Bridging the procurement gap

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The Institute for Supply Management, the largest trade association for corporate purchasing professionals, published an analysis just a few years ago that outlined the attitudinal and behavioral changes required in this procurement field as it continued to expand in size, importance and influence within the corporate world.

Practitioners were urged to be "future oriented" and to meet the "interests and concerns of senior management" by being "strategic in relation to the competitive imperatives of the organization" and to "identify what might provide value and uniqueness to the organization's offerings in its marketplaces."

Strategic! Aligned with senior-management concerns! Focused on competitive advantage! Aimed at enhancing value-added and unique marketplace offerings! This is a very solid strategic road map for an increasingly important corporate activity.

Reality vs. goals

In practice, however, the corporate-procurement reality that many of us in the advertising and marketing-services agency world encounter more and more regularly is far different. As procurement officers take on an expanded role in client/agency relationships, we're seeing information requests and decisions that are clearly much more tactical than strategic in their perspective. Much more focused on cutting costs for its own sake than adding value as part of our clients' strategic missions. And much more a treatment of agencies as generic suppliers than as unique offerings that can help our clients (who are, importantly, their employers!) grow and build competitive advantage.

This is not exactly collaborative. Or future-oriented.

Because of how rapidly procurement professionals are expanding their domain into marketing services, this is an issue we need to address with some urgency. Procurement is no longer a routine ordering process, but a way to deliver shareholder value. Purchasing magazine notes many publicly owned corporations are explicitly promising improved profits directly as a result of purchasing and supply-management cost savings. And to drive this, as a recent Harvard Business Review article noted, these companies are rewarding purchasing managers with incentives based on cost-cutting results. Given the reward system, it's not surprising that nurturing creative quality and long-standing relationships with agencies are not the priorities they should be. Hasn't American business learned enough about the risks and disadvantages of overly focusing on short-term gains?

At the same time, ad and marketing-services agencies should not battle the overall trend. Corporations are right to recognize that they can centralize and widen certain expertise-based functions in the name of achieving greater efficiency. And our ongoing mission must be to strive continuously for improved accountability and transparency.

But we need to find common ground to begin a meaningful dialogue. It exists. For one thing, while procurement managers are working for public companies that need to deliver an improved ROI to stockholders, they need to remember most agencies today are also part of public companies with similar profitability mandates.

steep learning curve

Also, I think we all would agree cost management is a discipline and not the same as a cost-cutting exercise. I suspect we would also agree that the point of improved operating efficiency is ultimately to increase competitive advantage in response to expanding revenue opportunities.

Part of today's problem stems from how quickly procurement managers have been asked to extend their expertise. It's a steep learning curve. Applying principles from sectors where there is more standardization, such as manufacturing, or where critical mass can be reshaped into greater value, such as with technology, does not translate easily or sensibly into our industry. Whether in process or product, we're not even like other professional services.

In fact, advertising and marketing services are businesses where unique blends of talent, methods, experience, client mix, intuition, insight and culture make agencies a lot less like each other than an outsider might think. And our "product"-basically a selling idea that has the potential to deliver value to a client far beyond its cost-input equation-is not very easy to program, predict, evaluate or quantify.

But we are also profit-oriented businesses that need to pay attention to costs and our bottom line. And we do need to find new ways to collaborate with procurement management that is now involved in our industry, recognizing them as professional experts who are part of our changing mix of client influencers and decision-makers.

Learning efforts do work and need to be stepped up. As one of many examples, McCann-Erickson WorldGroup's Zentropy Partners U.K. for several years now has been bringing in and educating its clients' procurement officers about the dynamics, quality and production aspects of its project-driven business with very productive results.

Leadership in the procurement field does recognize that marketing communications purchasing is a new and different field. Well-informed sourcing personnel-and there are many-understand it's about mutually improving processes without impairing the ability to sell more product.

A major study that interviewed senior U.S. purchasing managers about purchasing advertising services noted that "all of the respondents agreed that advertising, like many creative activities, is a challenging service to evaluate." But it is a challenge they were willing to embrace. As the Henley Management College professor who conducted the research noted in his conclusions: "Purchasing must have the credibility, expertise, time, and willingness to become knowledgeable enough technically to make a value-adding contribution to the procurement of advertising."

I agree with that. That's the kind of attitude that is the beginning of a dialogue.

John Dooner is chairman-CEO of Interpublic Group of Cos.' McCann-Erickson WorldGroup, New York.

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