Tag Archives: accountability

Never a Wrong Time to Do the Right Thing

27 Sep

DoTheRightThingDoing right by others is certainly a core value and one that many of us subscribe to. For me personally, as a former ad agency account director, I have always been fond of the quote by Victor Hugo, the nineteenth-century French author: “Initiative is doing the right thing, without being told.

In the professional services business sector this credo was once considered “cost of entry.” Today, however, having one’s advertising agency and or intermediaries “do the right thing” isn’t a given and, in the current environment, very likely will come at a cost.

As an example, Forrester recently interviewed thirty-four media agency clients and found that “transparency” was a key priority for marketers. However, many of the media agencies that they spoke with indicated that they “are only transparent if clients require it in their contracts.” Nice to know.

Perhaps you’ve been following the trend among influencer marketing agencies and their vendors who are now charging clients incremental fees for conducting content reviews or brand-safety checks to safeguard advertisers’ placements. For years, influencers have been paid largely based upon the number of followers that they had. Sadly, many influencers had engaged in buying followers to boost their appeal to advertisers and, in turn, their revenue. Now that advertisers are savvy to this practice and are looking for assurances on the influencers utilized and the nature of their followers, influencer agencies want to incorporate an upcharge to advertisers.

What about those instances where trading desks and DSPs are now charging premiums to access content from exchanges that will ensure proper placement, safeguarding brands and minimizing the incidence of media fraud? Whoever said that it was okay to purchase high-risk, low return inventory to begin with?

Maybe you’ve experienced abnormal delays with regard to your ad agency partners closing and reconciling projects to actual costs or in receiving post-campaign media performance recaps. Or perhaps you were expecting your agency to competitively bid your production work, only to find out that they were relying on the same vendor(s) that they’ve always used (maybe even an agency affiliate). Or, you were of the belief that your media campaigns were being monitored and that audience delivery guarantees were being negotiated in-flight, only to find out that there was no such stewardship of your media investment.

What is going on? What happened to doing the right thing? When you query your agency partners they suggest that the Scope of Work (SOW) didn’t specifically call for those activities nor did the agency Staffing Plan allow for providing that support at the frequency or within the time frame that you had come to expect. This obviously begs the question, “When did the agency stop providing the level of service and oversight support that it once did?”

The message is clear, advertisers can take nothing for granted and certainly cannot assume that their agency, adtech, production and media vendors have their back. Simply stated, we are operating in an era when advertisers must incorporate legal terms and conditions, which provide the requisite safeguards and controls that govern the behavior and service levels that they expect, into their agency agreements in order to have each vendor in the advertising supply-chain do the right thing.

As importantly, having solid contract language and tightly written scopes of work in and of themselves does not guarantee that agents and intermediaries will fall in line and comply with advertiser expectations. Experience suggests that adherence will typically only be achieved through performance and accountability monitoring. As the old adage goes; “What is inspected is respected.”

Please note, that we are not suggesting that an advertisers shouldn’t pay for the level of coverage and service that they expect to receive. That said, advertisers can no longer take it for granted that certain service standards, which historically have been part and parcel of agency standard operating procedures and hadn’t been necessary to be called out in an agreement or an SOW, are still being followed. If a service provider drops or alters the nature of a service being provided, it should be incumbent to at least communicate those decisions to the advertiser and engage in discussions to ascertain if the changes are acceptable or negotiate additional fees to cover the desired level of support.

In the end, successfully aligning advertiser expectations and supply-chain member service delivery standards comes down to all parties committing to a policy of open, honest, two-way dialog to ensure that there are no surprises and to incent an environment of initiative taking.

 

 

Funding Accountability Initiatives

26 Aug

Accountability FinalThe desire on the part of many advertisers to extend their organization’s accountability initiative to marketing is high. This is due to the fact that marketing is both one of the largest indirect expense categories within an organization and, for those that believe in its ability to drive strategic outcomes, critical in driving brand value and demand generation.

