Financial Perspective-Balanced Scorecard, Essay Example

The situation at Saatchi & Saatchi in the early 90’s was deplorable. They were hit by the recession that came at the backdrop of rapid and exciting development of the 70’s and 80’s. This made it quite a sudden change in direction. The challenges of the 90’s are coupled to the fact that Saatchi & Saatchi were a group of competitors brought together only by common business interest and with very little cohesiveness of strategy and focus. By the mid 90’s Saatchi and Saatchi was tottering at the brink of bankruptcy (Business Intelligence).

The company sought to respond to the challenges they were facing by developing two perspectives, the financial and customer service. In terms of the financial perspectives the new leadership set several goals for the company. These goals were; first was to ensure that the revenue base outgrew the market, the second was to ensure that the realised profit is a good 30% of the revenue so realised by the strategy. This was not a very easy strategy to achieve to achieve such a high margin on gross profit, they would require to cut down on operating expenses and minimise overheads (BPP 2009). The third component of this strategy was to double the earnings per share. This could be achieved by increasing the profits available for distribution. The strategy that the company had adopted would work for them in two ways, by having good earnings per share, the Wall Street would paint a very good picture of the company since it would attract both investors and business.

The business units (agencies) were classified in three categories depending on their employee population as well as the foreseen growth potential. The three categories were prosper, lead and drive. The strategies adopted for the prosper group included less expectations on their growth but at the same time they were expected to record steady growth of their volumes.  The other category of drive agencies were expected to slightly grow their numbers and margins though the expectation was not very high. They were also expected to record a gradual increase in the client numbers. The third category was the lead agencies that were expected to record significant and rapid growth and its to these agencies that most resources were allocated.

In customer perspectives they aimed at creating a set of permanently infatuated clients who they aimed to ensure loved their services and also gave them most revenue. The analysis indicated that a small set of clients contributed most revenue to the company and hence they set out to ensure that they retained these clients and also gave them quality services. The strategies also depended on the employees coming up with good ideas to complement the efforts that they made towards ensuring that these infatuated clients get excellent services. To this end they crafted a category called big fabulous ideas. These were aimed at ensuring that these infatuated clients get value for money and that the relationships are maintained at long term and they also feel well catered for. The target was to ensure that there was uniformity in quality of services provided to the clients at whichever the location that these services were provided and hence ensure that they clients felt well served as well as getting consistency of quality from the bureaus wherever they were located around the globe. This they expected to translate into higher volumes of business hence more business for themselves as well as marked success for their clients. Value for money is a major consideration for any business that is investing significant sums of money in business (BPP 2009).

The financial strategies adopted by the management had a lot of sense in respect to the business units for which they were adopted. The major consideration was how to maximise utilisation of the business units that had potential and hence avoid wastage of resources and time in trying to expand units that did not have any potential for growth. In addressing all these considerations, it was also critical to categorise the client in terms of revenues that each brings hence be able to zero in on those that brought most business to the company.  The identification of lead agencies is also important since it allowed for investment of appropriate volumes of finance and manpower to these agencies in order to obtain maximum returns. The financial strategies were therefore in line with the capabilities of the various business units.

The acquisition of the group by Publicis group SA did not change the strategy but rather it worked to be the ultimate success of the strategy since it helped confirm that the group had succeeded in gaining investor confidence and thereby being saleable. The two approaches worked in synergy and thereby resulted in not only of raising the customer confidence in the organization but also increasing the value of the group as a business.

The customer perspectives were well utilised in conjunction with the financial perspectives. The use of the balanced score card was in a big way crucial in giving the execution an appropriate focus on the target. The manner in which the strategy was implemented by use of the balanced score card signals the execution of a well laid out strategy.

References

Business Intelligence. Building a strategic balanced score card. Retrieved, 19 April 2010 from. http://www.business-intelligence.co.uk/PDFdownloads/strat_bsc/Saatchisr.pdf

BPP Learning Media (2009). Performance management.  Glascow: BPP Publishers