Saatchi & Saatchi was one of the world's leading advertising agencies, but over-expansion and a lack of a coherent brand image required that the company create a new strategy to continue to thrive. Financially, it set more specific benchmarks for itself and strategically it focused on large clients and larger agencies to generate more positive buzz about its brand on a mass scale. This case study examines how the Balanced Scorecard enabled the agency to achieve these goals.
Balanced Scorecard
Saatchi & Saatchi: Balanced Scorecard Case Study
Saatchi & Saatchi was once one of the world's most respected advertising agencies, but its fortunes were floundering in the mid-1990s. It had crafted a quirky brand image for itself that had been diluted due to its over-expansion and a lack of a coherent vision for its various component agencies. "Throughout the 1970s and 80s we experienced rapid growth through acquisitions. We were essentially competitors only connected through common ownership" (Greenhalgh 2004:2).
The company established specific financial benchmarks for itself to meet.
These included growing its revenue base better than the market average, converting 30% of its incremental revenue to operating profit, and doubling its earnings per share (Greenhalgh 2004:3). This was designed to give the company a sense of focus, purpose and clarity in reshaping its new future over a three-year period. Clear goals provided shareholders with a sense that the company was getting 'back on track' versus vague reassurances that it was simply going to try to get better.
Analysis
As well as financial goals, the company also set customer-related goals. Three agency classifications of the existing Saatchi empire were created: 'lead, drive, and prosper' and "each category had different strategic charges" (Greenhalgh 2004:4). To some extent, it could be said that these 'coded' words was a way to soften Saatchi's decision to emphasize large, money-making agencies at the expense of smaller agencies. Most agencies were classified as prosper agencies, or agencies with less than fifty employees with very limited growth potential. To justify their existence, "units in this category were not expected to grow dramatically, but were charged with achieving high-margins" (Greenhalgh 2004:5).
The second category of 'drive' agencies with 50 to 150 employees "was given the goal of maintaining or slightly growing their revenue base, but also growing their margins" (Greenhalgh 2004:5). However, it was the 'lead' or most important agencies located in desirable markets like the UK, New York and China that were the focus of the new plan. "It was here that rapid growth was expected and where the lion's share of investment would be allocated" (Greenhalgh 2004:5). This focus on lead agencies reflected the new desire of Saatchi to create 'Big, Fabulous Ideas' (BFI) that would rebrand Saatchi as on the cutting-edge of advertising. Saatchi wished to dominate the marketplace once again, and it believed that only with high-profile clients and agencies it could do so. Smaller agencies were seen as diluting the brand image and drawing focus away from 'big things,' and thus they would have to fight to justify their existence.
As well as BFIs, Saatchi wished to cultivate a strong, loyal client base, particularly at its 'drive' agencies. These "Permanently Infatuated Clients' (PICs) saw unique value in the Saatchi brand and the image of the company would become fused with that of the image crafted for the company by the advertising agency. It was not enough to merely be financially strong. The company needed a sense of vision and a coherent branding to generate such clients.
The company's focus thus was not simply on improving its bottom line in the short-term, but reviewing the Saatchi way of doing business from the ground up. After all, no business that does not produce a good product can stay solvent for long. In advertising, ideas are the product, and clients are the customers for those products. Both of these had to be larger than life for the company to turn itself around. Agencies were given explicit instructions to groom and give special attention to PICs. All clients were not created equal. This reflected the fact that "20-30% of Saatchi & Saatchi's client base made up 70-80% of its revenues (Greenhalgh 2004: 5)
Conclusion
Through the use of the Balanced Scorecard to achieve its benchmarks, Saatchi was successful, realizing its projected goals by 2000, six months prior to deadline (Greenhalgh 2004: 7). However, "in September 2000, Saatchi & Saatchi was purchased by Paris, France-headquartered Publicis Groupe SA, for close on $2.5 bn" (Greenhalgh 2004: 7). This changed the company's careful calculus of how to manage its different units. Now Saatchi was part of a much larger entity. It could no longer assume that it could micro-manage the character of each individual unit according to its carefully calculated Balanced Scorecard approach. Also, its new, sprawling size meant that resources were spread thinner, and there might be fewer opportunities to cultivate a handful of small clients. Demand for growth in a wider array of business units might also require setting more ambitious goals for smaller agencies. Depending on the needs of Publicis Groupe SA, the financial and customer-focused benchmarks might not be in a state of harmony, as they were before.
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