In his Marketing Week article “Agency Kickbacks…” dated 23 May, Prof Mark Ritson speaks about the practice by media buying agencies of getting rebates, kickbacks, discounts, etc from the companies they buy from and that it is casting a bad light on the industry. The media buying agencies charge their customers for their buying services and they get the rebates from their suppliers i.e. they get money from both sides. He goes on to relate a story by Jon Mandel (Former CEO of Mediacom) who said that “They (the media buying agencies) are not transparent about their actions. They recommend or implement media that is off-strategy or off-target if it works for their financial gain”. Apparently, Deborah Morrison from ISBA in the UK does not believe that the agencies have their customer’s best interests at heart. Deborah and Jon believe that media buying agencies will make decisions or recommend strategies to their clients to further their financial situation and not their clients'.
Although Mark admits that the kickbacks situation is not a new phenomenon, he says that it is now getting out of hand and that clients need agencies to be more transparent when recommending strategies. Procurement has the same requirement of “Transparency Above All”. To compound this requirement, for most organizations we are their in-house support function, so it is assumed that we will do the right thing by our organization. However, if a Procurement function is set on delivering savings – above all else - then yes, decisions could be taken that will deliver the Procurement function’s agenda. There is an easy way to fix this and I believe the function has gone a long way in ensuring that their actions are audit-able, accountable and transparent. We do this through running a structured RFP process with its incumbent documentation: Weighted Scoring Matrix, Due Diligence, Decision & Reasons of Award, Contract etc. which we have created and need to use on each project. I am not saying that we could still get it wrong, but there is less chance of this happening and the wool being pulled over someone’s eyes if the decision trail is clear and understood by all. If your Procurement function does not have all these decision making tools in place, you need to start to create these or download them off sites like “Spend Matters”. You’ll be glad you did.
In the “Comments” section in the Marketing Week article someone wrote “wonder how much of this is the result of procurement-driven clients screwing agencies down on margins?” It is in Procurement’s best interest and the longevity of our function to quiet these negative/vindictive voices and finger pointing behaviour. We need to put out houses in order, accept that it is not all about the savings and bring value to our organizations by doing what’s best for it every day. Only with consistent effort and setting out to change these nay-sayers’ attitudes and the perception of Procurement as a savings-grabbing, short-termism function, will we get to a better world for Procurement.