The Transformation of Saatchi & Saatchi 1970-2006 (C) Navigating in a Shifting Landscape

Act Three: Turnaround and Regeneration (1995–2000)

With the immediate crisis over, Seelert needed to set a new direction for a resurgent Saatchi & Saatchi and in 1997 he recruited Kevin Roberts as CEO. Roberts had built his career as a client, working at Mary Quant, Gillette, Pepsi, Procter & Gamble (P&G) and latterly at New Zealand brewery Lion Nathan. His approach to business was colourful and direct: he had earned the nickname ‘Rambo’ Roberts after incidents such as dressing in a commando uniform for Lion Nathan meetings, bringing a lion cub to a conference and firing live ammunition into a Coke machine on stage at a convention.

Like Seelert, Roberts resisted the temptation to blame former leaders and tear down the myths that surrounded them, or to make sweeping changes to the team. Instead, he retained the Saatchi & Saatchi spirit embodied in the mantra ‘nothing is impossible’ that is still carved into the steps of Saatchi & Saatchi’s premises at Charlotte Street in London. ‘One of Kevin’s biggest beliefs,’ said Seelert, ‘is that great leaders meld past, present and future.’

Seelert had set Roberts a demanding set of objectives when he joined the company. These included doubling Saatchi & Saatchi’s EPS by 2000, which in turn called for faster than market sales growth and achieving 30% operating margin on those incremental sales. To begin with, Roberts recalled, ‘I did none of the text-book things. I focused only on the product, the work: develop the creative product and win at Cannes. We had two great clients so we could forget traipsing about for more. I wanted to win every dollar they spent.’ He boldly told P&G that Saatchi & Saatchi wanted to be their number-one roster agency, and duly made good on his promise by winning back brand after brand, largely through his personal passion and credibility. Amazed by the results, Bob Seelert called this time ‘the fountain of wonderment’.¹

Roberts was clear that his task was to galvanise the whole organisation, not just to win key accounts himself. ‘I wanted work’, he said, ‘To feel like family.’ Under Roberts, the phrase ‘one team, one dream’ became another rallying cry for the organisation. As he felt it, the Saatchi & Saatchi spirit that would regenerate the business would arise from ‘transformational, inspirational, competitive, passionate, restless team players’ wholeheartedly engaged throughout the network. But giving this idea traction was especially challenging in a creative business where the balance between individuality and collective harnessing to an organisational task was difficult to strike. And Saatchi & Saatchi was a more change-weary business than most.

Roberts built on Seelert’s disciplined approach to governance, dissolving Saatchi & Saatchi’s worldwide board, slimming budgeting procedures right down and getting rid of unwieldy decision processes. Even with a de-cluttered organisation Roberts knew that driving change would be hard and he looked for sources of advice. But he was unconvinced by the traditional prescriptions of organisational consultants and business academics. Instead of looking at successful companies, Roberts and three academics from Waikato University in New Zealand colleagues looked at successful sports teams such as the New Zealand All Blacks, Bayern Munich, the Atlanta Braves and Williams Grand Prix. The result of the study was a clear perspective on what a Peak Performing Organisation (PPO) should look like (see Exhibit 3). Roberts then applied these principles to Saatchi & Saatchi. ‘Permanently infatuated clients’ (PIC’s.) would then be drawn to the firm’s top talent working at peak team effectiveness. Get this right, thought Roberts, and revenue growth would follow, with some simple supporting tools and processes in place. “Advertising is as simple a business as you can get”, said Roberts, “You hardly need processes.”

Beginning in 1998, Saatchi & Saatchi adopted a Balanced Scorecard approach to control, creating a steering committee in collaboration with Renaissance Consulting, the predecessor to the Balanced Scorecard Collaborative formed by Robert S. Kaplan and David Norton, who had originated the technique. Saatchi & Saatchi’s version of the Balanced Scorecard was called ‘CompaSS’².

CompaSS spotlighted key outcomes across four dimensions: clients, product and processes, people and culture, and financial. Specific financial outcomes included reducing costs, increasing EPS, growing revenues and building brand equity. CompaSS cast these as the consequence of success or failure on the other dimensions. At the top level, the client dimension of CompaSS focused on client win and loss rates, moving towards the goal of developing PIC’s. The product and process dimension focused on speed, while around people and culture Compass tracked progress (through training and other initiatives) towards realising: ‘One team, one dream: create a rewarding, stimulating environment where nothing is impossible’. Outcomes were specified from the top of the organisation, ultimately by Roberts himself. Top-down goals, Roberts reflected, ‘Saved our operating people all the wasted time and politics involved in negotiating bottom-up targets. I just told them what I wanted and they told me what they needed so they could deliver well.’

The CompaSS design team was careful to avoid any kind of one-size-fits-all approach to control. Strategic ‘lead markets’, including the US, the UK and China, were selected for revenue growth and creative reputation building, as distinct from established ‘drive markets’ such as France that simply needed to be nurtured. Each business unit developed its own CompaSS scorecards aligning their own distinct targets with those of the group as a whole. The system encouraged regular reporting and discussion of results across the four key dimensions. It also allowed much more robust financial control within the group, as the connections between financial and other outcomes were more apparent.

