by Johanna McDowell (@jomcdowell) With pitching and agency management being some of the most-foremost discussions at the moment — some agencies are calling it “pitching bedlam” — what is the role of King IV at a time like this? And is there a role?
King IV is the latest iteration of the world-renowned King Report, which first appeared in November 1994 as a result of a concerted effort by the Institute of Directors to introduce corporate governance to assist listed entities in being more transparent. King IV is currently open for public comment and will be formally launched later this year on 1 November 2016 by the Institute of Directors in Southern Africa (IoDSA) at an all-day conference in Sandton.
What are the implications of King IV for the marketing and advertising industry? Most agencies are led by owners and directors who, as company directors, have the typical fiduciary duties associated with being a director. So agency chiefs are also bound by the code of good practice, along with the directors of the companies or clients that they serve.
Here are some practical examples:
1. Effective leadership
King IV reminds us that corporate governance is essentially about effective leadership. Leading a pitch process is a great challenge for agency leaders, who have to inspire their hardworking teams to live, eat and sleep the pitch — as many agencies have been doing for the past few months.
From a marketer perspective, effective leadership means ensuring a transparent pitch process with reasonable levels of access to the client.
2. Aspire to comply
It is not about ticking boxes to denote compliance but rather to encourage companies to aspire to comply and not to be grudging in their acceptance. Agencies and marketers are all about aspiration — this is a great fit with King IV.
Outcomes that King IV wants to see
- Ethical corporate culture
- Performance and value creation
- Effective and adequate control
- Trust, good reputation and legitimacy
3. Independent directors
This has long been an area of importance underlined by King. Independent directors on a board ensure that questions are asked. Larger agencies often have independent directors in place, and should be encouraged to do so, as this will lead to robust questions being asked.
Larger corporates will always have independent directors on board and it should perhaps be something that agencies might look for when pursuing new client business. This will often demonstrate the level of transparency and ethics that a corporate environment may or may not have in place.
This particular area may also encourage broader B-BBEE levels, both in agency and in marketer structures — and, again, this is a further demonstration of leadership, transformation and commitment.
4. Management of the supply chain — procurement
This is possibly one of the most important areas of King IV, especially in the light of the questions around “tenderpreneurs” and government contracts, and even private-sector collusion over pricing. It is also the area most under contention in a pitching process between a marketer and its agency requirements, with procurement looking for very different factors than a marketer might. An agency’s willingness to comply with procurement rules is often an indication of how well the agency is run and managed. Aspire to comply, rather than being grudgingly supportive.
From a PFMA perspective, agencies competing for pitches among government structures would benefit from greater transparency, which should be possible over time if King IV could be considered along with treasury rules and regulations — this is an evolving aspect.
5. Simplification
Looking at a King Report may be daunting and not the normal content that agency folk or marketers are keen to embrace!!! King IV has simplified its 75 principles down to 16, being lessprescriptive and more inclined to encourage, as opposed to blame or look for faults. This approach might well help agencies and marketers to understand corporate governance easily and more comfortably.
6. Conflict of interest/conflict clients? Trust issues
Often, agencies are in the difficult position of having the experience in a certain category of business but being unable to take on a client in that area because of potential conflict. Among the healthcare specialist agencies, and among certain digital agencies and media agencies, this problem has been overcome simply by creating separations within the respective agency to ensure that confidential information is not shared or abused.
However, this is a serious concern for most marketers, as they do not want their competitors to have knowledge about their own activities and information might be transferred — unwittingly — by agency folk as they move from agency to agency, or even within the same agency. Should conflict clients be such an issue? It is a debate worth having. Does client conflict matter more than agency expertise? This will be a good topic for one of our future Marketers’ Masterclass joint sessions with agencies.
7.Transparency of budget and costs
The cause of a great deal of emotion between marketers and agencies! Should marketers reveal their budgets in the interests of transparency? Are agencies being totally transparent in their costing methodologies and mark-ups, commissions, media discounts, etc? Again, an area of debate and discussion — surely open to being reviewed under King IV guidelines.
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For me, King IV is about better business ethics, better behaviours, transparency and leadership. These guidelines would certainly open up marketers’ minds to new possibilities, as well as agency leaders and top teams to better business practices.
Johanna McDowell (@jomcdowell) is managing director of the Independent Agency Search and Selection Company (IAS), and she is one of the few experts driving this mediation and advisory service in SA and globally. Currently she is running the IAS Marketers Masterclass, a programme consisting of masterclasses held in Cape Town and in Johannesburg. Twice a year she attends AdForum Worldwide Summits.
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