Saatchi and Saatchi: Financial Strategies

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Table of Contents

Introduction
Analysis
Conclusion
Evaluation
References

Introduction

Founded in 1970, Saatchi and Saatchi is a company which quickly grew to be a leading agency in the advertising world. Throughout the seventies and eighties, the company performed very well and revenues increased exponentially (Saatchi and Saatchi, 2008). However, the recession in the mid nineties had a severe impact on the performance of the company and it was on the verge of collapse. The agency had also experienced an uncontrolled over-expansion which led to the ousting of the founders. The ousting of the Saatchi brothers also brought with it serious complications as several high profile staff left the company at the same time, causing the company to pay huge bills in compensation of the staff who left. Each business unit lacked a common corporate vision. The Company was running bankrupt and there was an urgent need to turn around the performance of the company before it was too late (Greenhalgh, 2004).

After the Saatchi brothers left the company, the new chairman and CEO brought with them several changes that would lead to a transformation of the company. The company adopted a balanced scorecard as a management tool to help her achieve her strategic journey, which has four categories of measure- financial, customer, internal business processes, innovation and learning. The financial perspective goals of the agency focused on paying a very close attention to the main client base of its business units. This involved channeling resources based on how they were required, and also based on the potential for growth and reproduction.

Analysis

With over eighty business units running, Saatchi and Saatchi categorized these units depending on their number of employees and the potential for growth. These categories are lead, drive, and prosper (Greenhalgh, 2004). The lead agencies were the largest of all, such as UK, New York and China, while the drive agencies had about fifty to one hundred and fifty employees. The prosper agencies had typically less than fifty employees and were the smallest.

Rapid growth was expected in lead agencies and therefore the greatest share of investment was allocated here due to the high potential for growth and expansion. The drive agencies were medium sizes and although they could not achieve some very high growth rate, they were expected to maintain their current revenue base or slightly improve it. These agencies would also be required to grow their margins. The prosper agencies had limited potential for growth and therefore in the strategic focus, they were not expected to grow exponentially, but rather to widen their margins greatly.

In order to improve customer-seller relationship, the agency formulated a blueprint to assist them relate better with the customers. First of all, they were to focus attention on some clients who formed a big part of their revenue worldwide (Saatchi and Saatchi, 2008). This would involve serving these clients fabulously in all the business units in order to satisfy their needs. These were about twenty to thirty percent of their client base and they contributed to about eighty percent of their revenues. By offering these companies perfect and flawless service, the agency would form a group of what they called ‘Permanently Infatuated Clients’ or PCIs.

The agency also came up with a program where they would work to create quality ideas which would transform their customers’ brands or businesses. These ‘Big Fabulous Ideas’ or BFIs were the ideas which would help to create the permanently infatuated clients, therefore each business unit had to come up with a team of creative people who would generate and implement these ideas. This was all done to build better relationships with the customers.

Conclusion

The financial strategies adopted by the agency involved channeling the available resources based on the expected potential for growth and reproduction in each agency. This meant that some agencies received more resources than the others, depending on their clients and their room to grow. Agencies in each category were performing differently and therefore it made sense to invest different amount of resources in each one of them. Besides, by identifying the clients who contributed to the highest amount of profits among all the clients, each agency could focus on these high value customers and allocate resources to develop some cutting edge services for them.

The acquisition of Saatchi and Saatchi by Publicis Groupe SA was at about five times its market worth (Greenhalgh, 2004). This is a clear indicator that the company had made a turn-around and was doing perfectly financially, just in slightly less than three years after the implementation of the balanced scorecard. The acquisition did not change the results of the balanced score card but it was further proof that the scorecard had worked and achieved its objectives timely and very successfully.

The approaches used by the agency were fruitful and they complemented each other. The customer perspective helped to identify the customers who had the greatest value to the company so that each unit could strive to ensure that maximum support was given to them irrespective of the location of the unit. The financial perspective on the other hand helped to distribute and allocate resources so that each unit would be in a position to service its clients as per the current needs, hence even the smaller client would not be ignored at each point.

Evaluation

The customer perspective strategies employed by Saatchi and Saatchi served to reinforce the financial perspective strategies. This is because in the financial perspective strategies, the agency aimed at increasing the revenue amount and sources, reducing the costs and making maximum utilization of the available assets (MyStrategicPlan, n.d). This would ensure that the resources were maximized and the opportunity cost minimized, while each available resource would generate the maximum possible revenue by channeling it towards serving the high value clients.

The customer perspective strategies worked to identify those clients who formed the major revenue base for the company and therefore ensure customer profitability. By identifying the main revenue generating channels, the financial resources can be allocated appropriately so that the financial goals are achieved and the customer satisfaction is achieved. This would also ensure customer retention and increased customer loyalty (MyStrategicPlan, n.d). The two strategies therefore worked hand in hand and ensured that the overall objectives of the ongoing reforms in the company were achieved. The two strategies did not conflict with each other.

From the case study, the implementation of the strategy was well done as the performance of the agency was transformed in a very short period and the desired results were achieved. By carefully formulating the financial and customer perspective strategies, the agency was able to transform its mission and vision into a reality and there was a turn-around in terms of revenue and customer growth. The fact that the company was sold at about five times its market worth was vivid evidence that the agency which had been almost filing for bankruptcy was now a profit generating agency.

References

Greenhalgh, C. (2004). Building a Strategic Balanced Scorecard: Saatchi & Saatchi Complementary Case Study. Business Intelligence Company. Web.

MyStrategicPlan. (n.d.). Balanced Scorecard: Performance Measurements for Success. Web.

Saatchi and Saatchi. (2008). Where We Are. Web.

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Saatchi and Saatchi: Financial Strategies

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