What is Fair Agency Compensation?

By Aaron Goldman, VP Marketing & Strategic Partnerships

As the head of new business here at Resolution Media, it’s my job to create mutually beneficial frameworks for relationships between us and our clients. Clearly, there are many variables that make up a strong client/agency partnership -- trust, expertise, thought leadership, access to internal/external resources, well-managed expectations, etc. However, in the business development process, there is one that always bubbles up to the surface and, for better or worse, often clouds all others -- fair compensation.

Just what is fair compensation? This has been a hot topic in the industry rags lately. 2 recent articles caught my eye and prompted this post. Ironically, they both appeared in the “Small Agency Diary” section of AdAge. Having seen Resolution Media go from small agency to big(ger) agency in a few short years, I can appreciate the plight of small agencies to achieve fair compensation. However, I can also attest to the fact that the issue doesn’t get any easier to solve when you’re a big agency.

In assessing various compensation structures, Tom Martin asks, “How long does it take to think a thought?” He notes that, during fee negotiations, clients often feel that the proposed services “just shouldn't, couldn't possibly take that long and cost that much.” To which Martin asks the afore-mentioned question and usually gets it turned right back on him. At which point, he asks if the client wants a big thought or a small thought. After going around and around a bit like this, Martin lands on the real question at hand -- “How much should a solid good ole thought cost? And should that cost be based on the time it takes to think it or the value the thought itself creates?”

Which leads me to John Barker’s AdAge piece in which he questions the validity of agencies being compensated based on hourly work. Cutting right to the chase, Barker points out that “agencies shouldn't be rewarded for mediocrity or penalized for brilliance.” As Martin might say, why should agencies get paid more because it takes them longer to come up with good, big ideas? Or paid less, because they came up with one in no time at all?

So how do clients and agencies achieve fair compensation? I’ll leave you with Martin’s perspective…

“So what is the right answer? There isn't one. Compensation is an imperfect science at best. The first step is for clients and agencies to learn to trust again. Clients need to invest in agencies and agencies in clients. We need to create compensation packages that underwrite effort and reward brilliance regardless of how long it takes. Clients and agencies need to recognize that four singles are just as valuable as a home run. We all need to rededicate ourselves to the core offering -- thought -- and ensure that the person or persons responsible for creating the really big, really valuable thoughts are justly compensated.”

Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships