Agency performance management is an essential element in building an effective, highly productive network of marketing partners that includes an advertiser’s media, creative, experiential, shopper marketing and PR firms.
While important, agency performance management is sometimes an afterthought for many organizations. Structured properly, a formal performance monitoring and evaluation program can yield meaningful and actionable results on a range of critical topics:
- Contract Compliance & Financial Management
- Audience Delivery & Measurement Validation
- Brand Safety Guideline Adherence
- Regulatory Compliance Verification
- Billing & Fee Reconciliations
- Scope of Work Completion Assessments
- Agency Compensation & Staffing Reviews
- QBRs & Annual Performance Evaluations
With an advertiser’s agency partners managing tens if not hundreds of millions of dollars on their behalf, too few organizations have implemented the appropriate controls and processes in this area. Experience suggests that without effective verification controls, advertisers rarely have a clear understanding of how well their advertising investment is being managed.
To achieve this end, it is essential that an organization assign responsibility and allocate a budget to conduct proper oversight of the performance of its agency partners. Some organizations are fortunate to have marketing operations teams or experienced marketing procurement peers and or engage external specialists to consult, audit and improve financial effectiveness in this area. However, this type of structure or process is not employed as often as they should be given the material nature of marketing spend. As a result, most advertisers simply leave the management of their agency network to the marketing team.
Why could this be an issue?
First, marketing’s primary responsibility is to build brands and drive revenue, which is how most marketing departments staff and develop their internal teams. With finite resources, adding marketing personnel with the requisite experience or skills to handle financial, compliance, regulatory, and operational oversight may be a luxury. Given that the average tenure of a CMO is 40 months, the lowest rate in a decade (source: Spencer Stuart, December 2021) it may not be reasonable to expect senior marketers to care too much about monitoring below the line agency performance details or to conduct financial compliance reviews. As an aside, CEO’s have an average tenure of more than two times that of CMOs… 85 months.
Second, despite the level of budget allocated to marketing, conforming to corporate governance standards in this area has not become a priority in many organizations. Without the financial leadership team applying appropriate pressure and installing a strict requirement to improve transparency and accountability regarding a firm’s marketing spend, agency performance vouching simply does not receive the necessary attention. Often procurement, finance or internal audit have an interest in engaging outside support to undertake independent reviews of agency performance or to verify compliance in these areas but, they typically do not have the budget. They in turn must secure the buy-in and funding from their peers in marketing, which heretofore has not been required to comply with such initiatives. In fact, often, marketing will often block or defer any such attempt to review agency performance or compliance with the organization’s desired controls citing concerns regarding timing or available funds or signaling that everything is under control.
One solution to the current quagmire is for organizations to adopt the mindset that a company’s ad agency network is a corporate resource, deserving of cross-functional support. As such, budgets should be established to formalize strategic supplier performance reviews of those agency partners and the appropriate responsibility for monitoring financial, legal, regulatory, and operational performance should be established. Such an approach would allow marketing to remain focused on brand building and demand generation, while engaging qualified personnel (i.e., procurement, finance, internal audit, external specialists) to help establish the desired controls and to monitor agency compliance with those guidelines and processes. This would yield millions of dollars annually per company in the form of reduced ad budget waste due to fraud and process inefficiencies, while also yielding future savings.
In the end, all stakeholders both corporate and agency will benefit from a formalized performance oversight program that aligns all parties’ interests… optimize the client’s return on marketing investment. As Benigno Aquino III once said: “With proper governance, life will improve for all.”