One of the key challenges for Internal Audit and Procurement professionals in implementing accountability programs is that they typically do not have a budget to fund the projects. Rather, they are reliant on their peers in Marketing to “buy in” to the concept and to underwrite the investment associated with analyzing contract compliance, financial management and in-market performance across their agency networks. This dynamic can create a loggerhead that delays or prevents corporate scrutiny into marketing and advertising spending and its resulting business impact.

The irony is that relative to the millions of dollars invested in marketing, the cost of implementing an accountability program for this corporate function is much less than one-percent of total spend. As we know, applying the skills and capabilities of audit and procurement teams and outside consultants typically results in improved controls that mitigate financial and legal risks to the organization. Further, these efforts often uncover historical errors and overbillings, and always generate future savings and improved marketing return-on-investment opportunities that more than offset the cost of the program.

It has always been a mystery as to why more advertisers simply don’t formalize and legislate the marketing accountability program and establish the requisite budget to be administered by the CFO / Finance organization. A minority of our clients operate in this manner, but clearly a “win, win” situation is created where internal audit and procurement provide their support and apply their resources pro-actively and marketing doesn’t feel as though funding is coming at the expense of critical business building programs within their budgets.

From our perspective, the source of funding for extending a corporate accountability initiative to marketing is the last hurdle. The reason is that we have seen marketing’s appreciation for accountability support grow along with their respect for the audit and procurement functions and a recognition that such programs can improve the efficiency and efficacy of the organization’s marketing spend.

The advertising industry is a complex; rapidly changing, technology-driven sector fraught with opacity challenges and risks such as digital media fraud and non-transparent revenue practices employed by agencies, ad tech providers, ad exchanges and media sellers. In light of these dynamics, organizations truly understand the benefit of monitoring the disposition of their marketing investment and the performance of their advertising agencies and third-party vendors.

It has been over 140 years since Philadelphia merchant John Wanamaker offered the following perspective on his ad spend:

Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Yet, with the passage of time it would be difficult for the industry to suggest that much has changed with regard to a marketers ability to accurately assess the efficacy of their advertising spend.

There is no time like the present to proactively develop; implement and fund transformative accountability programs that can optimize planned business outcomes, while safeguarding marketing spend at every level of the advertising investment cycle.

Interested in learning more about marketing accountability programs? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management| AARM at ccampeau@aarmusa.com for a complimentary consultation on the topic.

Two Words That Represent Accountability’s Biggest Obstacle; “Who’s Budget?”

24 Feb

Accountability FinalMany organizations want to implement an accountability program. Virtually all Internal Audit directors would like to extend that accountability initiative across the enterprise and most certainly want to provide coverage for categories with a significant spend, such as marketing.

Yet, in spite of the good intentions, U.S. companies have been slow to embrace independent compliance and performance auditing of their marketing supply chain partners. Ironically, the reason emanates from the answer to a very simple question, “Which departmental budget will be tapped to fund the initiative?” More often than not the answer to that question, in the context of a marketing and advertising spending review, is “Marketing.”

Given this dynamic, it is often a challenge for companies to implement an “unbudgeted” audit project once the fiscal year planning process has been completed, even if results dwarf its cost. Additionally, while many CMO’s have come to value the feedback and insights provided from the independent testing of supplier contract compliance and performance, there are others that still do not embrace audit or accountability initiatives. As a result, unless mandated by the C-Suite, independent accountability testing may never make its way into the budget, causing a huge assurance gap governing that company’s multi-million marketing investment.

There is good news however for procurement, finance and audit executives seeking to remove these obstacles and manage associated risks. Namely, that in addition to the opportunity for process improvements, performance monitoring, contract language enhancements and better controls, these engagements yield hard dollar returns resulting from various financial true-ups and future savings opportunities; far exceeding the fees necessary to conduct the review.

Positive financial returns aside, the costs associated with an audit of an advertiser’s agency network partners is miniscule when compared to the tens of millions or hundreds of millions of dollars being expended in this area.

