Compensation Redux: Cory is almost right...
Corporate earnings for quarter three have been reported over the last week or two and have reflected a rich mosaic of both boon and bane.
Investments in advertising, as they typically do, will trend with the company's prospective fortunes. Traditionally - though this is a mystery to me as to why - a company's investment in what is ostensibly a sales tool, tends to diminish when income is off. Why not spend more to try to sell more? I have never understood, but...
Be all of this as it may be, by and large, the market is doing all right and advertising is an endeavor being engaged in once more, and that means hiring marketing specialists, i.e. agencies. This then turns attentions to compensation for the services these entities provide.
In his column on Wednesday, Cory Treffiletti addressed the issue of agency compensation. Before going further, I suggest you read it here.
Though I agree with Cory's thesis that agency compensation models are in a dramatic state of flux, and though I think that the use of the professional athlete simile is accurate, as presented it is incomplete.
It is true that pro athletes are compensated based on performance benchmarks, but those components of compensation are in the form of bonuses, not base. There is still a "salary" being paid for services rendered that are prima facie indifferent to performance benchmarks.
This is how agencies, too, need to be compensated. There is an allocation of resources that is necessary in order to accomplish work for a client; the goals to be accomplished are what that work is designed towards, but it still costs money to do tasks that facilitate the achievement of those goals.
If a perfume client hires me to market a fragrance, and it turns out that the fragrance, once bottled, smells like dog-poo, is the agency held accountable for the product not selling and compensated according to those sales? I'd like to think not.
Among the biggest problems with the agency business today (aside from their spinelessness) is their inability to view themselves as being worthy of a client's respect. Too often they fall into the role of 'yes-man' to the client during the planning phase and the 'straw-man' if things go wrong. Getting respect requires acknowledging your own value to yourself.
Shooting for ONLY performance-based compensation structures is another sign that agencies, incapable of convincing their clients of value (and it can be argued that agencies, particularly the commodities-houses, don't demonstrate much value), are using compensation gimmicks to convince clients to stay with them.
I suspect that improved self-esteem, which will only come by having something to be proud of, will go a long way towards agencies being paid in kind for the work they do.