Accountability equals credibility. To have both, advertisers and their agencies must first have a relationship based on trust and a compensation system based on performance, but equitably so.
Agencies and clients have turned up the volume in their discussions of incentive compensation. It's considered astute to advocate it, neanderthal to reject it. Consultant Robert Lundin, of Jones-Lundin Associates,
says pay-for-performance incentives add value to both advertiser and agency by leading to more enduring relationships, clear definitions of expectations and a way to evaluate performance on a regular basis.
Yet for an incentive-based compensation plan to work, trust must be the point of embarkation. Since trust is not easily forged in any quarter of society today, it is unreasonable and shortsighted of marketers to ask agencies to accept a narrow gauge of performance.
DDB Needham Worldwide Chairman Keith Reinhard has championed pay for performance, but admits in some cases the system has abused agencies by making them a scapegoat for brand managers seeking quarterly cost savings to goose their numbers. Saatchi & Saatchi Advertising Exec VP-Chief Financial Officer William Cochrane, at this month's American Association of Advertising Agencies meeting, told of a client that, after a year of solid business, faced an unexpected downturn. It then refused to pay the incentive compensation that would have accounted for 20% of the agency's revenue from the account.
So agencies must not only be selective in determining which clients make good partners in pay-for-performance plans but also in how the plan is structured. Overall performance, not just isolated brand objectives, must be judged, since factors other than advertising can play havoc with targets. A system that awards bonus points throughout the year rather than one that depends on a make-or-break, end-of-year evaluation would seem the way to go.
Even so, agencies should not leave it up to the client to say what they have done but document that to the client at regular intervals.
West sets pace
As the editors of Advertising Age convened to select our 24th annual U.S. Agency of the Year, a common theme kept resurfacing: Nearly every short-list agency being considered for the honor was based on the West Coast. There was the eventual winner, of course, Foote, Cone & Belding, San Francisco. Also the runner-up, San Francisco's Goodby, Silverstein & Partners. Not to mention the Venice, Calif., office of TBWA Chiat/Day, and Portland, Ore.-based Wieden & Kennedy.
The West, of course, has long been a creative hot spot. But its creative dominance was overpowering last year, which is as much a knock on the work being produced by the rest of the country as it is an acknowledgement of the brilliance of the work coming out of the West. Lists of last year's best ads inevitably were topped by Nissan's "Toys" spot and Energizer's "Spotters" campaign (both TBWA Chiat/Day), FCB's Levi's work and Goodby's offbeat Polaroid commercials.
Chrysler Corp. Vice Chairman Robert Lutz, speaking at the annual American Association of Advertising Agencies meeting this month, told agencies not to get so caught up in defining themselves as "full-service communications conglomerates" that they lose sight of the core product. "If your mission . . . is to produce great advertising, and nothing but great advertising, you'll be ahead of the game," he said.
That's a message the West Coast has already absorbed.