An acoustic guitar saddle performs vital functions. It establishes the height of the strings or "action" of the guitar while also setting the radius to work with the curvature of the fingerboard. The strings will increase in diameter and mass from high "e" to low "E" while also decreasing in tension from high strings to low. With each increase in diameter and tension change each string will likely get a little higher off the fingerboard. The saddle takes the pressure and vibration from the strings and transmits them to the bridge which in turn transmits that energy to the top. Having the right material, height above the bridge and string angle from saddle to bridge pins are all a part of the mix.
When a saddle is worn out, cracked, damaged or loose in the slot it should be replaced. One of the first things I check is the location of the saddle slot in relation to the scale length of the instrument. If the location of that slot is off just a little bit, the intonation will suffer and making a new compensated saddle might not fix it. There's no use putting the time into making a new compensated saddle if the saddle slot is in the wrong place. So from time to time some instruments need to have the slot filled with wood, saddle re-located and slot slot cut before beginning to make a new saddle.
Another thing I always like to check is how flat the slot is so there is good coupling between the saddle and the bridge. There's no sense making a perfectly flat saddle bottom if the slot it rests on isn't flat. Over time a guitar top will settle in and pull up so it isn't unusual for the saddle slot to have a slight convex curve from one end to the other.
Once the saddle slot is prepared I will fit the thickness of the saddle to fit with width of the slot and then fit the ends of the saddle to fit the ends of the slot. If a saddle is too tight it won't couple with the bottom of the slot. If the saddle is too loose it will lean forward under the string pressure creating unnecessary stress at the ends of the slot which will also lead to cracks developing in the bridge. If the saddle leans forward it can also throw off the intonation of the instrument.
After the saddle blank has been shaped to fit the slot I mark out a rough height to the blank, measure the radius of the fingerboard and match it on the saddle. The saddle gets shaped to match that curve and either rounded over (non-compensated) or notched for each individual string (compensated).
A refining of the shape and polishing of the surface rounds out the job for a saddle that rings true, feels good to the player and performs the job