It’s been said that sunlight is the best disinfectant, which is true, especially in advertising where clients are holding ad agencies’ feet to the fire, demanding clarity and transparency in the business arrangements between them.
For media agencies, transparency remains an important and controversial issue. With most agencies running an opaque and non-transparent business model—and with the feds now hot on their heels—the industry not only runs the risk of losing their clients’ faith and business, but many agencies may find themselves subject to indictments and a perp walk. Not a good image for the imagemakers.
Meanwhile, as ID Comms’ Tom Denford commented, “Advertisers now see transparency as a competitive advantage.” Agencies that are truly transparent are the ones poised for growth, as more clients today are demanding accountability in their partnerships. Verifiable transparency has become a key requirement for doing business.
So how can a media agency practice transparency? True transparency is an operational proof for eliminating the conflict of interest any agent faces. In light of this, we recommend agencies consider adopting the following principles, as they can make a real difference and give your agency an advantage.
Establish that operating revenues result from remuneration arrangements with clients
This is the foundational basis for achieving transparency, and it addresses where clients have lost faith. A stated set of guidelines backed by third party monitoring underscores that an agency is truly transparent and not just delivering lip service. Clients should ask their media agency partners to outline in writing their policies for handling rebates, discounts, etc.
Transfer discounts negotiated on clients’ behalf, rebates, volume bonuses and other value from media planning or buying
This is a critical element of being genuinely transparent. When clients begin to see that their agencies are actually crediting them—in dollars and cents—for benefits accrued by the agency on their behalf, they’ll start believing that transparency is real, not imagined.
Avoid potentially complicated financial relationships
None of your employees should participate in or have financial relationships to media suppliers, sales houses, purchasing companies or other third parties that could in any way compromise the neutrality of its advisory service to its clients.
It’s important that transparency extend throughout the organization all the way to the people who are running the business and handling client budgets. Setting rigid standards for your people needs to be part of the equation, one that clients should not just expect but demand.
There goes those Elton John tickets and all the other industry-accepted perks, gifts or swag. This sends the message both internally and externally that profiting in any way from a client’s business, outside of fees normally charged for services, is not a part of your culture.
Transparency in compliance
Compliance with transparency principles should be reviewed by a third party, preferably an independent auditing firm, with the results of that review made available to all your clients.
While easier said than done, this is where the rubber meets the road. You need to open your books and grant access to experts who know which rugs to look under, then make sure your clean bill of health is shared with the right stakeholders.
One important thing to remember is that transparency is not synonymous with ethics or morality. Rather, it’s a way of conducting your business and managing your operations that are often a reflection of a company’s values. Adopting practices that guide transparent behavior helps attract people and clients who want to be associated with companies that have strong belief structures. It indeed becomes a competitive advantage.