The Financial Perspective
Introduction
Saatchi & Saatchi is a leading creative organization in the industry of communication services that range from advertising, marketing strategy, and production of media channels. In the 1970s and 80s, the company grew fast through mergers and acquisitions, but was to later to face a tough financial situation in the 1990s. In this decade, the company was affected by recession; in 1995, the company was on the verge of bankruptcy, and new management was put in place as the Saatchi brothers left. There was no common vision among the 45 agencies, each with its own goals that did not match the corporate vision, and communication among the agencies was poor and needed restructuring. The company was merged to others, and acting independently was not possible.
At this time, the new management adopted a two-pronged strategy that was the customer perspective and the financial perspective. For the financial perspective, the company set new goals that were aimed at improving the financial stability of the company, and reducing costs. The first goal was growing the revenue base better than the market. The second goal was converting 30% of the increased revenue into operating profit, and the third goal was doubling the earnings per share. The management aimed to do this through de-merging from the other companies, so that they could rule their own destiny creatively and independently. The goals were embraced by the shareholders since their desire was to realize value for their wealth (Robin, n.d.).
Analysis
In order to achieve the goals, the management team had to restructure the internal processes, and find out the best way to invest and where. To achieve this, the company did a financial check and recognized the agencies that brought in more revenue, and they categorized them into three types of agencies, each with specific strategies and obligations. These agencies were ‘prosper’ agency, ‘drive’ and ‘lead’, which were categorized in terms of size and ability to make growth. With the categories, the company knew better which to invest heavily on and which not to, each category was given a specific strategy and role to achieve (Greenhalgh, 2004)
Prosper’ agency, under which most agencies fall was to be comprised of less than 50 employees and they were not meant to grow into big agencies. The strategy in these agencies was to maintain or grow their revenues slightly, but also had to grow their margins, and they received the least investment. Drive agencies were the second category that had between 50 – 150 employees, and its responsibilities included maintaining their revenue and growing though not rapidly, and growing its margins. These agencies received little share of investment. Lead agencies were the big ones, such as those located in the major places as New York, and had the responsibility of growing rapidly and increasing their revenues and revenue margins highly, since most of the investment went to this category. With strategies for each category, it was easier to monitor the success or failure of each agency easily.
Saatchi & Saatchi also adopted customer-oriented strategies aimed at retaining customers through creative service provision. Since 70%-80% of their revenue came from their clients, all the agencies were presented with the responsibility of focusing their attention on core client base, where the management coined the phrase, “ Permanent Infatuated Clients, PICs,” (Greenhalgh, 2004). All the agencies were supposed to focus on the large revenue-earning clients, irrespective of how much percentage revenue a client would bring to a particular agency. For instance, if a client is global, and an agency in Vietnam may not benefit as much from the client as an agency in New York, it was supposed to continue giving services that satisfy the client as long as it brought more revenue to the whole company. In order to make PICs, all agencies were charged with creating big ideas, which were referred to as BFIs, ‘big fabulous ideas’ that would transform business and create better brands and reputation of businesses of the clients. Creating an environment conducive for creativity among all the agencies as well as using people who added to the company’s tradition of creativity was imposed in all the agencies as a strategy to enhance big fabulous ideas. These strategies answer how Saatchi & Saatchi will deliver the service to the customers, and creating what they want as well as satisfying them, which is the aim of customer perspective (Niven, n.d.).
Conclusion
The new strategies in Saatchi and Saatchi designed for each agency were quite sensible to ensure that all the agencies worked towards one goal, of achieving a bigger financial base, as well as growing its margin. Giving a strategy for each agency helped the company to handle its customers well, and utilize its resources to achieve optimum output. The first strategy of categorization that determined how much investment would be drilled into each strategy served to ensure investments were in the right place for the right purpose. For instance, prosper agencies received the least investments and were not expected to grow, but rather, to maintain revenue and increase margin. Expanding such an agency would have been harder since more investments would be required and only little revenue would be generated in the near future, as opposed to the big agencies; hence, investing in the bigger agencies ensured that the investments realized the optimum results faster, in both long term and short term periods..
After the acquisition, the balanced score card would have to change a little to incorporate the mission of the parent company. Since the financial perspective in the company was to increase the revenue, this would still be expected after acquisition. However, creating a value for the parent company would have to be looked into, hence the balanced score card would undergo a little change to match the parent company, but will still remain with its contents. The two prongs adopted by the new management in Saatchi & Saatchi worked in synthesis to achieve the company’s goal of creating value for shareholders. In order to achieve the financial goals, the company had to focus on the customer-oriented strategy that ensured customer loyalty, and reduced the costs of airing new customers. If the service was not customer focused, very few clients would have been converted into PICs, and the revenue could have gone down. Both prongs served to complement each other since none could be gotten without the other in a service industry.
Evaluation
Meshing up customer perspectives with customer perspectives can either reinforce or conflict. In Saatchi & Saatchi, to increase the revenue meant increasing customers and customer loyalty. “…there are a number of interrelated factors that must be in place to succeed. Possibly customer satisfaction must be enhanced to increase the number of customers or increase the loyalty of existing customers’” (My Strategic Plan, n.d.). In the case of Saatchi & Saatchi, the strategy of creating PICs meant retaining customers and BFIs aimed at creating new customers and turning them into BFIs, which increased customers. Hence, more revenue was achieved, which was a financial goal. Meshing the customer perspective strategy was a complement to the financial perspective.
In my opinion, the strategy was implemented excellently since it achieved the targeted goals six months earlier than expected. This is an illustration of successful implementation of the strategy. In Saatchi & Saatchi, the management was able to tell everybody the task designed for them, state where they were and where they wanted to be, and when. Implementing a balanced score card entails translating the strategy into action, lining up the organization to fit into the strategy, involving every body, making it a continuous process and maintaining it through good corporate leadership (My Strategic Plan, n.d.). From the Saatchi & Saatchi case, this is evidenced by the devotion of the top management in communicating the strategy to all agencies, and involving the employees in becoming creative, and shaping the organization in a way that fits the strategy, such as creating an environment for creativity. The results illustrate a well-implemented strategy.
References
Greenhalgh, C. (2004). Building a Strategic Balanced Scorecard: Saatchi & Saatchi Complementary Case Study. Business Intelligence Company. Retrieved from http://www.business-intelligence.co.uk/PDFdownloads/strat_bsc/Saatchisr.pdf
MyStrategicPlan (n.d.). Balanced Scorecard: Performance Measurements for Success. Retrieved from http://www.mystrategicplan.com/strategic-planning-topics/balanced-scorecard.shtml
Niven, P. (n.d.). Financial perspective. EPM Review. Retrieved from http://www.epmreview.com/Resources/Articles/Delivering-shareholder-value-growing-revenue-and-enhancing-productivity.html
Robin, D. (n.d.). Vision, Mission and Values: Management Tools for Building a Better Workplace. Daniel Robin & Associates. Retrieved from http://www.abetterworkplace.com/027.html
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