A further tool that Roberts had put in place to support change – and one that some of his team members saw as especially effective - was the RASCI discipline. RASCI was a tool for driving empowerment, accountability and teamwork and was an acronym for five critical team roles: ‘Responsible, Approve, Support, Consult and Inform.’ Under RASCI, an ad hoc team was formed around a strong community of interest in delivering on a project or task. This could embrace both a new idea or campaign, or an internal operational task. At the outset of each project, each member of the team would be assigned a respective role within the RASCI framework and would retain this role throughout the process. ‘Responsible’ meant the one person with direct accountability for the project; ‘Approve’ stood for the person with final sign off; ‘Support’ applied to those ‘doing the real work’; ‘Consult’ was ‘the brains that add that extra bit of magic’ which could be ignored only if discussed; and finally ‘Inform’ stood for those who need to know.

The principal benefits of RASCI were that it was non-hierarchical (in an organisation where the notion of a hierarchy could be problematic) and, crucially, that it created a mechanism for working in an aligned way across the traditional agency silos of creative, planning and account management. RASCI, for example, had helped to revitalise the process for developing client ideas briefs by allowing all functions to be appropriately involved as a team at a very early stage of defining the client challenge that Saatchi & Saatchi needed to address. Previously the brief had been developed much more slowly as it passed step by step through each functional silo.

‘We had to be empathetic and fast, in very uncertain conditions,’ said Roberts. ‘Above all we had to be flexible, with no capex, no cars, no buildings. I wanted to own nothing, so we could be flexible when shit happened and agile when we’d got the ball.’

Reflecting Roberts’ emphasis on achieving strong results quickly, Saatchi & Saatchi also adopted a key process in which the RASCI and CompaSS tools were embedded. This was the 100 Day Plan. Although some goals – such as winning the Gold Award at Cannes – were recognised as longer term, in principle any initiative at Saatchi & Saatchi needed to be broken down into chunks that delivered measurable impact within 100 days. The plan discipline included three steps: describing the issue (where we are), stating the challenge (where we want to be) and detailing the actions (how we will get there). Behind the 100 Day Plan was Roberts’ golden rule: ‘You can’t fix what you don’t acknowledge.’

As well as providing tools and processes, Roberts also gave rewards. Saatchi & Saatchi’s top 90 worldwide executives were eligible for an Equity Participation Plan. Each participant bought (for cash) one tenth of their stock award at market value. After three years (if performance targets were met) they were eligible to receive the remaining 90% of their award at the original market price. Ultimately, those who had met their targets earned $30 for every $1 invested at the start of the EPP in 1997. Shareforce – which was open to all employees as a Save As You Earn scheme on a three year savings contract – gave employees $4.55 for every $1 invested in 1997.

In June 2000 Saatchi & Saatchi was acquired by French Groupe Publicis for 500p a share. Roberts had met or exceeded all the performance targets set for him by Bob Seelert in 1997 and the exit price proved the value of the business’ regeneration. ‘We had demerged at 110p, and we did the Publicis deal at 500p,’ recalled Seelert. ‘So the guys who had bought into the rights issue at 60p, they were really happy!’

Few could have predicted that Publicis would have done such a deal. ‘Back when I was coming into Cordiant, all the worldwide networks were poised like pieces on a chess board. Now we’re into the endgame, and the one company that is way beyond what most people expected is Publicis. We gave Publicis global reach and credibility,’ Seelert added. ‘Also, this helped set them on the way to do the BCom3 deal.’ Publicis completed the $3 billion stock acquisition of Chicago-based BCom3 in 2002, creating the world's fourth-largest advertising network. Now part of a major marketing services group with global ambitions, Roberts and his team at Saatchi & Saatchi could proceed with renewed confidence and pride.

By contrast, CCG (the Bates part of the demerged Cordiant) largely failed to learn from the mistakes of its own past and continued with acquisitive expansion, now spiced with the flourishing dot-com optimism of the times. Between 1997 and 2003, it invested heavily in a number of marketing and internet consultancies including National Research Group (bought from VNU), Lighthouse Global Network (£392m), The Leonhardt Group, Donino White & Partners, MicroArts Corp (£63m), Healthworld Marketing (£113m), Bamber Forsyth (£30m) and others. Sales declined sharply over the next two years, and CCG was acquired by WPP in July 2003 for 10p per share, against the 1997 de-merger value of 110p per share. ‘Initially everyone thought that Bates would do better than Saatchi & Saatchi,’ revealed Seelert, ‘But Michael [Bungey, CEO of CCG] repeated the mistakes of the [Saatchi] brothers, buying rag-tag companies at high prices without much integration, and it fell apart.’ Today, all that remains of Bates Worldwide is Bates Asia, which operates as a standalone regional agency within WPP.

