Procurement is nothing new. Procurement departments have for years sought the lowest cost providers for paper clips, cubicles and other material commodities. But it's just in
last two years or so -- with corporate America watching every red cent because of the tight economy - that procurement has expanded into the area of professional services,
including PR.
The trend is causing consternation in some PR precincts, with agency execs saying that procurement officers don't understand the tenets of PR and are so preoccupied by price
that they can't appreciate the subtleties of effective communications. Despite the concerns, however, procurement for PR is a reality.
"Procurement [in PR] is here to stay and will only get more widespread," says Harvey Greisman, vice president of communications for IBM Global Services, who admits that he was
a bit skeptical before he started working with procurement officers about two years ago. "I had never had that kind of relationship with procurement before and it hadn't been a
factor in previous [agency-client] relationships," he says.
Since procurement got into the PR mix IBM has whittled down the number of PR agencies it works with to three from 50. The computer giant's "One Blue Team" currently consists of
Omnicom's PR agencies, Text 100 PR and Magnet Communications. "We decided the communications disciplines we needed and which agencies could provide them," Greisman says.
"Procurement can help PR with the essentials in terms of a fair selection process and making sure we are not inadvertently favoring one agency over another."
Greisman says he's well aware of the adversarial relationships that can develop between procurement and PR, but stresses that agencies have to change their tune if they want to
compete. "Agencies need to adopt a different position when dealing with procurement and give procurement executives a fair chance to prove themselves," he says. "Some of our own
agencies - as well as other agencies -- now admit that they have benefited from the experience of corporate procurement people advising them on how to run their businesses more
efficiently."
The Council of PR Firms has started to grapple with procurement. This summer the Council will release guidelines and best practices to help agencies deal with procurement as
well as tips on negotiating skills. "If you know what to expect, know your own costs and can show them how you make money you'll be prepared for the procurement process," says
Kathy Cripps, president of the Council of PR Firms, who pointed out that corporations still need to understand that PR is a different animal than raw materials.
Francisco Escobar, president of JFE International Consultants, who was in charge of worldwide marketing services at Texas Instruments prior to launching his own consultancy,
says the ball is in the agency's court when it comes to procurement.
"They need to get their heads out of the sand, educate procurement execs on what they do and not be defensive about it," Escobar says. But he also stressed that procurement is
a two-way street. "Procurement needs to understand that [PR] is a different kind of buy as opposed to typical procurement."
It's crucial that both sides of the table try to clear the air from the get-go, but it's hard when agency execs feel as if they have Big Brother watching over their shoulders
and corporations feel that agencies are holding back information that will enable them to make cost-effective decisions.
"It's a painstaking process but you have to get procurement to understand that you can't apply PR to ad prices or ad structures," says Jerry Selick, chief financial officer for
Burson-Marsteller USA. "You need a well-written, well-defined plan so there's no mystery involved. Procurement people are pros and make every effort to work with us so the
relationship is not adversarial."
The larger PR agencies may have the financial infrastructure to deal with procurement, but not so for mid-size agencies. Asked whether there is anything positive when
procurement crosses PR, Steven Cody, a managing partner with mid-size PR agency Peppercom, says, "The way I would answer is that is what Dwight Eisenhower said when asked to name
the most important accomplishment of his Vice President, Richard Nixon, and Ike said, 'Give me a week, and I'll think of one.'"
Cody says he's concerned that procurement execs too often lump PR together with office supplies and other "stuff" and fail to understand PR's intangibles. Equally troublesome
are the kinds of questions procurement departments ask the agency about individual salaries and/or profit margins.
"You have to ask yourself how badly do you want the business," Cody says. "We had very serious discussions about walking away from a [potential] piece of business because the
procurement process became so onerous."
Margaret Booth, founder of M Booth Associates Inc., a New York-based PR firm, says that procurement departments have a say for about a third of her business whereas two years
ago procurement for PR wasn't even a consideration.
"With the large multinationals it's more and more becoming the reality," Booth says. "Most procurement people know really well how to bill services by the hour but they don't
understand the PR business."
Booth reiterated that the onus is on PR firms to educate procurement managers on what exactly PR can accomplish. But that may only go so far. "Part of the problem with
procurement is that they're looking at every kind of service or vendor," Booth says. "Education is tough because you're just one of 50 other items in the mix, and I don't think
[procurement execs are] particularly interested in getting educated because they're paid to save the company money."
Although reps from mid-sized PR agencies express deep concerns about procurement, IBM's Greisman says mid-size agencies can be in a better position to make their case to their
corporate clients. "They're more flexible and more easily scalable, with lower cost infrastructure," he says. "In essence, they meet the criteria for the on-demand business model
that IBM established and other companies are now emulating."
As a testament to procurement's increasing prowess, IBM now sells its procurement services to other companies, regardless of the space, for their own use.
Contacts: Margaret Booth, 212.481.7000, [email protected], Steve Cody, 212.931.6114, [email protected] ; Kathy Cripps, 212.351.5048, [email protected]; Francisco Escobar,
214.728.6903, [email protected]; Harvey Greisman, 914.766.4560, [email protected];
Jerry Selick, 212.614.4780, [email protected]