It used to be that Madison Avenue, the Chicago Loop and Hollywood were the familiar haunts for clients. But these days, they're willing to explore less obvious places -- like, say, Nebraska -- to find the best partners to serve their marketing needs.

Unlike the "Mad Men" era, it doesn't matter where you're located, it just matters that you're smarter and faster -- and a dose of respect for clients doesn't hurt either. As Omaha-based Bailey Lauerman, a 74-person shop that's in the midst of a transition from a solid regional player to a forward-thinking national one likes to put it: "Our ideas are bigger than our egos."

That's just one of the reasons why Ad Age named the agency its 2013 Small Agency of the Year. This year's honor builds upon the shop's win last year as Midwest Agency of the Year. "Our clients appreciate the fact that we aim to be the best listeners in the room," said Bailey Lauerman Chairman-Chief Creative Officer Carter Weitz. "It's what's led to our success and theirs."

Those clients include AMC Theaters, Disney and Union Pacific. With their support, the agency is on track to increase revenue 7% in 2013 to $11.5 million. It's done so while evolving its compensation model from hourly fees to value-based compensation -- something that a lot of bigger agencies have paid lip service to for a few years but, for the most part, still aren't successfully pulling off.

Setting up such arrangements, as Bailey Lauerman has found, can be infinitely easier when you are able to prove your effectiveness to clients. And this agency does that in spades.

One of its most remarkable cases is for Union Pacific.

Potential Union Pacific customers saw it as a railroad company limited to tracks and trains, rather than the logistics company -- complete with trucks, ships and other technology -- it had become. So Bailey Lauerman led the way with the biggest national ad push the company has run in its 150-year history to specifically target new business. The cleverly crafted messages ran on TV, in major business media online and national newspapers to capture the attention of decision-makers and paid off. The move doubled new-business revenue generated from unsolicited calls in the span of eight months -- and did so without showing trains in the ads.

The shop is not just handling traditional brand work; it's creating new revenue streams, too. The agency launched a new brand at Bass Pro Shops, Oculus binoculars, which went from zero to sold-out in a matter of months.

And compensation models haven't changed for clients alone. Bailey Lauerman CEO Andy Fletcher, who was recruited from MDC Partners agency Fletcher Martin in Atlanta, has been devising new ways to manage talent and positioning the agency for the future. The agency believes that every staffer's skills and career trajectory are different so it has done away with agency-wide bonuses and tailor-made performance-based incentive salary plans for employees. Mr. Fletcher also installed a new management team and the agency, which had operated in two locations 50 miles apart, consolidated to one office in Omaha.

To help encourage idea generation, the shop holds what it calls "R&D Fridays" to spur the birth of new technology and software. By setting aside time for staffers to pursue passion projects that can turn into revenue-generating possibilities, Bailey Lauerman is also keeping staff happy. As hometown-hero Warren Buffett has said: "Without passion, you don't have energy. Without energy, you have nothing."

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CORRECTION: An earlier version of this article said a campaign by Bailey Lauerman doubled revenues for Union Pacific in the span of eight months. New-business revenue generated from unsolicited calls doubled in that time.