The Financial Perspective of Saatchi & Saatchi Company and Its Merging with Publicis Groupe - Research Paper Example

? Saatchi and Saatchi: The Financial Perspective Finance and Accounting Lecturer’s May 8, Traditional performance measurement methodologies have fallen out of favor with regard to their application as performance measurement tools. Recent economic turbulences have pushed many corporations to the brink of bankruptcy, partly due to poor performance measurement techniques. The result has been the growth in popularity of balanced scorecard in performance measurement. Unlike traditional performance measurement methods, which gauge a company’s performance with regard to the past, balanced scorecard reports on what the company hopes to achieve in future. This report analyzes Saatchi & Saatchi Company, an advertising corporation that at the peak of turbulent economic climates recast its strategic vision, reshuffled of its management team and merged with an industry peer, Publicis Groupe. Introduction Saatchi in the mid-1990s, new goals according to financial perspective In the mid-90s, Saatchi & Saatchi was contending with a string of harsh corporate choices. The economically lethal combination of factors pushed the management to reposition its vision and global strategy in a way that would revamp the company and ensure an operational reality. This approach, founded on balanced scorecard, rested on two overarching premises: financial perspective and customer perspective. Either of these perspectives had new goals to articulate the new, bolder, and more effective strategic agenda that would rescue the company from the precipice of corporate failure. Specifically, the management set a number of goals with regard to the financial perspective for the company. The turbulence in the early nineties, culminating in a comprehensive shakeup of the company’s structure, also resulted in the development of new financial perspectives. The new leadership set a number of goals to perpetuate the company’s financial perspective. The first agenda was to grow the revenue of the company above the market average. In addition, the company also aimed to convert 30% of the incremental revenue into operating profit (Business Intelligence, 2003). The new financial perspective hopes to guide the company towards determining the financial success of the shareholders viewpoint, which consists of driving revenue growth and maximizing productivity (Niven, n.d). Analysis Business Units and the Strategies, and Customer Perspectives Strategies In consistency with the new strategic outlook, Saatchi & Saatchi set a number of categorizations for its various business units. The three agency categories were, lead, drive, and prosper, each having different strategic charges. Most business agencies fell under the ‘prosper’ category, which had a workforce of less than 50 employees and a limited potential to become a big entity. For the ‘prosper’ category, the strategic vision was to achieve high profit margins. The other agency categorization for Saatchi & Saatchi Company is ‘drive’ agency, with 50 to 150 employees, and set towards a strategic path of slight growth in revenue base and an improvement in profit margin. The third category, ‘lead’ agencies, had the largest agencies in the company, with locations in the UK, New York, and China. For ‘lead’ agencies, the company’s strategy was to drive a strategy of rapid growth through intensive investment. Saatchi & Saatchi has adopted various perspectives to tend to customer needs. According to MyStrategicPlan (n.d), customer perspectives should aim to give customers the maximum level of satisfaction. According to the new customer perspective strategy for Saatchi, the clients would get the first priority, regardless of the level of their business. In addition, agency heads were to adopt a strategy of continual innovation aimed at boosting quality and customer experience with the company, in any part of the world. In addition, the company would double its earnings per share to keep the shareholders of the company happy about their contribution to the company. In addition, Saatchi & Saatchi adopted the strategy of paying close attention to client needs in what the executive management regarded as ‘Permanently Infatuated Clients’ (PIC) (Business Intelligence, 2003). To achieve this broad vision, the company charged agency heads to come up with creative and innovative ideas that transform client experience for the better. Conclusion Financial Perspectives for the units, Acquisition impacts, Perspective Comparison According to Niven (n.d), a financial perspective should exhibit a balance on all the aspects that accrue to financial success of a company, and failure to do so could put an organization in jeopardy. The need to balance the factors affecting financial performance in Saatchi & Saatchi is something the new management team seems to have deliberated on comprehensively. The company seeks to drive growth, surpass industry average, and optimize productivity by investing some of the profits in operating activities of the company. All these factors forge the company’s financial perspective. In addition, according to the three agency categories of Saatchi, the financial perspectives seem achievable. In the ‘prosper’ agencies, the financial goal is to increase profit margins. For the ‘drive’ category, the company hopes to grow revenues and improve margins. Finally, the ‘lead’ agencies get additional investment to improve revenues and profitability. All these aspects touch on the financial perspectives of the new strategic outlay for the company. The balanced scorecard concept derives a lot of mandate from the company’s strategic outlook (Robin, n.d). An acquisition radically changes the vision of a company to assume the corporate outlook of the acquiring company, to differing extents. After acquisition by Publicis, Saatchi was allowed to retain its strategic goals, in consideration of its agency categorization of the various arms of its operation (Deboo et al., 2006). Therefore, the acquisition did not fundamentally alter Saatchi’s result as regards its balanced scorecard. Evaluation Harmony between the Financial and Customer Perspectives As far as financial perspective and customer perspective strategies are concerned, there is a coherence of the viewpoints in the achievement of the company’s strategic vision. The customer perspectives seek to win customer loyalty, while the financial perspectives will help the company invest more in the clients to improve performance of the company with regard to revenue and company growth. Therefore, the financial and customer perspective strategies complement each other for the company. Concentration on one perspective usually results in failure to achieve a balanced scorecard, which leads to testy times for a corporation (MyStrategicPlan, n.d). Consequently, the fact that the company achieves unprecedented growth after implementation of the strategies attests to the fact that the two-pronged strategy adopted by the company works effectively. Further evidence of the harmony of the two strategies is elucidated by the acquisition of the company by Publicis Groupe, which occurs at a value estimated to be five times the value of the company (Business Intelligence, 2003). References Business Intelligence. (2003). Building a Strategic Balanced Scorecard. Business Intelligence. Retrieved on May 8, 2012 from http://www.business-intelligence.co.uk/ PDFdownloads/strat_bsc/Saatchisr.pdf Deboo, M, Houlder, D and Jacobides, M. (2006). Saatchi and Saatchi: Navigating a Shifting Landscape. London Business School. Retrieved on May 08, 2012 from http://www.dime-eu.org/files/active/0/JacobidesPAPER2.pdf MyStrategicPlan (n.d.) Balanced Scorecard: Performance Measurements for Success. My StrategicPlan. Retrieved July 20, 2010, from http://www.mystrategicplan.com/ strategic-planning-topics/balanced-scorecard.shtml Niven, P. (n.d). Why do you need financial perspective? EPM Review. Retrieved on May 8, 2012 from http://www.epmreview.com/Resources/Articles/Delivering-shareholder-value- growing-revenue-and-enhancing-productivity.html Robin, D. (n.d). Management Tools for Building a better workplace. ABetterWorkplace.com. Retrieved on May 8, 2012 from http://www.abetterworkplace.com/027.html Read More