Whether in our business or personal lives, third-party inspections are a fact of life. Public companies are required to engage independent financial auditors to review their financials. Many U.S. firms are subject to independent inspections by OSHA to ensure compliance with the Department of Labor’s employee safety and health standards. And for purposes of establishing a tax base, local governments employ independent appraisers to assess the value of commercial and residential real estate.
Certainly there are times when we rue the fact that we are subjected to outside scrutiny. However, independent inspections are both necessary to protect stakeholder interests and provide valuable insights that enable businesses, governments and individuals to mitigate risks and drive improvements.
So when it comes to marketing accountability, why do so many organizations eschew independent third-party reviews of their agencies’ processes, contract compliance, financial compliance and performance? Sadly, in a majority of instances an advertiser allows its agency partners to self-police themselves by providing their own internally generated performance reports on topics ranging from how they invested and stewarded their client’s media dollars to the agency’s time-of-staff investment; or the timeliness with which they paid vendors; or processed discounts, rebates and credits back to the client.
Given that the marketing budget is often the largest component of an organization’s SG&A expenses, one has to ask, “Does the absence of third-party marketing agency oversight make sense?” “Are there benefits which accrue to the organization by not engaging independent auditors to review compliance and performance across their marketing agency network?” Can one honestly answer “Yes” to either of these questions?
Marketing accountability audits take several forms ranging from contract compliance reviews, process and performance assessments to financial and media audits. Conducted by professional independent auditors the process is designed to help advertisers and their agencies mitigate financial and legal risks, improve work processes, verify the equitability of agency compensation, and enhance reporting and communications. The objectivity, transparency and best practice comparatives yielded by an independent marketing agency audit can provide a positive basis for creating solid, performance-based relationships with each of an advertiser’s marketing agency partners.
It makes sense to outsource since the analytical software, industry knowledge and specific subject matter expertise required to conduct a comprehensive examination of an organization’s marketing spend are typically not available within the advertiser’s Finance, Procurement or Internal Audit staffs.
It is virtually standard practice for client-agency agreements to allow advertisers the “right to audit” all aspects of the agency relationship ranging from agency resource investments to fee reconciliations to financial transaction details and supporting documentation.
Ironically, very few advertisers enact their right of independent examination, a right that they felt important enough to negotiate into the contract on the front-end of the relationship.
In the word of noted American author, Bodie Thoene:
“What is right is often forgotten by what is convenient.”
Interested in learning more about marketing agency accountability audits? Contact Don Parsons, Principal at Advertising Audit & Risk Management for a complimentary consultation at firstname.lastname@example.org.