Why Performance-Based Agency Compensation Doesn’t Work

Sarah Sikowitz
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.

Please reach out for an inquiry if you would like to learn more. 

Categories

Related Posts