The Financial Perspective

The Financial Perspective

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The Financial Perspective

Saatchi & Saatchi was in a recession period throughout the 1990s as the large agency was at the edge of becoming bankrupt. Before they managed to adopt the balanced scorecard, Saatchi & Saatchi went through a phase of reformulating their strategy and changing the structural organization of the agency. The aim for this step was to avoid the fast oncoming danger of running bankrupt. Other than adopting a customer perspective strategy, the agency focused on the financial perspective as well to ensure that the company had a balanced improvement in both the services they offered and their financial status (Greenhalgh, 2004).

In terms of the financial perspective, the Saatchi & Saatchi leadership during the mid 1990s set up several goals for the company in order to boost their need for financial breakthrough. A public announcement was made during the period of the de-merger that there would be a release of a blueprint with the full details of the agency’s comeback that was to be met within a period of three years from then. The first goal of the agency was to grow their overall revenue base better than the market. The revenue base is the main source of the major and regular overall revenue of a firm. If Saatchi & Saatchi was able to grow their revenue base to be better than the market as expected, this would give them the financial stability required to propel them from their current situation to the better one they aspired for. Secondly, Saatchi & Saatchi set a goal to convert 30 percent of the achieved incremental revenue here above into an operating profit. Therefore the second goal was rooted to the achievement of the first goal and this systematic setting would ensure continuity in achievement of the set goals. Since the agency was in a threatening period of bankruptcy, increasing their operating profit would give them more cash to work with and in turn they would be in a comparatively better position to outrun the bankruptcy chasing after them. Last but not least, the agency set a goal to double their earning per share with the hope to gain more shareholders. Saatchi & Saatchi therefore had an obligation to work hard enough to achieve enough income to be able to achieve the set goal of doubling their income per share. In addition, if the managed to double the income per share, more people would gain interest in their shares. In turn, the increasing number of shareholders would add in more money to the agency therefore supplying them with enough money to set them off the bankruptcy ground and into motion towards accomplishing their set goals.

Following to the results of Kevin’s visits to all the 45 business units dispersed all over the globe, there was the urge to create a management tool that would assist communication between these units and play a role in making operational the new vision. However much great work was being done in each of them, they lacked coordination as each unit had its own agenda and consequently there was nil improvement in corporate value. After a financial health check conducted to determine the agencies that made money for the agency and which did not, three agency categories were created; lead, drive and prosper. In a hierarchical manner, a prosper agency had less than 50 overall employees and most agencies were classified under it. They had a very limited potential to become big agencies ever. The new strategic focus therefore expected this group of agencies to achieve high margins in the market rather than grow dramatically. The drive unit was typically composed of between 50 and 150 employees and the goal set for them was to maintain their revenue base or slightly grow it. They were to increase their overall margins as well so they worked hand in hand with the lead unit. The lead unit comprised of the largest agencies worldwide such as the New York, China and United Kingdom. It is in this unit that the goal of rapid growth was set and enormous immediate results expected. The largest share of investments was allocated in the lead unit too because they were perceived to incur more profit margins. These classifications would ensure coordination and reciprocate to financial success depending on how close attention was paid to the agency’s units. In relation to customer perspective, a number of strategies were adopted. Closer attention was to be paid to the main client-base of the agency.

Other than the agency being loved by Wall Street, they also needed their clients to love them therefore the executive team adopted the phrase ‘Permanently Infatuated Clients’. Research conducted showed that between 20-30 percent of the agency’s clients contributed to between 70 and 80 percent of the total revenues. This prompted all the units to focus most of their attention to the clients earning them large revenues. This also served the purpose of promoting the new classification of the agencies and merge up the units into one global organization. For the creation of ‘Permanently Infatuated Clients’ to succeed, the agency and its employees came up with a strategy of creating big ideas that would propel its prosperity. It was phrased ‘Big Fabulous Ideas’ and it was meant to present big moving ideas not in form of volume but their quality. The ‘Big Fabulous Ideas’ were meant to promote success in the businesses, brands as well as boost the reputation of their clients. For this to be made possible and achievable, the agency needed employees who really bought into the Saatchi & Saatchi way of life and had passion on their history, creative culture and their proprietary tools. If this demand was countered it would ensure a smooth flow of big ideas with the assistance of inspirational leadership in every unit.

The adopted financial strategies made sense almost similarly for all the units. They ensured that even with the classification, the units still upheld the overall vision of the agency. For instance, the prosper and the drive unit were obliged with the task of increasing the growth of the agency’s revenue base and this would set pace for the lead unit. Subsequently, the increased revenues would then be converted to operating profits and play a role in doubling the income per share. Its purchase by the Publicis Groupe SA in the year 2000 was not of noticeable effect to the results of the balanced scorecard since the set goals for the agency had already been achieved by then. Therefore the implementation of the newly achieved goals continued.

