ANALYSIS <b>The Agency Business</b>: Agencies finding benefits in clients' procurement divisions

PR firms are coming to grips with the role of procurement in account reviews, and some agencies are beginning to embrace it as a key factor in clarifying business relationships.

PR firms are coming to grips with the role of procurement in account reviews, and some agencies are beginning to embrace it as a key factor in clarifying business relationships.

PR firms are coming to grips with the role of procurement in account reviews, and some agencies are beginning to embrace it as a key factor in clarifying business relationships. Agencies over the past two years have come to understand that the role of procurement in account reviews is a fact of life. For a while, there might have been some wishful thinking that the involvement of in-house purchasing agents in this process was fleeting, merely a function of a floundering economy that would recede when the good times rolled in again. But that is simply not the case. The fact is that agencies are, in general, operating more efficient businesses now than they did in the past, and that is in no small part thanks to the exacting eye of the procurement department. Martin Sorrell, CEO of WPP, told PRWeek earlier this year that, "We don't like the rise of the procurement function inside our clients, but there's nothing we can do about it. You can't fight it; you have to go with it." Sorrell added that the pressure facing clients internally to control budgets is clearly a factor that's here to stay. "Whatever the situation is, the pressure on cost and efficiencies is not going to go away." Some agencies, like Waggener Edstrom, are finding the involvement of purchasing departments to be basically a good thing, mainly because of the clarity it has brought to relationships. "It has cut down on the opportunities for misunderstanding in the ways that services are priced, what's included, and what the expectations are," explains Michael Bigelow, the firm's CFO. The benefits, says Bigelow, are not limited to the agencies. "Procurement has driven more discipline into the process on the client side, too," he says, "helping them tell their internal customers how they are going to measure value and results." The reason for Bigelow's positive view of the benefits of purchasing in the process might stem from the active role he, as CFO, plays in the dynamic that exists between the agency, the communications client, and the procurement department. Procurement people will often negotiate with either an agency's financial chief or department, or its legal representative. One such purchasing manager suggested that the process is significantly easier if it is handled by the CFO rather than a lawyer because what is really needed is a good understanding of the back-office functioning of an agency - or, in short, how a firm makes money. Procurement and finance speak the same language more meaningfully. In Bigelow, who was previously a partner at KPMG, Wag Ed has a resource that bridges the various constituencies. First, in the relationship between the agency and the purchasing department, Bigelow says one of his jobs is to help companies understand the business model of PR agencies. "They come to understand that people costs are by far the most significant costs, for example," Bigelow explains. "It's sort of walking them through those things. We do believe we pay higher salaries than the market, for instance, and that explains why we have low turnover." The benefits of less churn on the account become apparent through better understanding of the agency business. Bigelow also will help navigate confusion or resistance about fee structures and other billings issues. "If there is a problem, they've probably had some bad experience in the past," he says. "We can say, 'Let's have a conversation to discuss that.' That's an opportunity to have a really rich dialogue." But once an account is secured, the CFO need not recede from the process, as a deep understanding of the financial processes within the company can pay unexpected dividends. For example, when a communications person is hired in an organization, it can sometimes precipitate an agency review. Bigelow says that helping the new contact come to grips with his or her company's procedures is a way to instantly earn trust and establish a positive relationship from the beginning. "I had a situation where a new marcomms person came in, and she thought she could just tell us what she needed and we would tell her what we'd charge her. But she had no way of making that happen, and procurement said she did not have the power to authorize that," Bigelow says, adding that Wag Ed was able to diagram the process for her, taking her through the steps to get things done internally. In other cases, the agency has been able to help procurement people understand PR. "Not all of them have a frame of reference through past experiences, so we help them see what's happening in the industry," he explains. "It's part of the notion of wanting to partner with clients." Building relationships with procurement Michael Bigelow, Waggener Edstrom's CFO, offers the following tips:
  • It sounds strange, but there is pride of authorship for procurement people and attorneys in the contracts they draw up. Bigelow says it's courteous not to mark up the contract, even if it's in negotiation. Instead, attach an addendum outlining additional or alternative points.
  • Make sure that everyone in the agency's financial team, from those chasing payments to those issuing bills or negotiating contracts, is sensitive to the fact they are dealing with clients. Cultivate a problem-solving attitude in every situation.
  • Financial people should strive to attend PR training to better understand their agency's business.

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