There's an excellent article over on the US' Advertising Age about aligning the incentives between advertising agencies and procurement functions. It's one of the more grown-up commentaries about the challenges that undeniably exist in a relationship which, historically, hasn't always seen eye to eye.

It's easy to assume that procurement people are interested only in saving money by getting products and services as cheaply as possible. No doubt their goal is to lower your price (just as your goal is to protect your price), but procurement exists as a function to secure value for the marketer.

It's this focus on "value" which really sets the argument apart from most you will read on the subject.

It goes on to cite a conversation that the author had with the head of procurement at a large company, who said that procurement was insistent on making agencies comply with rigorous processes in order to guarantee value for money. Because most agency remuneration is calculated on 'hours worked' rather that 'value created' it's necessary to nail down the process - otherwise, it's in the interest of agencies to work more hours, not less, regardless of the quality of the output or the end benefit to the client organisation.

The author, Tim Williams of agency consultancy Ignition, then posed a hypethetical situation to his head of procurement friend:

"What if," we asked, "the agencies you are evaluating proposed a form of compensation in which the economic incentives of both parties were in near-perfect alignment?"

Apparently, the head of procurement said this would do away with the need for such rigorous process - I assume because there would be a certain level of risk/reward built into any such financial agreement.

It's an interesting argument, and one that tends to contradict the approach of Procter & Gamble (a thread on which you can follow here).

So, can advertising agency and client organisation incentives be aligned? And if so, how?