March 9, 2015
I embarked on the topic of performance-based agency compensation because I was getting A LOT of questions about it. Mostly, folks wanted to understand how to structure it.
As I set out to answer that question, I uncovered a topic that is probably one of the most hotly debated topics in the industry. People are passionate – on the agency side, on the finance side, on the procurement side, and on the marketer side. Everyone has an opinion.
So, instead of doing a straightforward report on how to structure performance-based compensation, I took a step back to dive into whether performance-based compensation is actually achieving the desired results – which is better performance from agencies.
I found that:
- Performance-based compensation, as it is most commonly structured and applied, is being used as a stand-in solution for a much larger issue – the fact that CMOs are having a very hard time measuring and explaining the impact of their agencies' work on ultimate business outcomes.
- Adding financial incentives to agency contracts gives organizations a way to measure the impact of agency work and assign that impact a monetary value.
- These organizations are not getting better work from agencies because of this. And by using performance-based compensation as a motivator, they are missing an opportunity to truly motivate their agencies.
Read It’s Time To Abandon Performance-Based Compensation to find out more about how these compensation deals are structured and the ways that a performance-based compensation deal can be mutually beneficial to both marketers and agencies.
A special thank you to Jim Nail who lent me his brain and editing expertise and to Liz Perez for all of her work.
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