Perhaps best of all, independent assessments of marketing agency compliance and third-party vendor billings sets a tone of the desired financial stewardship and accountability behavior that the client would like to see employed across its marketing supplier base. In turn, the very act of performing an independent audit, provides a powerful incentive for an agency to diligently self-police itself by tightly adhering to the processes and guidelines agreed to and memorialized in the Client/ Agency Master Services Agreement. In the words of the noted English author and speaker, Simon Sinek:

Actions speak louder than words. All companies say they care, right? But few actually exercise that care.

Interested in learning more about fielding a marketing agency network accountability initiative at your company? Contact Cliff Campeau, Principal at AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com to for a complimentary consultation on the topic today.

 

 

 

In the Wake of PepsiCo’s Marketing Procurement Decision

17 Nov

OversightOn November 12, Ad Age reported that PepsiCo had made the decision to eliminate its Marketing Procurement department. As a result of the decision, the company will shift responsibility for marketing procurement activities to their brand executives.

PepsiCo’s move is consistent with its philosophy of shifting responsibilities to their brand teams with the goal of allowing those decision makers to “more quickly balance cost value and quality in all of their decisions.” While the company acknowledged the potential risks associated with the move as it relates to financial due diligence and contract compliance, it believes that it will be able to leverage its procurement experience, practices and processes to support the brand teams in this endeavor.

As industry participants know all to well, the role of procurement in marketing has been a contentious one over the last decade or so. Thus, it is likely that this decision will spark much dialog among marketers, procurement professionals and their agency partners. Some advertisers will evaluate the merits of a similar approach for their business and many in the agency community will weigh the impact of this decision on the broader topic of procurement’s role in marketing going forward.

We believe that regardless of one’s perspective, periodic introspection on seminal topics such as marketing procurement is helpful and continued dialog between advertisers and agencies on the practice is healthy. That said, we do not view PepsiCo’s decision as the beginning of a trend away from enterprise accountability and its application to the marketing function.

In our agency contract compliance practice, we work with advertisers that have highly developed, actively involved marketing procurement teams and we also work with advertisers that have not yet involved procurement on the marketing portion of their business. Regardless, each organization is mindful of the accountability and oversight obligation they have when it comes to their marketing investment. After all, advertising and marketing spend is one of the largest line items on a company’s P&L, and is critical to brand building over the long-term and demand generation in the near-term.

Financial accountability related to marketing can be viewed as falling into the following categories:

  1. Formalizing and centralizing key aspects of the agency relationship lifecycle: agency selection, on-boarding, performance monitoring, optimization, and transition when necessary.
  2. Leveraging the agency investment, by brand and across the organization as a whole. Decisions in this area can include both agency remuneration system development and overall composition of the agency network. Do we draft and engage disparate agency brands? Select agencies from a particular holding company? Or do we build a dedicated shop at the holding company level (i.e. WPP’s Team Detroit serving Ford Motor Company or Garage Team Mazda).
  3. Financial stewardship oversight and implementation of controls to safeguard the organization’s marketing spend at each stage of the investment cycle.

In our experience, the best tactic for aiding management of an agency network is the use of a standardized but customizable “Master Services Agreement” template. Formalizing the legal and financial terms and conditions necessary to protect an advertiser’s monetary investment and intellectual property rights is a critical first step on the path toward accountability. This is closely followed by the need to identify representatives from select functional areas of the organization that have would have involvement in the contracting, compensation system development and performance review portions of the agency relationship management program.

Organization’s that have implemented Strategic Relationship Management (SRM) initiatives will undoubtedly have an edge when it comes to leveraging their agency fee investment across brands, divisions and geographies. These companies will likely already have pre-determined agency selection protocols and established compensation guidelines or at a minimum maintain a database of information that can be accessed by client-side executives responsible for agency relationship management to help shape their decision making in this area.

Finally, whether an advertiser has a formalized marketing procurement department or not, independent agency contract compliance and performance monitoring support will typically satisfy an organization’s oversight and transparency requirements.

