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Five Reasons Agency Compensation Should Not Be Relationship Based
| Guest post by: Darren Woolley |
Article Overview: Don't get me wrong, measuring and managing a high quality relationship is important between agencies and marketers. But at the ANA Marketing Financial Management Conference last week in Phoenix, Arizona, there was a presentation by Sarah Armstrong on Value Based Agency Compensation.
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Free Download - The Important Distinctions Between Relationship, Collaboration and Performance Benchmarking By Darren Woolley |
Five Reasons Agency Compensation Should Not Be Relationship Based
Don't get me
wrong, measuring and managing a high quality relationship is important between
agencies and marketers. But at theANA
Marketing Financial Management Conferencelast
week in Phoenix, Arizona, there was a presentation bySarah Armstrongon Value BasedAgency Compensation.
In this Sarah
presented that one of the four measures used for determining the agency
incentive is a relationship / performance score card. This is the same approach
we have been promoting with our clients with a system that uses Soft, Medium
and Hard criteria. (See below for more details on this)
Our experience
is that the linking of the performance score card or relationship survey to the
agency financial incentive or bonus is that it can have little or no effect or
in the worst case scenario a negative effect.
1.
Focus on the score not the cause:The use of a score card system or the relationship measure will
have the agencies obsessing about what the score is more so than what is the
underlying cause of the change in score. This is often because many systems
will provide a score with little or no commentary to help identify the root
cause. Likewise marketers will often feel more comfortable giving a score that
providing what can be confronting feedback or criticism.
2. The
criteria and metrics can drive unwanted behaviour:We have seen score cards and questions that focus on creating a
smooth, non-confronting relationship. In doing so the process is actually
making the agency compliant to the marketers requests rather than encouraging
the agency to challenge the thinking. The ideal strategic partner is one that
provides an alternative view and strategic insight, while a supplier is simply
one that provides what is requested without question.
3. The
metric becomes the end not the means torelationship management:It sometimes appears that relationship and performance measures
were linked to incentives and bonuses to make them more meaningful. And certainly
the agencies have a high motivation to get the score, but unless the process is
seen as valuable in its own right then the score and the incentive become the
end of the process rather than the beginning of the discussions to foster
improved relationships and working practices.
4.
Leads to a focus on the scoring methodology and not the outcome:We have seen agencies waste hours questioning and pulling apart
the methodology because they have a motivation to maximise the score rather
than focusing on the process of improvement. All of these systems are
subjective because you are dealing with perceptions from multiple individuals.
In regards to the methodology,apart
from the fatal flaw of self-assessment used in many system, it is more
important to use these systems to set the agenda of relationship management and
improvement.
5. Both
agencies and marketers reap the benefits of successful, functional
relationships:Time again the benefits
or creating and managing highly productive and successful relationships have
been demonstrated for both the marketer in greater output and productivity and
the agency in longer term, stable more rewarding engagement. Therefore why do
we feel the need to provide a financial incentive on top of the inherent
benefit?
Since dropping
the recommendation of including a relationship metric in the agency incentive
we have seen many marketers and agencies argue for its inclusion, not because
of an inherent benefit, but because they cannot agree on a suitable medium or
hard metric.
It appears to
be a much softer, easier, subjective default metrics than one of the more
objective, relevant and accountable marketing or business metrics.
What has been
your experience?
Business
Performance (Hard)
Examples
include: sales, traffic, profit, market share, volume growth, etc. These can be
measured by the same criteria that the advertiser uses for their internal bonus
systems.
Agency often
claims that business results may not be within their ‘span of control’ as many
factors besides advertising can affect business outcomes.
Advertising
Performance (Medium)
Examples
include: product awareness, ad awareness measures, consumer measures, attitude
ratings, persuasion, purchase intent, awards, brand equity, image,
effectiveness awards, etc.
This kind of
performance assessment is vulnerable to research technique, statistical
anomalies and discussions of creative ‘philosophy’.
Agency
Performance (Soft)
Relates to the
evaluation of agency functional areas: account services, creative and media in
terms of: performance, service, relationship, cost efficiencies, etc.
This is highly subjective and may be affected by ‘entertainment’ on the upside
and personality problems on the downside.
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About the Author: Darren Woolley RSS for Darren's articles - Visit Darren's website During his 15 years as a writer and Creative Director, Darren developed brand and business communication strategies for a broad range of organisations. He was Creative Director at J Walter Thompson and President of the Melbourne Art Directors' Club for two consecutive terms. In 2000, Darren founded TrinityP3, Asia Pacific's leading strategic marketing consulting company with an international network of more than 30 industry professionals helping people to achieve commercial purpose through creative process. What that means is he leverages his extensive knowledge of the marketing and advertising industry, to help advertisers achieve maximum value from their budget by providing cost benchmarks, industry best practice knowledge, training and independent third party advice on agency selection and remuneration, media planning and buying, digital, direct and interactive marketing, TV and print production and public relations. Now a decade on, TrinityP3 is at the leading edge of decision making in the marketing and advertising industry that spent over $200 billion in 2009 and their client base includes more than 50 of the world's top 100 advertisers, with offices in Hong Kong, Singapore, Sydney, Melbourne, London and Wellington. With his background as both scientist and Creative Director, Darren brings a unique sense of process combined with creative purpose to his work. He has regularly been named in Australia's AdNews Power 50: The Most Powerful People in Advertising since 2005 and is a regular industry commentator contributing to numerous trade magazines. Click here to visit Darren's website   The Importance of Strategic Marketing Consulting in Marketing Vendor Management Increased Marketing Efficiency Can Be Delivered Through Regular Process Benchmarking Selecting the Top Advertising Agency for your Business Depends on the Metrics you Measure Increasing Marketing Supplier Performance Through Business Strategy Alignment Selecting The Right Advertising Agency Is Dependent On Access To A Comprehensive Agency Register |
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