Procurement Sucks

In an age of demand management (consumables and internal spend), spend management (to keep costs in line with actual inflation) and value management (where value-added services help increase revenue rather than reduce spend), there is something that all agencies of all sizes and dispositions will agree on. That is, procurement sucks. In fact, it doesn’t just suck. It drains, maims, bleeds, depletes and squeezes the citrus out of agency life for the (mistaken) benefit of clients.

Procurement guys are deployed as chief negotiators to beat down on ‘suppliers’ like your agency and some other toilet tissue vendors. This might sound harsh. But experience shows how procurement departments are tasked to ask for the world, corner you into feeling you can’t say no, then hope you cave. So how do agencies survive this unforgiving onslaught on their professional integrity? I don’t know. But we might alert ourselves to some of the archetypes at play.

1 The Bitch: Decreased retainers and the sudden increase in project-based RFPs are all thanks to the Bitch. For starters, the Bitch ensures that supply is on-tap for more ideas, from more companies, more often. Then, the Bitch plans to get away with microscopic fee projects with newer or start-up agencies who want to ‘prove’ themselves by working for next to nothing. Of course, if the relationship curdles (no surprises here), the Bitch breaks-off the relationship to restart his scheme.

2 The Shoplifter: Not too far behind you will find the Shoplifter. She uses her business to shop around for as many free ideas as she can get. This is not window-shopping, mind you – where you take time and pleasure in discovering the right fit. This is an epic demonstration of disrespect for the creative process – on top of the exhaustive and wasted undertaking to demand an unmanageable range of free ideas from an unmanageably wide range of shops.

3 The Dick: Intrusive and abusive, the Dick comes along with his ‘show-me-yours’ demand. If procurement asks you to open your books so that they can see how much you are charging other clients, then it is time to raise the alarm. Their objective is to question how you rationalise your fees with the intention of reminding you that you are making too much. It usually ends by an instruction to change the way you run your business so you earn less. Much, much less.

4 The Bait & Switcher: The Bait & Switcher will serve you with a notice to participate in an RFP for the business you already possess. The Bait & Switcher will bring in a number of competitors, including one that they know will underbid and work for less. Everyone pitches (naturally). And, to no one’s surprise, the lowest bidder’s ideas win. The agency on record is left with two choices. Either drop the business. Or drop the fees.

5 The Undertaker: The Undertaker firmly believes that an agency should underwrite a client’s marketing. They do this by using a series of short deadlines to drag out the desired scope of work. As your team is busy getting up to speed, and by the time the contract appears, the fees for services rendered are dramatically cut. Which is to say, a lot of the work is already done but there is no money in the kitty to actually pay for it. So, technically, you are dead.

6 The Freeloader: Procurement is notorious for asking for free loans from their agencies. Whether advancing funds for countless activations and third-party commissions, or simply waiting for the proverbial cheque that is (hardly ever) in the mail, agencies are often expected to bankroll their clients. To add insult to injury, long payment terms typically range from 90, 120 to 180 days. It sounds more exasperating when you realise that it’s anywhere up to six months of free credit, if not longer.

Trouble is, even if you are accustomed to these affronts, there is still no guarantee of a fair fight. You could start counter-interrogation and ask why a pitch is mandatory? Whether there is compensation for a spec creative? What the fees, scope, budget, or spend for the assignment being commissioned is? And, if their CFO can talk to your CFO to verify the numbers and viability for participation. If they won’t answer, it’s best to walk away. After all, with all the options out there, there is always someone willing to cave.

But if, as WPP CEO Martin Sorrell once noted, in contrast to clients rationalising their short-term business pressure, “longer-term equity incentive plans, which most companies are being encouraged to implement, make longer-term thinking more frequent. Interestingly, where management has a significant shareholding (not options), performance long-term tends to be better.”

Until that happens, it’s a good idea to guard your ideas. Faraz Maqsood Hamidi is CE & CD, The D’Hamidi Partnership.