Many will suggest that PepsiCo’s decision will lead the industry down the path of rethinking the role of or need for marketing procurement. To the contrary, we believe that procurement’s role in marketing has been and will continue to be a highly individualized decision for advertisers. While important, we believe that procurement is but one piece in the overall puzzle for advertisers seeking to optimize their return on marketing investment.

What if Advertisers Suspended All Digital Media Spend?

23 Jul

committeeSound preposterous? Perhaps not when you consider how much of an advertiser’s investment is siphoned off by digital fraudsters and criminals. One has to wonder if the efficacy of a reallocated media mix would really hamper in-market performance.

Let’s face it, in spite of the incessant level of press coverage, advertiser, agency and publisher posturing and the formation of numerous industry task forces, digital ad fraud has continued unabated.

In March of 2014 the IAB estimated that approximately 36% of all web traffic was fake, the result of bots. In December of 2014 a joint study by the ANA and White Ops, an ad security firm, estimated that digital fraud accounted for $6.3 billion out of a total estimated spend of $48 billion.

Various other studies have suggested that up to 50% of publisher traffic is bot related and that somewhere between 3% and 31% of programmatically bought ad impressions were from bots. During December of 2014 there was a research study done on FT.com which revealed that “in a single month, 72% of the ad impressions offered on open ad exchanges as being on FT.com were fraudulent.” The impressions were from sites pretending to be the FT and the ads appeared only on sites viewed by bots.

Ironically, in spite of the financial impact of these crimes, advertisers continue to spend an increasing percentage of their marketing budgets on digital media. According to Strategy Analytics, digital media will reach $52.8 billion in U.S. ad spending in 2015, accounting for 28% of every dollar spent, second only to TV. Further, while every other medium is either losing revenue or seeing low single digit growth, digital is anticipated to grow at 10% to 13% per annum over the next three years.

There are a number of industry stakeholders benefiting from the meteoric growth in digital spending, publishers, ad tech providers and agencies to name a few. For example, the major ad agency holding companies have seen revenues from digital media grow to represent up to 50% of their annual revenue base.

Thus it was with a slightly cynical eye that I viewed the recent press release from the Trustworthy Accountability Group (TAG) regarding their latest initiative to combat digital ad fraud. The focus of the release was straightforward enough, dealing with working to minimize “illegitimate and non-human ad traffic originating from data centers.” However, in the end it was about Google lending the group its blacklist of suspicious data center IP addresses for use in a pilot program.

As most industry participants know, TAG is the joint effort of the ANA, 4A’s and IAB launched in 2014 to work collaboratively with companies in the digital advertising space to combat ad fraud. While supportive of industry stakeholders teaming up to address key issues, one wonders how likely it is that TAG will be able to mitigate advertiser financial risks in the near-term.

Curiously, on July 23rd the 4A’s announced the formation of a committee that will focus on addressing “issues related to the digital supply chain.” Their press release pointed out that the newly formed committee will work closely with “other 4A’s committees and task forces, such as the Media Measurement, Data Management and Mobile committees, on policies and best practices.”

Have any of the existing task forces’ yet demonstrated tangible evidence of progress being made to combat digital fraud? It is difficult to imagine how the formation of yet another committee is going to make a difference. Do the organizations forming these ad hoc groups feel that the industry is so superficial and shallow that the news of a new committee will help advertisers feel better about the lack of measurable progress being made on this front?

If the industry doesn’t make concrete progress in the near-term, there is a strong likelihood that we will be welcoming a new “alliance partner” to the team… regulators. We know that historically business in general and the ad industry in particular have never been fans of government involvement. However, if the industry’s self-regulatory approach doesn’t begin to yield results, Washington will assert itself and they should, advertisers are literally being robbed. This is white collar crime at the highest level when you consider that in the U.S. alone, $6.3 billion is being siphoned off by bad actors on an annual basis, 13% of total spending in this specific area.

While the industry struggles to bring order to the chaos surrounding digital media advertisers might rightly ask the question; “Does it really make sense to continue to allocate hard earned dollars to a medium with the audience delivery and viewability issues that currently plague digital?”

