When Incentive Pay for Agency Performance Doesn't Work

Too Often, Marketers Forget the Importance of Non-Financial Incentives

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Former Intel Chairman Andy Grove once sent a shrink to his agency. Not just to the agency, but to all the manufacturing companies that built Intel-chip-fabrication plants as well. Why? Because he wanted all the strategic vendors on whom his company's success depended to understand Intel's psychology.

Casey Jones
Casey Jones
He knew that if all those companies understood how Intel thinks, they'd be able to perform better. The reverse is also true. If you understand how your ad agency and the teams within it think, you'll be able to create a relationship that is mutually rewarding.

Nowhere is that more important, or misunderstood, than when it comes to incentives -- the stuff you think motivates your agency.

There are a number of principles that govern how to motivate the individuals that make up your agencies' teams. Most marketers seem to think only about one: money. Even when we think beyond the standard agency retainer, it's usually just considering other ways to pay agencies for their work. One that you hear a lot about is incentive-based compensation, aka value-based compensation, and many consider it one of those game-changers. It seems like such a simple idea: You hire an agency, they do stuff that works, and you pay them more.

Surely this makes sense? No need to dig further, right? Yet, if it's that easy, why are more agencies being fired or resigning more frequently and complaining more loudly than at any time in our industry's history?

Yes, money matters. But it's got a lot of problems, the first being that it's in damn short supply. More importantly, your competitors for agency talent have money too, and they are just as reluctant to part with it. Which means that it isn't much of a differentiator when you want to hire an A-team agency and you want their A-team working on your business.

The truth is , cash only fuels the fire so far. In fact, it may fuel it less than you think. So instead of thinking only about the money, consider thinking about the nonfinancial incentives that sit at motivational levels below the surface. Assuming that all anyone at your agency cares about is money is like assuming that all your customer cares about is price. Like Intel, you should think much more deeply about the psychology involved.

Does your agency CEO care about the money? Well, yeah. But what else motivates her? Does the creative director care about the overall value of the account to the agency?

Perhaps not as so much. What about the copywriters, the art directors, the day-to-day media team, the account planners and the account executives? Sure, they all need and deserve a healthy paycheck; that keeps them coming to work. But the incentive compensation that you are counting on to inspire their very best work is not the hot ticket that makes the difference you are hoping for.

The answer is simple really -- you think about it all the time when it comes to your customers.

It can be summed up in one word: segmentation. And, it can be executed brilliantly with another concept about which you are uniquely qualified to think. Three words this time. Call. To. Action.

It is imperative to know what stimulates each type of person at an agency and you can craft nonfinancial incentives to motivate them. Think about what it is that 's special about your business that gets them up in the morning and triggers their dopamine receptors.

For instance, let's assume your creative team is deeply concerned about the financial success of your brand. Let's also recognize that they are passionate about creative awards, which are generally won by teams doing very daring work; the kind that often makes your company uncomfortable. The kind that often gets killed by the more conservative executives on your team.

Let's say that as part of your incentive-compensation strategy, you agree to run with at least one crazy idea a year. You don't have to put a lot of media weight behind it, but let the teams loose to create something they'll kill to put in awards shows, into their book or in their next new-biz pitch. That could be very meaningful to them. More important, it's motivational.

Here's another example. Agency planners spend a great deal of time collecting and analyzing consumer insight and then applying it to your latest ad campaign. What if you allowed them to break out of those relatively narrow confines? Maybe share what they've learned with your product-development teams or sales staffs? Feeding their inherent curiosity and allowing them to be part of something big could be liberating and motivating.

As for motivating agency account managers, I'll stick with Intel for my favorite best-practice example. In my second year on the business, Ann Lewnes, now CMO of Adobe, called. With some justifiable pride she informed me that I had been nominated by her team and won a prestigious award. It was for employees who exemplified Intel's core values. It was the first time a nonemployee had been so honored. They sent me a $100 check. The money was inconsequential. It was the gesture itself -- that they thought of me and my contributions to their business -- that rocked my world.

Finally, if you are paying performance-based bonuses, know exactly how deep in the agency roster your financial incentives reach and how each office, department and team member earns their share. In other words, think hard about how much of that water actually gets down to the roots.

All agency employees should all take the time to re-examine the policies at your agency regarding bonuses. What percentage of their pay is variable, and is it directly tied to your metrics, or to policies and politics about which you are unaware? If you decide to inquire, be prepared for a call from a very senior agency executive who may attempt to convince you that how they manage their money is an internal matter that should not concern you. Don't listen!

The bottom line is , well, something beyond the bottom line. We are in a creative business, yet when it comes to compensation, we're typically anything but. Pay your agencies well, and they'll work well for you. Pay them well plus motivate them in other ways, and they'll become the game-changer you've been looking for.

Casey C. Jones is co-founder and CEO of BriefLogic and former VP-global marketing at Dell.

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