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JOINT COMMITTEE OF PUBLIC ACCOUNTS AND AUDIT - 23/11/2009 - Role of the Auditor-General in scrutinising government advertising

CHAIR —I welcome to our inquiry today Mr McClellan from the AANA. I just point out that the guidelines for you in terms of the conduct of this hearing at the table. You have given us an opening statement. It is quite lengthy, so we do not have time for you to go right through that, but would you like to elaborate on some major points?

Mr McClellan —Yes, I would. I would first like to give you a bit of background on AANA and focus on a couple of areas of what we do that have a bearing on government advertising. The first is AANA’s role in setting industry standards of decency and ethics in advertising and dealing with complaints. It might surprise you to know that complaints about government advertising are dealt with by the same system that looks after private sector complaints.

The second role that is relevant is our role in respect of best practice guidelines, particularly the client-agency relationship. These guidelines may offer some pointers as to how government advertising can be made more effective. With regard to ethics in advertising, one of AANA’s main objectives is to ensure ethical standards are upheld through the management of the industry’s self-regulation system. The central features of this are codes of ethics and codes around advertising to children, advertising of food and beverage and, most recently, a new code around environmental claims in advertising.

Our operational arm for this process is the Advertising Standards Bureau which administers the complaints handling service according to principles that are laid down by the association in consultation with other industry stakeholders. Complaints are heard by a board made up of members of the community with no affiliation to the advertising industry. They look at complaints into all media, including so-called new media such as the internet and mobile devices. The service is paid for by industry and is available to anyone in the community free of charge. It deals with about 3,000 complaints a year on average. It is indicative of the independence, transparency and professionalism of industry self-regulation that the Australian government has submitted itself to the jurisdiction of the ASB. Since 1998 the ASB has considered about 30 complaints regarding Australian government advertisements; it is noteworthy that all of these complaints have been dismissed.

CHAIR —Is that usual?

Mr McClellan —The point is that it is obviously to the benefit of the government to be able to assure the community that it does not hold itself above the advertising industry and businesses at large, and is willing to submit to the independent judgment of the community Advertising Standards Board about decency in advertising. Do you want to ask a question before I continue?

CHAIR —Have you concluded your statement or do you want to continue?

Mr McClellan —I have a couple of comments about our guidelines.

CHAIR —Please go ahead and then we will ask questions.

Mr McClellan —The second relevant role of AANA is establishing best practice guidelines relating to the client-agency relationship. We have guidelines on how to undertake a pitch, brief your agency, formulate an agency agreement and so on. I will not go into them in detail. I will, however, make a few comments based on some current industry trends that may be relevant to this inquiry. I mentioned our members are mostly large, national advertisers. Our day-to-day contacts are with marketing directors and chief marketing officers who are responsible for company budgets often into the hundreds of million of dollars, so these comments are based on the feedback I get from them. The first point I will make is that there is a very high level of importance attached by marketing directors to the agency relationship. The agencies are the source of ideas, and they are also largely responsible for the execution of these plans.

There are probably five main characteristics to this relationship. The first one is trust and respect and the term ‘partnership’ is used quite genuinely to describe the relationship: the marketer needs the agency’s ideas and its skills in execution; the agency needs the marketer’s courage and ability to articulate a vision for the brand. The second characteristic is clarity of communication of goals and expectations. This speaks to the importance of getting the brief right and communicating effectively between the two parties. The third characteristic is regular performance review and feedback. Again, the best relationships involve a two-way exchange in this regard, not only the clients giving feedback to the agency but the agency also telling the client what they are reading into what they are hearing from the client. The fourth characteristic is understanding each other’s businesses: one of the things advertisers complain about most is the failure of their agencies to understand their business objectives. But it is equally important for the advertiser to know as much as they can about their agency. You might ask why. The issue is whether the agency has the expertise and the capability. The client needs to satisfy himself on that point. The final and fifth characteristic is openness to new ideas and the willingness to challenge the status quo: one aspect of attracting complaints to the ASB is that it is a signal that you are pushing the envelope and testing what the community considers reasonable and appropriate. Although I would never counsel any advertiser, especially including the government, to wilfully breach our codes, there is no doubt that some government ads have achieved cut-through because they have been willing to be edgy. So I do not accept the criticism that government advertising is necessarily vanilla or cautious in its approach all the time. I might just conclude my remarks there as I have given this submission.

CHAIR —I see some great parallels between what we are doing and what you obviously do in your association. What proportion of your clients’ work—that is, the agencies that are part of your association—would be government advertising? Do you have any idea what proportion of their work it would be?