What if advertisers were to place a moratorium on digital ad spending until more concrete actions are taken by the industry to protect their investment?

An extreme position? Yes. Unlikely? No doubt. However, this is the type of dramatic action required to force reform and provide advertisers with the transparency and controls required to yield satisfactory returns on their digital media investment. If nothing changes, every incremental dollar invested in digital media will continue to line the pockets of the tech-driven criminals which are preying on advertisers. In turn, this rapidly growing revenue stream allows fraudsters to expand their capabilities at an even quicker rate than those trying to police them creating a “no win” situation for the industry.

From this writer’s perspective, while industry task forces and committees can play a role in furthering the dialog, they will not suffice. Traditional outcomes from these groups include recommended best practices, guidelines, advisory white papers and the formation of new committees to continue the fight… hardly enough to strike fear in the hearts of digital criminals.

In the words of noted businessman Ross Perot:

“If you see a snake, just kill it – don’t appoint a committee on snakes.”

 

For Advertisers Concerned About Transparency, There is an Immediate Solution

4 Nov

transparency concernsLet’s face it the advertising industry is a complex, fast-moving and ever evolving marketing eco-system which at times can mystify even its most experienced participants.  The expansion in both the number and types of media channels combined with the technology revolution that has ushered in tools such as digital asset management systems and programmatic buying platforms have only served to fuel advertiser concerns about their advertising investment.

The Association of National Advertisers (ANA) has twice this year issued statements regarding their membership’s concerns about the “transparency crisis” enveloping certain industry practices.  In May they announced that they were stepping up their “scrutiny of media practices” with the goal of shedding some light on the “dealings” between agencies and publishers.  Based upon a study which the organization had completed in February, 2014 forty-six percent of the ANA members’ surveyed expressed concern over the “transparency of media buys.” This was followed by a blog post in October in which the ANA acknowledged concern over a position paper issued by the trade group AICE dealing with agency in-house production practices entitled; “A Push for Greater Transparency, Ethics, and Fairness.

The good news is that advertisers need not wait for the various industry associations and their members to form task forces or appoint committees to assess the risk and propose potential solutions to the “transparency crisis.”  While these are important steps to be taken, they are time consuming, the potential outcomes are uncertain and the proposed solutions will not be tailored to a specific advertiser’s needs.  So what can an advertiser do today to thoroughly vet these issues and reassure their stakeholders that any attendant risks have been mitigated and to validate that they are receiving fair value for the advertising investment being made?

The answer is as close as a copy of the executed contract which is in place between the advertiser and the agency.  Specifically, the solution can be found in the “Right to Audit” clause, which is a staple in an overwhelming majority of client-agency agreements.  In short, this important clause affords advertisers the opportunity to examine the agency’s records of expenditures pertaining to the agency’s billing to the client for the purpose of validating media bills, production bills, studio costs and reconciling agency fees.

Audit clauses are inserted into contracts because they are an important financial control.  Yet, too often advertisers treat their right to audit as a fall back option, which all too frequently is never acted upon.  When this clause is not acted upon, the advertiser forgoes the opportunity to implement standard compliance testing, which in turn limits their opportunity to validate agency billings and gain a certain level of comfort that comes with transparency into the agency’s financial stewardship of their advertising budget.

Once audit rights have been established, industry “Best Practice” would suggest that implementing periodic and routine testing is a must for introducing and maintaining ongoing preventative control measures.  The resulting testing which occurs as part of the audit process can help to deter wasteful practices, identify errant billing transactions and to monitor key financial metrics. All told, a well defined contract compliance audit program can help an individual advertiser address the “transparency crisis” while providing the organization the necessary legal and financial safeguards.

Of note, the agency community has come to accept independent audits as a normal part of an advertiser’s broader corporate or marketing accountability initiative.  Any pushback on this front should be viewed as a “red flag.”  For those agencies which have implemented sound financial stewardship practices there is nothing to fear from an advertiser’s review of their performance in this important area.  Quite the contrary, a well conceived, balanced independent audit process can yield insights and recommendations which also benefit the agency.  Lailah Gifty, a Ghaniaian and founder of the Smart Youth Volunteers Foundation, rightfully said:

“Never believe all that you hear. Always verify the original source of information.”

