JWT Shakeup: Whispers, Wonder

Tony the Tiger was suddenly speaking in a whisper. J. Walter Thompson--the very firm that put the baritone bellow into Tony the Tiger--fired its advertising chief, who was headed for the top job at the 123-year-old ad firm. On Sunday, it was a whisper. The agency issued a one paragraph statement: Joe O’Donnell was out.

By Monday morning, it was the roar heard round the ad world. One of the nation’s oldest and largest advertising agencies now finds itself more dubiously ranked among the most-troubled. Suddenly, the agency that has had an iron grip on giant accounts such as Kraft, Kellogg, Eastman Kodak and Ford was being talked about in terms like bloated and top-heavy.

There was even talk that JWT Group, parent to J. Walter Thompson, may find itself an attractive takeover target. Meanwhile, the agency’s senior management has rushed to reassure their loyal clients that all is well. After all, the firm says it has hung on to its 20 largest accounts for an average of 30 years each.

The firm told its clients that Joseph W. O’Donnell, 43, chairman of the J. Walter Thompson unit, was out because he explored--without talking to the JWT board--the idea of taking the agency private in a leveraged buyout with himself in control.

Advertising industry executives and analysts say they are baffled over why O’Donnell would even consider a virtual coup d’etat that would have ousted his mentor, JWT Group Chairman Don Johnston. Neither O’Donnell nor Johnston were available to explain.

“If (O’Donnell) had just sat tight for two more years,” said Alan Gottesman, analyst at L .F. Rothschild, “he could have had the whole company and done anything he wanted to with it.”

But now, O’Donnell is without a job, and J. Walter Thompson is a ship in search of a rudder. When the New York ad firm is scheduled to release annual results in less than two weeks, shareholders of the publicly held company can expect to see a continued annual earnings drop, analysts say. And troubles at the top--along with continued disappointing earnings--make the agency a likely takeover target, Gottesman said.

“That’s a persistent fantasy on Wall Street,” said Donald C. Deaton, senior vice president at Hill and Knowlton Inc., the public relations firm that is a division of the JWT Group. “The fact is there has never been a successful hostile takeover of an advertising agency.”

Takeover or not, its clients are anxiously awaiting to see if the management shift will affect the agency’s highly respected creative work.

Concern was evident in Battle Creek, Mich., on Monday where J. Walter Thompson executives were presenting advertising ideas to Kellogg Co. officials. “It’s important that there be a stable work environment, and this won’t help,” said Mike Simpson, Kellogg’s executive VP of sales and marketing. “We can’t help but wonder how this might affect the people who work on our business.”

In an attempt to reassure clients that the sky has not fallen, Johnston--who has at least temporarily reassumed O’Donnell’s duties--has spent the last three days telephoning them. “The only time he took out was to watch the Super Bowl,” Deaton said.

Although the JWT Group is clearly embarrassed over the whole affair, it does not appear to be considering legal action against O’Donnell. “I don’t think he (O’Donnell) did anything dishonest,” said David L. Yunich, a 13-year JWT Group board member. “He just used poor judgment.”

Industry executives and consultants say that despite its creative work, JWT has become bloated with too many high-salaried employees. “The company has one of the worst profit pictures in the industry,” Gottesman said. “They spend too much money, primarily on personnel.” He expects profits to decline for the second consecutive year when the company reports 1986 earnings next month. In 1985, net income fell to $18.5 million compared to $20.5 million in 1984.

Until recent layoffs--which included the closing of its Washington, D.C., office--the firm had added numerous new employees in recent years and bloated its payroll to nearly 10,000 workers. “Even if you have the world’s most efficient heating plant,” pointed out Alan O. Pando, West Coast president of the competing ad firm DDB Needham Worldwide, “it won’t be very efficient if you don’t close the window.”

Sponsors Compete for Marathon Race

The chairman of the dog food company was practically yelping.

He had noticed more and more joggers with dog in hand. “If the dogs ate our high-protein dog food,” he lectured the president of the Los Angeles Marathon, “their tongues wouldn’t hang out so far.”

In fact, his company wanted to be a major sponsor for the much-trumpeted, March 1 event. But with the upscale image of the 2-year-old marathon at stake, the dog food executive had to be told that he was barking up the wrong tree. First of all, William Burke, marathon president, didn’t believe that any dog food could affect the distance any dog’s tongue hangs from its mouth. What’s more, he said, it just wouldn’t seem “appropriate” for a dog food maker to be on the same dais with such sponsors as Mercedes-Benz and Eastman Kodak.

“Last year, when I called on potential sponsors, people said I took along my knee pads,” Burke said. But this year, he no longer has to beg. In fact, after losing nearly $500,000 last year, marathon officials say this year’s version is expected to break even.

Reason: corporate sponsors. “Just about every other marathon in the country was originally put together by a bunch of die-hard runners,” said Philip Maher, editor of Sports Marketing News, a newsletter published in Westport, Conn. “But the Los Angeles Marathon started as a business venture from Day One.”

Corporate sponsorship is a relatively new phenomenon for marathons. Just 10 years ago, Manufacturers Hanover Corp. became what is believed to be the first big-name marathon sponsor when it helped back the home town favorite New York Marathon.

Now, sponsors are running after the marathons. And just like the runners, they are already elbowing each other for position. One local food manufacturer even offered a $1-million sponsorship if its chief executive could shoot off the race’s starting gun. Officials turned it down flat, explaining that the job belongs to the mayor.

But much as every runner wants to cross the finish line first, every sponsor also wants to be first--in the eyes of the TV cameras. The publicity struggle begins long before Race Day. Soon, nearly 5,000 of the Los Angeles area’s billboards will spout ads by marathon sponsors.

Coca-Cola Bottling Co. has plastered the marathon’s logo on 75 million Coke cans. Mercedes-Benz is flaunting its sponsorship on some 500 of the billboards. And licensees are minting marathon logos on everything from whole wheat bread wrappers to bottled water.

Marathons appeal to the wealthy, sponsors say. And in trying to get their messages across, sponsors vie for position with no less fervor then the runners.

“Sponsors are all gentlemen until the day of the race,” said David DePinto, director of public affairs for Coca-Cola Bottling Co. of Los Angeles. “But then it’s catch as catch can.”

“I can’t say we’ll sell 500 more cars because we sponsored the marathon,” said Jack McDonough, Los Angeles area general manager of Mercedes-Benz. “But we do know that 40% of our target audience is runners.” Mercedes-Benz will spend more than $1 million on its sponsorship, he said.

But what might have been the marathon’s most unusual bid for a sponsorship came from a toilet paper manufacturer. The offer was turned down by officials, despite a clever tie-in proposed by the company. It wanted to underwrite the cost of one of the marathon’s most used facilities--the portable restrooms.