Decideware

Purchasing.com offers a profile of successful efforts by Hewlett-Packard to improve their Supplier Management Process.

The article features comments by Operations Director at the Houston based Personal Systems Group, Tom Adams on how he focussed on a key objective of the program "to build partnerships with suppliers"

Critical to the program are two scorecards

Adams explains how the High Performance Supplier Scorecard enables HP to measure supplier performance and encourage positive behaviors, such as continuous improvement.

And, the Supplier Reverse Scorecard aims to ensure suppliers want to do business with HP by gathering honest feedback which is used in continually developing HP's supplier management business practices.

HP offer 10 Tips to 'Getting Useful Supplier Feedback':

1. Agree to formal and informal feedback from suppliers

2. Formal feedback can occur meeting with suppliers - such as monthly with strategic suppliers, quarterly with partnership suppliers and annually or semi-annually with transactional suppliers

3. Informal feedback can take place on a much more regular basis (even daily), via phone calls, emails and personal interaction

4. Consider designating an executive sponsor/champion to each strategic supplier, who talks with suppliers frequently and provides opportunities to share informal feedback

5. Create a formal process to assess supplier feedback. The first step should be to determine if the idea is worth pursuing. If so, come up with appropriate actions, and arrange for a team to work on those actions

6. Change may involve not much more than tweaking an existing process, not completely restructuring it

7. Respond to the supplier to let them know you are working on their idea

8. Implement the actions. Then provide the supplier with a way to provide feedback on the change

9. Be sure to get back to suppliers if you decide not to take any action on their recommendations

10. Finally, keep the whole process in perspective, remembering that it is designed to continue building stronger supplier relationships

Source: Purchasing.com & Hewlett-Packard

In a recent Blog entry entitled "The Marketing Organization – Can we manage it?" in ANA Marketing Musings, Bob Liodice (President and CEO of the ANA) made the following comments on Marketing Accountability.

"CMO’s have to seriously upgrade their credibility. As a function, marketing must continue to push for increasing levels of accountability across the entire marketing supply chain. Marketers are often disappointed due to a lack of credible metrics and measurements throughout the entire chain. A well-oiled accountability machine – that includes partnerships with Finance and an Analytics group – can provide increasing confidence that marketing does what it says it will do."

Blunt Tools

This concept of the "marketing supply chain" and its measurement is obviously very close to my heart. It is not surprising that CMOs do not have access to credible measurement and visibility. Most CMO's only have access to rudimentary tools used to monitor and measure agencies and these have been sadly lacking in bringing anything of great use to the CMO at a strategic level.

Fight the Good Fight

Your typical CFO has access to a wealth of information about their business processes. Comparisons of business units, benchmarking sales, budget trends, exception reports, global averages, normalized scores, capability assessments etc. They enjoy a very strong voice at the management table - armed with data to back-up their arguments and requests.

Why not your CMO?

Why then would each and every CMO not invest in exactly the same tool-set? Surely that would allow them access to the same armory of data that his or her peers have? And one of the cornerstones of marketing accountability should be the evaluation and rating of the performance of the company's key marketing agencies.

Now here is the provocative question - is your CMO being led to your company's management table without the appropriate tools to do his or her job?

Author: Richard Benyon (Decideware)

This is the second article in a series inspired by a book published by Harvard Business School Press called "Managing Performance to Maximize Results". It is a compilation of articles, all based around Human Resources Performance Management - and in many cases the ideas and practical examples have direct parallels in the area of Strategic Relationship Management.

What we all hate to do!!!

One of the most difficult aspects of Relationship Management is how to tackle poor performance. Faced with an uncomfortable situation, people often simply gloss over the problems.

In a client-supplier relationship this can lead to 'churn' which in many cases comes completely out of the blue because underlying issues have never been surfaced and discussed, yet alone resolved.

Fix or Fire

When a significant issues has been identified, perhaps the first decision is whether you actually believe that the agency / supplier can improve? And secondly, you want an ongoing relationship with them. If you do then the next step is to engage with the agency / supplier to address the issues that you have identified. And at this point you need to invest to fix the relationship.

So here are three tips we have gleaned from the Human Resources space that can help in managing relationships with your few key suppliers.