Those advertisers conducting business without a comprehensive “Right to Audit” clause are simply at risk, forgoing the most important control mechanism available to them to protect their interests.  For those advertisers, which have secured audit rights, but have failed to act upon this right, you are unnecessarily exposing your organization to legal and financial risks.

The “transparency crisis” cited by the ANA is a legitimate issue, which the industry will successfully address in due course.  The question to be asked of advertisers is; “Are you prepared to wait for a broad-based industry solution? Or do you leverage the contractual rights which you have already secured to address these concerns now?”

If you’re interested in learning more about how you might improve your agency contracts or the benefits of advertising agency contract compliance audits contact Cliff Campeau, Principal with Advertising Audit & Risk Management at ccampeau@aarmusa.com for your complimentary consultation.

Are Advertising Agency Performance Assessments Disruptive?

4 Mar

disruptionThe answer to this question will be as diverse as the background and experience readers have with corporate accountability initiatives in general and marketing services agency audits in particular.  However, the question shouldn’t be whether or not these assessments of contract compliance or performance are disruptive but; “are they beneficial?” 

As a former agency account director and client side marketing executive, I have had the benefit of seeing the marketing accountability process from both perspectives.   As such, in my humble opinion, performance assessments and contract compliance audits are neither disruptive to the advertiser’s or the agency’s workflow, nor do they place any undue strain on the relationship.  Quite the contrary, in my experience performance monitoring and compliance testing serve to better align advertisers and agencies and more often than not lead to process improvements which are beneficial to both parties.

What is puzzling is that there are individuals on both the client and agency side that continue to rebel against the prospect of a comprehensive, independent assessment of their collective performance and adherence to the terms of the relationship.  After all, both parties were actively involved in negotiating their letter-of-agreement (LOA), which most likely contains a statement of work, an agency staffing plan, a schedule of charging practices, 3rd party vendor management parameters and a clause detailing the advertisers “Right to Audit.”   It occurs to me that accepting independent assessments is much akin to accepting the truth.  In the words of the 19th century German philosopher Arthur Schopenhauer :

“Every truth passes through three stages before it is recognized. In the first, it is ridiculed, in the second it is opposed, in the third it is regarded as self-evident.”

More importantly, there isn’t a member of the C-Suite in any client organization who is not wholly on board with the notion of accountability.  While not initially the case in the context of marketing, those days are clearly in the rearview mirror.  It is not uncommon for corporations to spend between 1.5% and 5.0% of their revenue on marketing.  Whether the goal is to build brands, create short-term demand and or to grow market share, marketing is an important component in the success of an organization.  Thus, it is imperative that executives have confidence that their staff, their partners and their 3rd party vendors are making good resource allocation decisions with the company’s marketing investment. 

Performance reviews and compliance audits provide a measure of control to an advertiser to ensure that there is transparency into the decisions being made with regard to their marketing investment.  These initiatives have the added benefit of providing a mechanism to review personnel, processes and resource investment on the part of the agencies so that adjustments can be made along the way to improving their return on marketing investment (ROMI).   Independent audits also yield an excellent opportunity for client and agency to engage in a candid, comprehensive dialog regarding the audit findings and recommendations which frequently contain normative benchmarks or industry “Best Practice” insights.  This type of approach fosters partnership and strengthens relationships.  Everything is on the table, no surprises, with the simple goal of identifying various means of improving performance.

