Linking Employee Pay With Agency and Client Performance

Shops Beginning to Change Staff Compensation Models, Thanks to Recession

By Published on .

Al Moffatt
Al Moffatt
A not-so-funny thing happened on your last trip to the corner office to ask for a raise: the recession.

While the recession was certainly destructive in many ways, one positive outcome is that it has ushered in an aura of responsibility and accountability in both corporate and personal life. After a period of belt-tightening, companies are starting to cautiously invest in advertising again, and thus agency heads are also slowly opening their wallets, as pay freezes and hiring embargoes melt away.

But while clients' spending is resurfacing, agency-employee compensation models have changed forever. For out of necessity comes genius. More progressive compensation structures are emerging and taking hold, not only in the most contemporary of agencies but also among some traditional shops as well.

Rather than randomly throwing money at people, which is what used to happen, agencies are beginning to look for ways to tie employee pay to agency performance in the form of base plus incentives. As one mid-sized agency leader recently stated, "Now that we're coming back to life, I'd like to see our people have some skin in the game."

But where to start? The entrenchment of digital and analytics has certainly made it easier to track all kinds of data. But it's still a struggle for most agency chiefs to define (and financially motivate) employee performance because they're not really sure what they're measuring -- or why. Great creative? Happy clients? These feel-good measures may have worked in the past, but in today's non-agency-of-record, low-margin world with so many clients to satisfy and so many subtle forms of creativity, "happy" and "great" have become even more subjective.

Thus, agencies need to take a hard look not only at the data but also at what they stand for to arrive at a visionary yet pragmatic benchmark against which to evaluate employees -- and how each one of them is helping the agency reach its goals. A good place to start? Translate the qualitative vision of the agency into tangible goals and quantitative measures for each department and group of employees.

For instance, if the agency vision is to "Become the Biggest Agency in the East," this then gets filtered down to actionable goals and quantitative tactics for employees in each department. Thus, the new-business director receives a higher commission for bringing in larger clients. The account folks get rewarded for taking unsolicited, incremental-income ideas to clients. The creative people get cash for developing bigger-thinking, multiplatform campaigns for which the client allocates more money. Media and production people receive an incentive for negotiating better deals that make it affordable to run the additional work. And the digital and PR folks get a nice bump for creating an incremental buzz and ROI for the client and the work.

This chain of vision, responsibilities, performance and incentives can work for any agency and any goal -- be it improved profitability, client retention, innovation, breaking into the top 50 worldwide, etc. In short, think of employee incentives and agency performance as a relational database. Everything is inextricably linked.

Once agencies get their internal act together, they can then start to think about how to tie employee and agency performance to client incentives so that employee, agency and client successes are all linked and reinforced.

This also opens the door to talk with clients about performance incentives -- something that agencies have longed to do but have had trouble with because of the misalignment between clients' measure of success and agency compensation. But that's starting to change.

For instance, P&G rewards its agencies for coming up with sustainability ideas. So why, then, shouldn't these same agencies also reward their creative people for coming up with the ideas? Or if an agency is trying to enhance its creative reputation and has a large retail account, why not give a bonus the creative directors for doing great work and coming in under budget? And then tie this to a client incentive whereby the agency gets 10% of the amount it comes in under budget?

The more employees, agencies and clients have skin in the game, the more symbiotic the agency-client relationship becomes. This then translates to a more stable client base, improved agency profitability and a better paid, more enthusiastic and more consistent agency work force.

So the next time you dash down the hall to ask for more cash, perhaps you'll be armed with something more compelling than just "great" and, in the process, make your boss and your clients very "happy."

Al Moffatt is president-CEO, Worldwide Partners.
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