1. Be Direct

The first element is to make sure that you clearly, explicitly communicate that the supplier's performance does not meet your expectations.

At the same time you should ensure that you also communicate that you do hold out hope for an improved performance. The fact that the discussion is being held is evidence of your commitment to fixing performance and continuing the relationship.

2. Be Specific

Address the specific issues. Detail exactly what is wrong. And how you think it could be fixed. And consider this, what resources are you prepared to mobilize to help fix it?

This element of the action or development plan has been mentioned in many previous Blog articles. Without a commitment to address issues, the entire process is merely performance evaluation, rather than performance management.

3. Be Objective

Do not attack the team or personality in any way. Be sure to stick to as factual an account as possible. it needs to be about observable events, not hearsay.

Try to maintain an objective eye and ensure that in no way does it degenerate into any form of personal attack.

You may find that keeping these three points in mind will help keep a focus on the future of the relationship and not allow it to degenerate into a historical beat up session.

Author: Richard Benyon (Decideware)

Most managers in Strategic Relationship Management (e.g. Marketing Agencies or Strategic Suppliers) can list a fair number of reasons why relationship evaluations should be conducted on a regular basis.   A typical list is shown below.   The problem with these sorts of lists is that the benefits are all a little theoretical and lack direct practical relevance.   Forget the theory, how do relationship evaluations really help?   What practical help can I get from them?

In responding to these questions managers need to re-frame the objectives they seek to achieve from relationship evaluation programs.   There should be 3 basic expectations:-

a) Help the organization get what it wants from the agency / supplier relationship (outputs);

b) Help the organization get these more easily (process);

c) Help with delivery of results (outcomes).

Getting What You Want From The Relationship

The key to getting what you want from the relationship is to make it clear from the outset what it is that you want, and then to measure it.   As we often note: “People do not do what’s expected – they do what’s inspected”.   So it is important that the evaluation criteria in an evaluation program are carefully chosen and carefully prioritized for importance.

This is probably best accomplished by having all top managers involved in the relationship take part in the identification and prioritization process.   This has the added benefit of ensuring buy-in and cohesion i.e. everyone on the client side will be singing the same song.  

From the Agency / Supplier’s perspective, clear identification and prioritization of evaluation criteria helps them see exactly what you want and gives them the assurance that it is what you all want.   Armed with this information the agency can allocate resources and time appropriately.

If the Agency / Supplier knows what you want they have a better chance of providing it smoothly.

Getting what you want from the agency / supplier is sometimes referred to as Expectation Management.   If you can’t measure it then you can’t manage it.   Make it clear in the evaluation criteria what you want and then measure it!

Getting Things More Easily

Most large advertisers or strategic supplier managers today have multi-agency/supplier line-ups.   Whatever benefits this affords, an offsetting common problem is getting the various organizations to work together smoothly and cooperatively.   How can Client organizations more efficiently manage multi-organization line-ups?

One answer is better use of the relationship evaluation program.   If clients make it clear that cooperation between agencies is a priority – and that agencies will be evaluated and rewarded accordingly – then this is sure to lead to easier management and coordination.   Reiterating, people and orginazation do not do what’s expected, they do what’s inspected.   So if you want your agencies to cooperate with each other tell them, and tell them they will be assessed for their performance on this measure, and compensated accordingly.

Use the relationship evaluation program to help get what you want more easily.

Delivery Of Results

Most organizations these days have in place some kind of incentive compensation program.   The whole point about these programs is to further encourage focus and performance.   The Agency is set objectives and rewarded accordingly for achievement.

It is important that the incentive compensation program ties in with the evaluation program.   The two should complement and reinforce each other.

Summary & Conclusions

Relationship evaluation programs can deliver real value and practical help if they are set up and implemented correctly.   The keys to success are:-

Be sure that the program is measuring the right things.   Be sure that the evaluation criteria set out what’s expected of the Agency / Supplier in the relationship.  

If you have a multi-agency line-up, use the relationship evaluation program to encourage cooperative working.   And tie this to the incentive compensation program.   Your life will be easier!  

Ensure that the incentive compensation program complements and reinforces the evaluation program.   Once you have made it clear what you want from the Agency, encourage them to focus on this by rewards from the incentive compensation program.  