From a workflow perspective, audits should not disrupt an agency’s critical role in the demand generation process.  Is there a modicum of time required of the account team and or the subject matter experts on the agency side?  Most definitely, but not at an onerous level.  Further, this can be an incredibly worthwhile investment of time if the agency is willing to provide feedback and share insights into the relationship and thoughts that they might have on changes that can be made to strengthen that relationship and in turn boost performance.  Other than those qualitative interviews, it is the agency financial team that is typically “on point” for providing the requisite data and or reports required to support the audit.  The nature of the information request is straightforward is typically detailed within the LOA and can be readily accessed from the agency’s financial system, thus requiring little administrative time… unless of course the agency has neglected their “housekeeping” duties along the way (i.e. lax time-of-staff controls, failure to reconcile fees, delays in reconciling 3rd party vendor fees, etc…). 

In our opinion, it makes sense for both parties to view the accountability process as a sound “preventative” care practice that can preserve the health of the client / agency relationship… not to disrupt it.  Marketers who invite an independent assessment of their performance and that of their agency network are embracing an excellent opportunity to showcase their commitment to corporate accountability and a desire to maximize ROMI.   

Interested in learning more about marketing accountability and how to implement the appropriate controls and transparency?  Please contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on this topic.

Accountability Doesn’t Obviate the Need for Governance

12 Jun

It has been ten years since Sarbanes-Oxley was enacted by the United States legislature.  The SOX Act, as it is commonly known, covers a number of issues ranging from corporate governance to internal controls and reporting accuracy.  The law came into being as a result of high profile corporate and financial scandals at Enron, WorldCom, Adelphia and Tyco International.  The monetary impact of these events on investors around the globe was both profound and devastating.

As firms began to grapple with SOX compliance requirements, they implemented processes and procedures designed to enhance transparency and improve governance at all levels of the organization.  In the context of a business, Wikipedia offers this definition of governance: “Governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility.”

While it took awhile and in some organizations, a longer period of time than in others, marketing’s turn to go under the microscope has come to pass.  In light of the investment level being made by companies, this is certainly no surprise.  Given the complexity of the marketing-advertising supply chain, the use of agents, independent contractors and 3rd party vendors, and the lack of transparency often afforded advertisers, the only surprise is that it has taken this long for organizations to begin to “peel back the skin of the onion.”

For progressive companies that have created a culture of accountability, increased governance and its impact on marketing spend, and all that it entails, represented few challenges.  However, in many organizations the notion of “governance” was interpreted by client-side marketing and advertising agency representatives to be a full-frontal attack on their integrity.  Further compounding the process was the fact that marketing was, and to some extent remains a bit of a “black box” to corporate finance, audit and procurement departments.  In many instances, these departments simply don’t have the subject matter expertise on-staff to help guide their efforts to understand the nuances and complexities of the marketing area.

What do we mean by “complex?”  From the size of an organization’s marketing agency network which could include dozens of firms (earlier this year PepsiCo pared their agency network from 150+ shops to 50) to the hundreds of statements-of-work and purchase orders issued in a given year to the thousands upon thousands of bill-to-client invoices and 3rd party vendor invoices which are processed.  Remember, these include a staggering number of revisions to the ad industry’s typical modus operandi, an “estimated billing” approach in which the advertiser is billed upfront for all or a portion of the creative and or media activity for a given period.   In an estimated billing scenario, it is the advertiser who fronts the money, not the agencies and not the media sellers that bear the risks for their investment.

The good news is that there are a number of competent, highly-regarded, independent agency contract compliance audit firms that can provide capable assistance to an advertiser.  The subject matter expertise which they bring includes insights into most all facets of the marketing supply chain as well as industry “Best Practice” in the area of accountability.  Further, they provide an excellent bridge to enhance communication and further understanding between marketing and their agency network and the governance process championed by finance, audit and procurement.

The time has come that there should be few corporate marketers and fewer marketing agencies that resist an organization’s governance initiatives.  There is no reason, and frankly, no excuse in any quarter for not “stepping up” to enhance transparency and improve the reporting and controls a company has in place to safeguard its marketing investment.  In the words of Stephen Covey:

“Accountability breeds response-ability.” 

Interested in learning more about the role of contract compliance auditing in supporting your company’s governance efforts?  Contact Don Parsons, Partner at Advertising Audit & Risk Management at dparsons@aarmusa.com for a complimentary consultation.

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