Six years on from the Publicis deal, the Saatchi & Saatchi network covered 143 offices in 83 countries with 7000 staff. Saatchi & Saatchi’s parent company (see Exhibit 2) was continuing to prosper and the travails of the mid-1990s finally seemed a long time ago. Having consolidated its position within the critical P& G, Toyota and General Mills global account rosters, Saatchi & Saatchi had headed the sector’s Global New Business league table in 2002 and gained new blue-chip clients such as Novartis. By 2006 Saatchi & Saatchi worked with 60 of the top 100 worldwide advertisers and over half of the top 50 most valuable global brands. The business was increasingly admired and respected. In 2002 Saatchi & Saatchi had been named ‘Global Network of the Year’ by both AdAge and Adweek and had been the top award-wining network at the Cannes Advertising Festival in both 2001 and 2002. In 2006, Cannes put Saatchi & Saatchi in second place (after BBDO) worldwide and in Australia Saatchi & Saatchi was named Agency of the Year for an unprecedented third year running.

By 2006, Saatchi & Saatchi had become P&G’s biggest agency, working with seven of its 14 billion dollar brands. Saatchi & Saatchi was also the largest agency for Toyota and General Mills, working in 25 countries for Toyota and in 45 countries for General Mills, accounting for 90% and 65% of U.S. spend respectively. Saatchi & Saatchi deemed these three top clients to have all the characteristics of PIC’s. More were on the way, with Novartis won in 2005.

Contemplating progress from his Hudson Street office in New York City, Kevin Roberts could take real pride and satisfaction with what had been achieved in his ten years of stewardship. 2005 had been the best ever year for both revenue and profits. Since the Publicis deal, operating margins had consistently reached 15% with faster-than-market growth. But by no means did Roberts see the task as over.

This was an industry that still largely envisioned itself as a purveyor of advertisements for brands, particularly thirty-second TV commercials, and in which the hallmark of creative success remained the award for the best ad in TV or other specific media. Roberts had long questioned the limitations of this conventional wisdom. Within 100 days of his arrival at Saatchi & Saatchi he had rebranded the agency. ‘I literally crossed “advertising” out from the letterhead and wrote in “ideas”.’ He went on to define a compelling vision: ‘to be revered as the hothouse for world-changing creative ideas that create sustainable growth for our clients.’ Understood narrowly, being an ideas business could mean concepts, images and designs that played across the media spectrum. More broadly, it could mean any idea that enabled growth. But, said Roberts, ‘the ideas must be transformational, not incremental. Not fads – they must be sustainable.’ And they count for nothing unless acted upon. ‘Ideas are like arseholes. Everybody’s got one so don’t waste my time with more until you’ve executed.’

More recently, Roberts had given this vision fresh emphasis through two books that articulated what world-changing ideas could mean in practical terms. The first, Lovemarks (2004), argued that traditional brands were dead and that, in the future, successful brands were those that created ‘loyalty beyond reason’ (see Exhibit 4). In the second book, Sisomo (2006), Roberts observed that the traditional thirty-second commercial was becoming obsolete and that brands would need increasingly to manifest themselves in ‘sight, sound and motion’ across a range of media (see Exhibit 5).

Roberts understood that, in a business that comprised 143 local offices, transformation would be first and foremost a question of prioritisation. 12 key geographic markets were therefore identified where Saatchi & Saatchi would be looking to step-change performance and build its global reputation. Within these markets, offices would first need to make sure that they could deliver brilliantly around both traditional advertising and best-in-category creativity. When proven at this level, offices could then set about evolving themselves into fully-fledged ideas businesses. In lead markets such as the UK, by 2006 Saatchi & Saatchi was starting to make this come to life through the creation of new specialised business units such as an R&D lab (for strategy and innovation), industry@saatchi (which provided clients with growth strategy advice), gum@saatchi (creating youth entertainment content for brands) and Saatchi & Saatchi X (a unit tasked to drive creative ideas into the in-store environment).

‘Love was in the air this spring for Kevin Roberts and JC Penney’, said AdAge in September 2006, attributing JC Penney’s decision to move $430m of business from DDB to Saatchi & Saatchi to the premise of the Lovemarks and Sisomo philosophies. ‘Until last week’, AdAge went on to say grudgingly, ‘It could be argued that the premise was more successful at conferences and on op-ed pages than with business development.’ The following month the Lovemarks philosophy scored another win with a successful bid for Sony-Ericsson’s business by Saatchi & Saatchi in London, while Saatchi & Saatchi X won a mandate from P&G to create and deliver a new in-store approach across Wal-Mart.

Despite these successes, Roberts was not complacent about the magnitude of his task. This was a dual challenge: serving core, long established clients like P&G and Toyota (which accounted for approximately 50% of worldwide revenues, mostly in the United States³) and at the same time keeping Saatchi & Saatchi at the forefront of the global marketing services sector, which was now in an acute state of flux. The world of marketing and advertising was being transformed. The future would be exciting, but the direction and pace of change were far from clear.