Benefits Of Performance Management Programs

1. Establishment of goals and priorities in the relationship, and the benchmarking of performance against these.

2. Identification of strengths and weaknesses in the relationship (particularly so that weaknesses can be addressed early before they become real problems).

3. Facilitation of good communication and understanding between the advertiser and the agency/supplier, particularly at the senior level.

4. The tracking of performance over time.

5. Formalization of various ongoing informal comments that occur during the everyday life of the relationship.

6. Cross-comparison of performance across agencies/suppliers (where clients have multi-agency/supplier arrangements).

7. Help with the assessment and calculation of incentive compensation payments. 
 

Author: Derek groom (Decideware)

Professional services firms like advertising agencies, auditors and lawyers are quick to characterize their dealings with clients as “relationships”. Some go further and even describe their dealings as “partnerships”. But how many firms really know definitively what these terms mean? What specifically are the important component parts that add up to a relationship? What specifically is expected of the professional services firm in a partnership?

And commercially, what does an effective “relationship” and a strong “partnership” mean to the botton line?

The Business Lifecycle

There are 3 distinct phases in the business lifecycle of a professional services firm and its client – the initial pitch, the ongoing servicing of the business, and the termination. All the profit derives from the middle phase – the ongoing servicing of the client’s business. So the imperative in the business lifecycle is to prolong as long as possible the ongoing servicing phase of the relationship.

Defining & Measuring Success

Crucial to prolonging the relationship is surely some kind of ongoing evaluation of performance and satisfaction. Evaluation programs typically involve some kind of survey of participants in the relationship. Typically for professional services firms the assessment criteria are based on qualitative questions.

The basic discipline of an evaluation program has great value for the firm or agency because:-

• It compels the client to identify what’s important to them in the relationship, and where the priorities lie. Once the firm knows what’s important in the relationship they know where to allocate resources and time;
• Early warning! Regular evaluation of performance and satisfaction will reveal areas of weakness before they become problems.

Relationship Is Glue

All this should be viewed in the context that surveys of clients consistently indicate that the quality of the relationship with their professional services firms is a key reason why they remain with them. Professional services firms may win business because of their performance in some kind of pitch or tender, but clients stay the distance because of the quality of the relationship. The relationship itself becomes the differentiator and the glue.

Evaluation Programs

So management at professional services firms may want to rethink the role and value of performance evaluation programs. They should be viewed as an essential business tool which:-

• Helps define expectations and priorities in the relationship;
• Determines how well the firm is meeting these expectations (early warning!);
• Cements the glue in the relationship!

Does your professional services firm undertake regular performance evaluations?

Author: Derek Groom (Decideware)

I recently attended an excellent ANA course in San Francisco. The day's workshop, 'Optimizing the Client/Agency Relationship', focused on relationship management and was run by Joanne Davis, a leading light in this space.

Being a 'Great Client'

One of the key learnings I took from the day was how important it is to be a 'great client'!

It also got me thinking more on this aspect of the strategic relationship process, and relatively how little focus is applied to Client performance in many evaluation or SRM programs.

The good news is that we are seeing an increasing number of '360' relationship evaluations underway, i.e. where the performance of the client is measured and feedback is provided by the agency/supplier on strengths and areas for improvement.

However, the measurement of the client it is certainly of secondary importance in the program and I know I often fall into this trap, paying less attention to this process.

Get their attention

So why it is so important to be a great client in strategic relationships. Could I suggest that FOCUS could be the driving reason, that is you want the agency/supplier to concentrate as much of their attention on your business as possible.

Like it or not you are in competition with other companies for your agency/supplier's attention, just as they compete for yours.

Joanne had a great phrase she used to illustrate why this is so important... "get the 'A' team on your business"

• In the marketing domain the key reason to get the 'A' team is so you get the best creative, enhanced strategic insights, better production, smooth project/workflow management etc
• In other spend categories it may be to ensure continuity of supply (i.e. when things get tough you are the client your supplier calls first), innovations brought to your attention by the supplier, focus on cost reduction, better process management etc.

Recent survey results

In the marketing space the ANA and AAAA conducted a recent survey and asked what are the top 7 things an agency would like from a client.

If you work in the marketing space how does your organization stack up against these criteria?

