Saatchi & Saatchi's balanced scorecard strategy in the 1990s

Balanced Scorecard

During the mid-90s, the advertising firm of Saatchi & Saatchi was facing a crisis both in terms of its core mission and also in terms of its 'branding' within the industry. Once a financial pioneer, the creative cohesion between the different branches had been lost. The agencies existed as "competitors only connected through common ownership" (Greenhalgh 2004:3). The organization set specific benchmarks for financial improvement: "growing our revenue base better than the market; converting 30% of that incremental revenue to operating profit; [and] doubling our earnings per share" and also strove to offer its core base of customers a more consistent product branded with a unique Saatchi style (Greenhalgh 2004:3).

Analysis

The company segmented its agencies to prioritize high-growth markets. The three categories were those of lead, drive, and prosper' agencies. Each category had different strategic challenges. The vast majority of Saatchi agencies fell into the 'prosper' category of possessing less than 50 employees (Greenhalgh 2004:4). These agencies were not assigned ambitious growth targets and were merely required to expand the margins they accrued from clients, rather than to grow their revenue base. Drive agencies were mid-sized and were expected to modestly grow their base of clients and increase their margins. Most of Saatchi's energies were focused upon 'lead' agencies in large cities such as New York and London. These agencies were supposed to dramatically grow both their margins and their client bases (Greenhalgh 2004:5).

As well as focusing on a relatively narrow base of agencies, Saatchi also chose to focus on a relatively narrow base of clients, or Permanently Infatuated Clients (PICs). This was justified by the fact that "20-30% of Saatchi & Saatchi's client base made up 70-80% of its revenues" (Greenhalgh 2004:5). All agencies were instructed to focus on a few large clients, rather than on a large array of small clients. These clients were said to need 'Big, Fabulous Ideas (BFIs) or high-quality ideas that really made a splash in the advertising world. These BFIs would be used to elevate the company's reputation in the advertising world once again as well as to solidify client loyalty.

Evaluation

Fundamentally, the customer strategy seems to clash with the financial strategy. The customer strategy focuses upon generating high-quality ideas with a few clients, which required cultivating the client base over time, while the financial strategy is solely focused on the 'bottom line' and quick revenue generation. Saatchi is a creative company and to some degree quality of ideas rather than pure financial data must be a consideration for the company, but this was not reflected in the agency's stated goals. Ultimately, the agency was rescued by an outside turn of fortune rather than stands as proof that the Balanced Scorecard works.

Reference

Greenhalgh, C. (2004) Building a Strategic Balanced Scorecard: Saatchi & Saatchi

Complementary Case Study. Business Intelligence Company. Retrieved at:

http://www.business-intelligence.co.uk/PDFdownloads/strat_bsc/Saatchisr.pdf