Posted: June 27th, 2015

The Financial Perspective Saatchi & Saatchi

The Financial Perspective

Saatchi & Saatchi

Introduction

The Saatchi and Saatchi corporate is an internationally known advertising agency with more than eighty branches across the globe. It was founded by two brothers, Charles and Lord Maurice Saatchi in London, UK. It started to operate in the early 1970s and as time went, it emerged to be one of the world’s leading creative organizations. The company grew through mergers and acquisitions and also because of the recognition of their work which was of creative excellence. Being instrumental in keeping the Conservative party in power in 1980s made the company to become a legend in the UK. (Fendley & Fendley, 1996)

However in the mid 1990s, the company that was associated with billion dollars almost came to a halt, when bankruptcy stroke in. This happened because of the local recession that made Saatchi and Saatchi to loose much of its capital and poor management of the company’s acquisitions. The departure of the two brothers, Charles and Maurice Saatchi affected leadership and direction of the organization. The company found itself in a critical condition and the only remedy was to improve the set goals together with its efficiency. The top officials were changed and in 1995, Bob Seelert was appointed the chairman to replace the two brothers. Bob appointed Kevin Roberts to be the Chief Executive Officer. Saatchi and Saatchi desired a future that depended on laying supportive and aggressive financial goals. The two top officials came up with an approach with two perspectives; financial perspective and customer perspective.

The perspective of finance focused on the quantifiable and three achievable goals for the company, a new vision for the company. The first goal was to raise the revenue at a faster rate than how the market did; the second one was to convert thirty percent of the increased (raised) revenue to operating profit and the last goal was to double the earning per share. (Ledgerwood, 1999)

Analysis

With the new vision and financial goals set, the next step for the two top officials was to make the strategy real or happen. This led to restructuring the internal structure by introducing changes there. The top management started to re-examine their investment strategies on business units. They started by creating agency categories each with a different strategic charge, which were; drive, lead and prosper. The prosper agency had less than 50 workers. It was given limits not to grow big but was charged with having very high margins. (Hope & Player, 2012)

A drive agency had 50 and 150 workers. The senior team gave it a goal of maintaining or slowly growing their revenue base and margins. The UK, New York, China and other large agencies were given lead status. This is the unit where fast growth was expected and where the allocation of the lion’s share would be. Being attentive to the agency’s core client base determined the financial success of Saatchi and Saatchi, so, the management paid more focus to the lead agency. (Ramsey, 2011)

Saatch & Saatchi also adopted several strategies that related best to a customer perspective. Seelert, Roberts and their senior team set a customer-facing organizational structure and strategy. With the help of customer perspective, the financial perspective goals were achieved. By paying close attention and creating good relationship with the core client bases, Saatchi succeeded. The senior team came up with a phrase that said “permanently infatuated clients” (PICs). The company not only wanted to make a strong impression on Wall Street but also wanted to win the love of its customers. The analysis by the top management indicated that about 20-30 percent of the company’s customers were responsible for 70-80 percent of the company’s revenue. (Kaplan & Norton, 1996)

Communication was also an instrumental tool of customer perspective as in the case where, all the business units of Saatchi received a message that read that one of the company’s ways of becoming a global organization was through putting more attention towards the clients that earned large revenue. To create PICs, the Saatchi employees, in their business units were entrusted with generating BFS (big fabulous ideas) to win the favor of its clients. The (BSC) business scorecard played a number of roles in helping the company of Saatchi and Saatchi see success; it helped the company emerge from 1997 crisis and march towards attaining its goals, it helped the company accomplish the Wall Street objectives six months before the deadline, it helped Saatchi implement its strategies, etc. (Kaplan & Norton, 1996)

Conclusion

The financial strategies made sense for each given unit. With the help of the Business Scorecard, the company was able to make a financial check up. It could easily tell which of the three business units were earning profits, which were not earning, the units that had the potential to make profit in the future and the ones that could not, and many more comparisons. With this knowledge, the Saatchi and Saatchi company was able to make a wise decision on who it could transact business with and those not to transact with. The acquisition of by public Groupe SA did not affect the results of the Business Scorecard (BSc). It is because of the BSc, that Saatchi and Saatchi Company pulled itself out of the bankruptcy. Publicis Groupe SA was very aware that the business scorecard was a proven tool that could correctly restructure a collapsing company. By paying 2.5 billion for the company (Saatchi and Saatchi), Publicis Groupe SA was fully convinced that the company had to make it in the future. The positive results showed that the overall cost of Saatchi and Saatchi could easily be paid by its increased revenue year after year.

Evaluation

The two perspectives I e. financial and customer, worked in synthesis with each other in reviving the Saatchi and Saatchi. There are very many scenarios in the story of this company where we find cases of the two perspectives working together. They show a lot of interdependence and it is in rare cases you will find one perspective working on its own. The steps the senior management took in planning for the whole strategy worked effectively. The new financial goals of the company helped in guiding its clients within the three units. For the financial goals to be attained, planning and implementing of the clients’ objectives should be looked at first. In creating the PICs, BFIs were created by the workers and implemented as per the plans of the customers.

Mostly, the two perspectives work hand in hand and if you find company employing one perspective, it can put itself in an unresolvable situation. Then again, there is an issue of, which perspective to employ first; competent management is only remedy in this case. For instance, a firm that choses to employ the customer perspective first may get itself in trouble while budgeting for cash in order to satisfy a customer.

References

Fendley, A., & Fendley, A. (1996). Saatchi & Saatchi: The inside story. New York: Arcade.

Ledgerwood, J. (1999). Microfinance handbook: An institutional and financial perspective. Washington, DC: World Bank.

Hope, J., & Player, S. (2012). Beyond performance management: Why, when, and how to use 40 tools and best practices for superior business performance. Boston, Mass: Harvard Business Review Press.

Ramsey, D. (2011). Entreleadership: 20 years of practical business wisdom from the trenches. New York [etc.: Howard Books.

Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Boston, Mass: Harvard Business School Press.

Belch, G. E. (2009). Advertising and promotion: An integrated marketing communications perspective. Sydney: McGraw-Hill Australia.

Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Boston, Mass: Harvard Business School Press