1. Giving the agency the necessary time and resources to do its best work.
2. Working with the agency in a collaborative manner that puts a premium on mutual respect.
3. Identifying and articulating the outcomes the agency's work is expected to produce.
4. Providing clear complete direction to the agency.
5. Providing constructive timely feedback to the agency.
6. Understanding the problems and opportunities facing the brand and identifying the brand's key
   success drivers.
7. Ensuring that all relevant information and necessary personnel are made available to the agency.

I wonder if in your categories of spend there are similar common charateristics that suppliers would like from their clients.

As a suggestion, next time you meet them, how about asking and making sure that you have them included in your formal evaluation process.

Author: Richard Benyon (Decideware)

Depth interviews conducted recently with fifteen Chief Marketing Officers in the US has revealed some interesting trends in media spend and agency management.

The move to new media

The research, conducted by Andrew Tipping, a partner at Booz, Allen, Hamilton in conjunction with the ANA, found:

• Market leading CMOs have changed their advertising spend patterns ahead of the rest of the market
• Half of the budget of marketing leaders is now spent on the internet and other new media
• The change to a greater share of spend in digital has occurred in the past 2 years

Other characteristics

Further, Tipper found 5 other factors common to the study group, they were:

1. Driving advertising partners (agencies) to become more integrated, ‘go digital’ and collaborate better with clients
2. A customer centric marketing focus
3. Quantifying the return on marketing investment
4. Training staff and integrating them in the main business
5. Remaining adaptable

Tipping also noted when CMO’s focussed on profitable growth, they had more tenure than the average CMO of 24 months.

Our 2 cents ...

Can we add an observation?

The growing shift towards digital, and the emerging trend of digital becoming a larger part of the mainstream creative and media spend, may place some pressure on traditional client-agency relations.

Generally, if clients do want to encourage their agencies to move in a desired direction, e.g. to incorporate integrated digital offerings, then working with them to formulate an appropriate agency evaluation framework can be a very effective method to help manage the change process.

Marketers collaborating with their agency partners to design evaluation metrics which reflect the new shared objectives generates not only good will in the new direction of the partnership, but perhaps more pragmatically, also offers a means for both parties to table and discuss in depth the metrics that will drive the new direction and form the basis of successful future evaluations.

And it may be that where a significant shift in direction is required, marketers and agencies should design a staged evaluation framework.

Staged Approach

A staged approach, whereby for example the metrics shift toward the ultimate objective over an agreed period, delivers both guidance to all the people working on the partnership and time to allow both parties to adapt as necessary.

Many agency evaluations are currently limited to a short time horizon, commonly 12 months.  In the future, we may well see clients and agencies set short term, long term and transitional parameters for their relationships.

Author: Viji Ratnam (Decideware)

See: CMO Thought Leaders; The Rise of the Strategic Marketer.

Source article: The Australian, 18 Oct 2007.

A few weeks back we had the pleasure of presenting a paper to the ANA Financial Management Committee in New York.

We were also extremely fortunate to have two of our champions, Kim McMillon (who implemented at Hanesbrands) and Zac Belcher (key driver of the global roll-out at Procter & Gamble) provide their stories and insights.

A key message of our presentation was that an effective Agency Relationship Management program can be used as a lever to improve many aspects of financial performance.

FINANCIAL PERFORMANCE METRICS

Some of these aspects of direct performance are well understood and commonly applied, see some examples listed below:

1. Increased Sales:

Getting the Agency 'A' team on your business leads to...

• Improved Growth
• Gain in Market share

2. Improved Efficiency:

Better processes and financial management leads to...

• Lower costs

3. Reduced Risk:

Better identification of issues and positive action leads to...

• Lower 'Churn'
• Improved Governance

BUT WHAT'S MISSING?

But, perhaps what's missing from this set of typical metrics are measures of brand value.

Brand value is, arguably, the most important long-term metric that an agency can influence.

The problem is that brand value is also widely recognised as one of the more difficult metrics to operationalize in evaluation programs.

Further, the conflict between a focus on long term brand value and with efforts to meet quarterly results for the financial market, is well documented.

In a recent Harvard Business Review article entitled "If Brands Are Built over Years, Why Are They Managed over Quarters?", Leonard M. Lodish and Carl F. Mela provided an interesting analysis of brand equity, and how short term tactics can have a terrible effect on the long term value of a brand.

