Saatchi & Saatchi On The Edge Of Bankruptcy

THE FINANCIAL PERSPECTIVE OF SAATCHI & SAATCHI

In the mid 1990's, Saatchi & Saatchi were on the edge of bankruptcy, due to the fast growth in the 70's and 80's and the recession in 1990. Due to the fast growth the firm did not manage its acquisitions very efficiently and ended up losing their direction. In 1995, the two brothers left the company creating a significant loss in leadership, creating a company that was spiraling downhill quickly (Greenhalgh, 2004).

The new regime of leadership established high financial goals. Their mindset was to grow the revenue base rather than the company. This was a good plan because the agency worked for 56 of the world's top 100 advertisers and over 50 of the world's most valuable global brands.

The second major goal was to convert the incremental revenue to operating profit. This was achieved by re-directing the focus and drive of all segments to concentrate on the 20 to 30 percent of clients who made up the 70 to 80 percent of revenue. This idea gave them a way to achieve their third goal, which was to double each earning per share.

The third goal was met after the other two goals were met because of Wall Street. If a company is meeting its goals and is guided in the right direction then Wall Street typically looks at a company favorably, especially if the company is being profitable and in no danger of going into bankruptcy.

Saatchi & Saatchi started categorizing their business units in different ways. They made three categories, "lead, drive, and prosper". The original company did not have these business categorized, and once they were categorized it was easier for the new executive team to implement their strategy and create a larger vision for the company.

The "prosper" category had less than 50 employees and very limited potential. They were responsible for achieving high profitable margins and were not expected to grow significantly. The "drive" category had between 50 to 150 employees and responsible for maintaining the revenue base, and the margins. The "lead" category was apart of the largest agencies that had rapid growth and where most of the share of investments would be allocated (Greenhalgh, 2004).

The new strategy was to think big, and produce a quality product that would transform and improve the business, brands, and reputation of their clients. They wanted the employees to have a passion for the brands culture. They had a think