The two approaches served the better purpose promoting improvement because they worked in synthesis towards one major vision. Since it is the availability and devotion of customers that provided the finances required, both approaches ensured that improvement took place systematically uplifting the agency from both the customer and financial perspective. The customer perspective clearly reinforced the adopted financial strategies. This is mainly because the customer perspective would initiate the success of the financial perspective by creating a pathway through acquiring more customers for the agency. The implementation was professionally done and with the proof of the results achieved it is clear that it was proper and successful. In addition, with the support of the customer perspective, the perceived results were achieved in lesser time than the set time. This showed the successful implementation and coordinated work of both approaches towards realizing the set goals.

United Airlines is rated as the fourth largest airline in the United States of America and it is among the largest airlines worldwide. Its aviation history dates back to 1929 (Hameed, 2010). Following to extensive research on this corporation, it is notable that in place of vision, mission and value statements it has incorporated the “Focus on Five” approach. This refers to a set of prioritized factors that focus on how best to run the airline: one that runs on time, with clean planes and courteous employees, delivers industry-leading revenues and competitive costs, and does so safely. This approach is purposed to enable the airline to achieve classy performance, outstanding satisfaction of their customers, increased more organized cash flow as well as lead the industry with an exceptional margin.

Objective Measure Target Action

 Worldwide Competition mainly in transportation of passengers as enlisted on their corporate level strategy. Currently United Airlines is the fourth largest airline in the United States of America and it will become the largest airline after the merger is finalized. It has a higher competitive advantage over other airlines on several routes. For example, it is the largest United States’ courier to China.  It is possible to measure performance of this specific objective by statistically analyzing the number of passengers using the airline annually and then comparing it to similar statistical analysis for other airlines. Initially, the target could be set at 170 million passengers. According to statistical analysis of previous years, the airline has not reached that number but with this new action it would be possible. The United Airlines should work to gain more routes so as to increase their worldwide network. This will allow them to offer their services to an increased number of countries and customers as well. An increase in air routes will act as a boost to their financial position because they will be allowed to offer their services to a lot more countries and regions than they are currently. For example, there are ongoing negotiations with many middle eastern countries with purpose to acquire routes. This will even give them the chance to offer their services for transportation of the middle eastern minerals like oil. In relation to their “Focus on Five” approach, they would also be able to increase their cash flow and lead the industry as well.

 Offer the right kind of service to the rightful customer at the right price. With the business level strategy and proper utilization of both cost effective and differentiation strategies in coordination. This will ensure they have more customers compared to their competitors and that the customers prefer their airline to others.  This would be measured by observing the statistical increment in their number of customers or passengers after implementation of the new action focused on obtaining the respective objective.  Since the aim in focus is to increase and lift the financial positions, te target for this objective could also be set at 170 million passengers annually because increase on finances is dependent on increment on the general number of customers. Implement a strategy that not only focuses on the wealthy and well up but also the middle class and average person. This initiative would give them a wider distribution because if they were able to offer their quality services at a lower price it would be a major attraction to customers from all social and economical classes. This will also serve the purpose of delivering industry-leading revenues and services as stated in their “Focus on Five” approach.

 General hierarchical set up after the merge. Currently, the airline is headquartered in Chicago and offices distributed worldwide. The long hierarchical structure is expected to change due to the alterations brought about by the merging process of United and Continental.  The best suited measure for this objective would be keen observation of the financial trends. This would help ensure that during the merge period onwards the airlines finances continuously increase to the targeted value.  The target in this objective is to maintain the financial income through the merge and after the merge, increase the income to above the total of each company before the merge.  To be able to counter the change and avoid the airlines financial distress, the airline should focus on maintaining the same organizational structure and change it slowly after the merge has been completed. This will ensure continuous and increased cash flow because instead of one company’s income, the merge will allow for income from both.

References

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

Complementary Case Study. Business Intelligence Company.

Hameed, K. (2010). United Airlines Corporation: Company Analysis, 1-23. WordPress.

Robin, D. (2010). Vision, Mission and Values: Management Tools for Building a Better

Workplace. Daniel, Robin & Associates.

MyStrategicPlan. (2010). Balanced Scorecard: Perfomance Measurements for Success.

HYPERLINK “http://www.mystrategicplan.com” http://www.mystrategicplan.com

Niven, P. (2010). Financial Perspective: EPM Review. HYPERLINK “http://www.epmreview.com” http://www.epmreview.com

MyStrategicPlan. (2010). Measurements for Success: Balanced Scorecard.

HYPERLINK “http://www.mystrategicplan.com” http://www.mystrategicplan.com