Mr McClellan —I need to be clear that predominantly the membership of the AANA is advertisers. So we client side. We have a small number of agencies in membership but in fact—

CHAIR —So the majority are the clients themselves but some are advertising agencies?

Mr McClellan —Yes, a very small number. Some of them do have government work, but a very small proportion of the entire government business, I would have thought.

CHAIR —Have your members made any comments about the government’s advertising guidelines in terms of any restrictions this may place on them? Do they have any views on those guidelines?

Mr McClellan —I have heard comments about the lack of government work that has been available to the industry, especially over the past year or so. That has been noticed, particularly at a time when, due to the global financial crisis, there has not perhaps been as much work as there would have been in the private sector as well.

CHAIR —We had a presentation from Ms Sally Webster from the University of Canberra. She pointed out that some particularly effective advertisements, such as the Grim Reaper, would not have met today’s guidelines as the evidence was not in at the time. It was a proactive approach to warning and cautioning people about the risk of HIV. Have you any comments to make on that? You said in your presentation that you do not think government advertising is necessarily a ‘vanilla flavour’. Do you have any comments on this need for innovation or risk-taking or how it might fit with government advertising or not fit with government advertising?

Mr McClellan —I believe that risk-taking is inherent in the business and I made that comment earlier about the need for advertisers to be courageous and to trust their agencies. There perhaps is in government advertising fair criticism that, because it is heavily audited and heavily accountable, there is too much reliance on concept testing and that perhaps research is used to a point where it does not enlighten the client as to the likelihood of the campaign being effective. One of the most recent discussions that are occurring in the private sector is around trusting your gut as an advertiser and having the courage to take a chance on a campaign that perhaps the research has not fully validated. If there is a suggestion I would make then it would be that perhaps seconding some of the best talent from the industry to assist with the development of campaigns—and I am talking from the client side now not in terms of dealing with agencies—could be useful.

CHAIR —The guidelines would probably not say ‘trust your instinct’ or ‘trust your gut’.

Mr GEORGIOU —I would like to ask about the issue of effective advertising. One of the things that the guidelines commit government advertising to is objectivity and fairness. That means that there will not be any partisan or excessive promotion of the policy being pursued by government. Would you rule out those guidelines considering your statements about edginess and trusting your agency and going with your gut? Some campaigns are effective precisely because they are driven by a wish to persuade, which makes them very difficult to evaluate in straightforward, objective terms. That was a Greek question!

Mr McClellan —There is obviously some tension between the need to evaluate and be accountable and the need to be able to be creative.

Mr GEORGIOU —Objective.

Mr McClellan —Yes, the need to be accountable and objective and the need to be creative. I am suggesting the pendulum may have swung a little too far towards the need to be accountable. That is not to say that advertisers do not currently put a lot of emphasis on auditing and on accountability, but their emphasis on those elements of effectiveness tends to track back to the contract and whether there has been compliance with the contract. Have the correct number of head hours been applied to the project? Have the agency billed on time? And so on. The key has been to give greater freedom within the restrictions of the contract for the creatives to express their current thinking.

Mr ADAMS —Regarding your comments about getting the brief right, often there is limited time for government to get its message out to the general public. We have a world financial crisis, we are trying to spend money and we want to inform the public about why we are doing that. On getting that brief, would you say that the more time you have the better you get the brief together—if you have a lot of time? How many discussions do you need with the creative people to do that? How long does it take to write a brief?

Mr McClellan —In the private sector there is clearly a process that is followed. In fact, the tradition of calling for briefs is still generally followed. But in the private sector you might find that a difference with the government process would be that they would not call for as many. The marketing directors tend to make it their business to know what is going on in agency land—and it really is a place in people’s minds in this industry. They make it their business to know which practitioners are on the ascendancy and who is doing the really good work. They tend to shortlist about eight to 12 at the very beginning of the process. As they take the agency through the process of selection, they will perhaps only actually seek formal written briefs from three or four and only get down to the final stages of the process with a couple of agencies.

I am suggesting that advertisers take much more responsibility for vetting those agencies who would be eligible to do a particular campaign. If you are a bank, you want to use social media and you have some particular criteria that you have established, there will only be a certain number of agencies out there whom it would be worth even approaching for their business. Perhaps one of the challenges government faces in the need to be transparent and to invite all to tender is that you do not have the same ability to go out and be selective about who you are going to invite to tender for particular work. The corollary of that is that I think it tends to discourage some of the best talent that is out in agency land from pursuing government work because they see themselves up against enormous numbers of competitors—the people who happen to know they are the best ones or are among a very short list of the best ones to be able to do the work are likely to be winnowed out in a very lengthy process.