceral headlines; Maurice, with his round specs and first-class honours from the London School of Economics, was the implementer, the diplomat.

Saatchi & Saatchi made news from the moment it was launched. The brothers spent £6,000 of their £25,000 start-up capital on a full-page advertisement in the Sunday Times. Headlined "Why I think it's time for a new kind of advertising" and signed (though not exactly penned) by the management guru Robert Heller, the ad was a 2,000-word essay on what was wrong with the industry and what the agency intended to do about it.

According to someone who played a leading role in the agency's development at the time, Saatchi & Saatchi thrived because the brothers ran it as a commercial enterprise rather than a "creative indulgence", generating profits to fuel growth. Unlike some of the larger American firms that dominated the British scene, the Saatchis concentrated on the core business of producing ads and weren't distracted by marketing peripherals or film-making. In Tim Bell, the brothers found the consummate account handler, a man with so much charisma that it was said dogs crossed the road to be patted by him. He ran the agency, while Maurice went on the acquisition trail.

The work the agency produced was sharp, aggressive and startlingly consistent in communicating one basic selling message. One former managing director would throw a handful of sugar lumps at a graduate trainee on his or her first day and watch them all fall to the floor. He would then throw one, which the graduate invariably caught. "Get the message?" he would ask.

The bold approach turned on the big names, none weightier than Margaret Thatcher. The image of the dole queue under the line "Labour Isn't Working" ensured that by 1979, Saatchi & Saatchi was not only Britain's most famous advertising agency, but also its biggest.

With the acquisition of Dorland in 1981, the group became the largest European network. Despite the haemorrhage of clients and staff that followed the takeover of the American multinational giants Backer & Spielvogel and Ted Bates Worldwide, by 1986 Saatchi & Saatchi had grown into the largest agency group in the world.The drive into marketing services such as design, sales promotion, PR and direct mail seemed nothing more than the logical outcome of seeking to provide clients with a one-stop shop.

But there was more to it. Following a series of mergers, Saatchis had become a public company. And in the heady, fast and easy-money days of the mid-Eighties, shareholders demanded more than the measly single-figure returns that organic growth would provide. Acquisition was the only way up, and if they were occasionally outmanoeuvred and forced to pay over the odds, who cared, as long as the clients kept spending and the market showed no sign of slowing?

They started to play farther and farther away from home. A series of ill-fated sorties into management consultancy and litigation services followed. A former senior executive recalls how Maurice returned after his first meeting with the head of the Hay Consulting Group waving a brochure that detailed the company's services, but barely mentioned figures. "Maurice was so bowled over with the concept of a globalisation that he didn't really focus on the numbers. When we took over Hay, it was qu ite close to the brink."

By 1987, the company's attentions had turned to financial services and the Midland Bank. The single-mindedness that had driven the agency's work was being neglected by the brothers.When they mounted a second abortive bid to enter financial services, thistime with Hill Samuel, it looked suspiciously as though the brothers were floundering for ideas and direction.

The group that Robert Louis-Dreyfus and Charles Scott were drafted in to rescue in 1989, as chief executive officer and financial director respectively, was a mess. Revenue from the core advertising businesses was slipping as recession-hit clients cut budgets; debts were mounting; and the 1987 stock-market crash had wreaked havoc with the company's market capitalisation. Suddenly, Charles and Maurice looked frail and naked.

Ivan Fallon, who wrote The Brothers - the Rise and Rise of Saatchi and Saatchi before the rot set in, now believes that the group's astonishing growth, left the pair ill-equipped to cope with the crisis. "They could have done with a few setbacks early intheir career. They went into areas they knew nothing about and paid far too much for dreams that were plainly untenable."

Louis-Dreyfus and Scott set about clearing up the nursery. They began disposing of the more questionable assets. They extended banking facilities, converted debt into equity and secured a £60m rights issue.

They also took the marker pen to the payroll, so it was only a matter of time before they turned their attention to the brothers' inflated take-home pay. What were they doing for all of this money? Charles had always appeared semi-detached, never attending AGMs (to the irritation of shareholders) and obviously overseeing the creative work on only a couple of accounts. He deflected much of the heat by stepping down as a director last year and assuming the honorary title of President.

Yesterday's attempts to oust Maurice were greeted with astonishment at Charlotte Street. He has been an active senior contact on the major multinational accounts, such as Mars, Proctor and Gamble, British Airways and Gallaher, for example. According to one executive, he has been "a major competitive edge" in the drive for new business. As another former colleague points out: "In a service business, clients want to know the top man."

To them, it would make no commercial sense to ditch an obvious business asset. If it ain't broke, why fix it? Unless, of course, this time it's personal.

Even so, Saatchi & Saatchi, the advertising agency, the core brand, may continue relatively unharmed. That is a testament to the culture of self-belief they have instilled. Saatchi's has never suffered from the mass staff or client defections that have blighted virtually every big agency at some time or another. Talk to anyone who walks through the door each morning and ask them if they do not get just the hint of a thrill as they pass under the awning carrying still the most famous names in world advertising.