- March 9, 2013
- Posted by: essay
- Category: Term paper writing
Saatchi and Saatchi is one of the global advertising brands. Currently the company represents a global network of advertising agencies, with 6,500 employees in 80 countries (Marr, 2010). The company was founded in 1970, and was purchased by French company Publicis Groupe SA in 2000 (Marr, 2010). Since the very creation of the company and up to the 1997 the firm was performing aggressive acquisitions and developing its own creative style. Both directions were successful in 1970s and in 1980s, but in the beginning of the 1990s the recession affected financial performance of Saatchi and Saatchi (Marr, 2010). During these years, both Saatchi brothers who were the founders left the company. By 1997 Bob Seelert was its chairman, and Kevin Roberts was CEO of Saatchi and Saatchi (Kaplan & Norton, 2004). These leaders have dramatically reshaped the company and greatly contributed to its immense success.
In the middle of 1990s the company did not have a common vision, and all 45 business units were operating almost separately. Due to radical administration changes, the agency has lost about $40 million of revenue in 1995, with further litigation and severance payments (Kaplan & Norton, 2004). The new leaders performed the de-mergers, sold most of the acquisitions of previous 20 years (which did not create value) and announced the return of the advertising giant.
Seelert and Roberts have developed a new vision and a new set of clear goals for Saatchi and Saatchi. They have set two prongs of goals, financial and customer, for a three-year time period. Customer-oriented goals focused at positioning of Saatchi and Saatchi at the top rank of advertising industry; these goals were further transformed into organizational strategies. Financial goals included superior market performance and revenue base, 30%-conversion of revenue to incremental profit and doubling EPS (Marr, 2010).
After the goal-setting phase, the most important step in the structural change was to implement this strategy. First of all, Seelert and Roberts have performed a financial health check in order to classify existing business units according to their potential customer value (Apgar, 2004)
The leaders identified three categories of agencies, which they called “prosper”¯, “lead”¯ and “drive”¯. The “prosper”¯ type commonly had less than 50 employees and limited potential. “Drive”¯ agencies commonly had from 50 to 150 employees, and were expected to develop further on a medium speed. Finally, the “lead”¯ type agencies had more than 150 employees and were expected to have the biggest innovative power (Kaplan & Norton, 2004). Seelert and Roberts adopted different financial goals and investment strategies for these three types of agencies. “Prosper”¯ agencies were not expected to grow dramatically, and had to meet high profit margins. “Drive”¯ business units received a certain percentage of investments, and were expected to show moderate progress. The largest investment pool was sent to “lead”¯ business units in the UK, USA (New York) and China (Kaplan & Norton, 2004).
Seelert and Roberts have also developed several customer-oriented strategies. After a thorough check, they have found out that about 20-30% of customers made up to 80% of profit (Kaplan & Norton, 2004). They have called these clients PICs (Permanently Infatuated Clients), and all business units were required to focus on these clients and deliver maximal value to them. Another related customer-focused strategy was the concept of BFIs (Big Fabulous Ideas) ”“ the ideas which could transform the whole perception of the client brand and reputation (Kaplan & Norton, 2004). The idea of BFIs also went along with people-focused strategy and inspirational leadership. After designing the strategies, the leaders needed an instrument of translating the strategies into actions, and they chose the balanced scorecard approach as the most appropriate method after meeting Dr. Kaplan, one of the founders of this approach. Using strategy maps and CompaSS scorecards, Seelert and Roberts put their strategies to life.
In my opinion, the financial strategies developed for each unit were sound, and clearly distributed the priorities of the top management. Once they set the goal of becoming an industry leader, they had to invest into the business units which would be able to lead the company towards this goal, and this tendency was incorporated into financial strategies. Another advantage of financial strategies devised by Seelert and Roberts is the technique of targeting investments. If they tried to invest into all 45 business units, the effect would be neglectful. However, they researched for the most successful business units, and centered the business around them ”“ a very effective decision.
Using the balanced scorecard allowed Saatchi and Saatchi to implement strategies into life, and the company managed to reach their financial goals in 2.5 years instead of 3 projected years. This was an evident financial success, based on sound financial strategies and impressive implementation. The acquisition of Saatchi and Saatchi by Publicis Groupe SA in 2000 did not change the results of balanced scorecard approach. On the contrary, the fact that Publicis Groupe SA paid five time more than the company’s value constituted, is a clear proof of a very successful implementation of strategies (Marr, 2010).
The two approaches ”“ customer and financial ”“ worked in synthesis at Saatchi and Saatchi. Indeed, the primary focus on the PICs generating 80% of revenue allowed the company and its separate business units to increase gains, and the concept of BFIs allowed to create more PICs, and to engage clients by the unique creative vision of Saatchi and Saatchi. Thus, both approaches worked in synthesis towards generating sustainable revenues and developing the company’s image of top advertiser.
Customer perspective developed by Seelert and Roberts reinforces the financial strategies developed by these two leaders. The first customer perspective ”“ attention to PICs ”“ maintained financial security of the company and allowed all types of business units to cover its profit margins (since these clients brought a large percent of revenue). The second customer perspective ”“ attention to BFIs, people value and inspirational leadership ”“ allowed business units to rise higher on the corporate ladder and to transform from “prosper”¯ to “drive”¯ and even “lead”¯. This perspective was the one that made Saatchi and Saatchi a top advertiser ”“ its unique culture, vision and approach.
Evaluation of effectiveness of the scorecard approach can be done by reviewing the organizational goals and comparing them to actual achievements of Saatchi and Saatchi. Its immense financial success and the fact that the firm managed to reach its financial goals in 2.5 years instead of planned 3 years shows that the implementation of the strategies was as successful as their concepts. Both in terms of cycle time (efficiency) and in terms of quality and outcomes of the process (effectiveness) (Creelman & Makhijani, 2005), Saatchi and Saatchi outperformed its initial projections, and thus it is possible to state that the implementation of strategies using the balanced scorecard method was done successfully.
Creelman, J. & Makhijani, N. (2005). Succeeding with the balanced scoreboard. John Wiley & Sons.
Marr, B. (2010). The Intelligent Company: Five Steps to Success with Evidence-Based Management. John Wiley and Sons.
Kaplan, R.S. & Norton, D.P. (2004). Strategy maps: converting intangible assets into tangible outcomes. Harvard Business Press.
Apgar, D. (2008). Relevance: Hitting Your Goals by Knowing What Matters. John Wiley & Sons.