WPP to Lay Off "Several Thousand" on Accounts Where Staff Cost More than 60% of Revenue

Last Updated Jan 5, 2009 3:27 PM EST

WPP is to cut "several thousand" jobs from its 100,000 headcount, according to the Guardian. Layoffs will come "where staff costs exceeded 60% of revenue," the paper said. The company immediately denied the report.

martinsorrell_photo111.jpgThe denial was odd, given that WPP boss Martin Sorrell has himself confirmed there will be layoffs across WPP in the near future. There has also been a steady drumbeat regarding WPP's debt load (although as BNET readers know, on paper, at least, it looks OK.)

Cuts at WPP would be entirely predictable. Of the giant holding companies, Omnicom already laid off 3,500, Interpublic is said to be considering 2,000. The shoe has simply yet to drop at WPP, Publicis et al.

The interesting part is the new notion that staffing should be drawn down to 60 percent of revenues. IPG holds it staff costs at about 67 percent of revenues. And Publicis's staffing is at 75 percent of revenue, per both companies' Q3 financial statements.

That range is a good guide for any major holding company with a mix of old and new businesses, above and below the line.

So for WPP to be looking to draw that down to 60 percent means cuts are likely to be deep indeed. More worrying: It's not just WPP's use of staff that is relatively inefficient. Its revenue is only 13 percent greater than its total operating costs per quarter. Which means that aside from staff costs, WPP is wasting money elsewhere, perhaps on real estate or legal bills.