MEASURE AND REWARD

The authors recommend every senior-level brand manager take a quarterly look at the 4 key metrics, below:

1. Estimated brand sales at a constant, non-discounted price
2. The change in baseline sales over months, quarters and years and the probability that the baseline sales have increased or decreased over those time periods
3. The regular price and promoted price elasticity -- or the percent change in revenue due to a percentage change in price
4. Change in brand price response over months, quarters and years, and the probability that elasticity has increased or decreased.

Our view is that we should at least consider incorporating measures of brand equity in agency evaluation / compensation frameworks. And even if they not immediately available, that we look to include them in future reviews. 

Author: Richard Benyon (Decideware)

This article introduces a tool we use to map agency or strategic supplier performance - the Relationship Matrix.

The Relationship Matrix helps clients visualize the two key dimensions that all suppliers must deliver on - Product and Process.

This is a powerful tool to deliver deep insights into performance, quickly. As such, it's a terrific "C" level report.

More than a Number?

With formal evaluation programs it is very easy to get caught up in the final, overall rating score.

However, it's also very useful to dig deeper into the data to understand how that overall score was determined.

The Relationship Matrix helps clients better understand where the strengths and weaknesses of their suppliers are. Then they can develop strategies based on those understandings.

Performance Dimensions

In the Relationship Matrix we label the two dimensions "Product" and "Process".

The Product dimension is what the agency / supplier actually does and relates to the craft or output that they deliver.

As an example, in advertising this would include such aspects as strategic insights, creative ideas and customer understanding. In strategic supply it might address the quality of a product, innovation and delivery.

The Product in an agency context has been referred to as the 'Magic'.

The Process dimension is how the agency / supplier does it and relates to the way in which they provide their goods and services.

Examples of this would be project management, financial administration and account service.

In an agency setting, this has been referred to as the 'Logic.

For more on Magic and Logic see the ISBA / CIPS / IPA Whitepaper 'Magic and Logic: redefining sustainable business practices for agencies, marketing and procurement' .

Mapping

Where do your key agencies or suppliers fit on this Relationship Matrix?

Using these dimensions we can segment agencies / suppliers into 4 key sectors. Potentially, clients can develop  different strategies to address each group. Hopefully, very few of your portfolio are in the final segment!

• Dynamic: Strong on both “Product” and “Process”

Your ideal partner. Learn from what they do and build best-practice models to leverage across others in your portfolio.

• Develop: Strong “Product” but weak “Process”

They are good at what they do but can be a nightmare to work with as their processes are inefficient. Help them to identify and improve the areas that are causing you concern.

• Diagnose: Strong “Process” but weak “Product”

This is a difficult segment, as suppliers may be easy to deal with and incredibly efficient, the issue is that don't deliver what you are actually paying them for. Diagnose quickly what the problems are as they can have a major negative impact on your business.

• Danger: Weak on both “Product” and “Process”

The big question here is whether you should continue to work with anyone in this segment. Is it worth having to not only improve their processes but also to address the critical problems they have with their outputs?

Author: Richard Benyon (Decideware)

Just a quick notification that there has been a subtle change in focus to the upcoming Decideware session in New York with the peak industry body, the ANA Agency Financial Management Committee.

With this committee having a strong financial, purchasing and operational interest, Bill Duggan (Executive Vice President of the ANA) has kindly allowed us to the forum to present and facilitate discussion on the 'cutting edge' of agency evaluation (see the agenda below). We will make a copy of the presentation available in early October, please email me on rbenyon@decidware.com if you would like us to send you a copy.

FINANCIAL LEVERS OF AGENCY EVALUATIONS (12:45-1:45pm)

Key financial levers for agency evaluations include cost reductions/resource usage, risk reduction, linkage of performance to results, and incentive compensation.

Decideware, an Australian based company (www.decideware.com), will share learning from their experiences working with various clients on agency evaluations and demonstrate their "Agency Relationship Optimizer" solution. Participants representing Hanesbrands and Procter & Gamble will be in attendance at this meeting to provide the client-side perspective.

Speakers: Richard Benyon, Executive Chairman and Derek Groom, Executive
Director - Decideware