Agency compensation is a hot topic today. An industry that grew up on the billable hour has been looking for a new remuneration model for years, unsuccessfully for the most part.
Some agencies want to tie compensation to performance. Others, like BBH New York, are willing to barter. For example, the well known creative agency recently accepted 12,000 cans of PBR as payment for work on the brand’s new hard seltzer.
“We really wanted to work with them [and] wanted to prove ourselves and just thought it would be a fun perk for the agency, really,” Alex Monger, BBH New York’s business director, told Ad Age. “So we calculated how many beers could possibly be drunk in the office, over our happy hours and parties and whatever else, and suggested that number to them, and they were very happy to do that.”
“I am not saying getting paid in beer is the future of agency remuneration models,” Monger says. “But I do think there is something where the old paying by the hour thing is so outdated. We are always looking with all of our clients on how we can get paid differently, be it performance-related bonuses, or based on the value of our work. Or in beer.”
For what it’s worth, the market value of 12,000 cans of PBR or 400 30-packs at just over $20/per pack equals $8,000 give or take. The brewery’s cost to produce is significantly lower. When you look at the story from a financial POV, it makes no sense. The Ad Age article mentions that more business with PBR is an outcome of this effort, but picking up projects from PBR won’t keep a NYC ad agency afloat for more than a few minutes. I haven’t been to BBH’s offices, but my wild guess is their rent costs $8000 per week.
Getting Paid Fairly Can Be A Challenge
Business development pros and creative people who run small firms (and therefore wear many hats including the rainmaker’s) all know how important it is to negotiate a fair contract upfront.
In this business environment ownership of the creative product should be revisited. We should at least have a conversation about it, talk about the pluses and minuses. Some of the newer compensation models involve agencies and creatives maintaining ownership and leasing work out.
— Derek Walker (@dereklwalker) August 23, 2019
I agree that the ad industry needs new answers that lead to economic well being for all. At the same time, I wonder if our peers in medicine, law, accounting, or consulting are also backing away from the billable hour. If they are, I haven’t heard about it.
The more I puzzle over the problem, the more I think that the billable hour is not the true problem. The real problem is advertising that moves people to buy isn’t properly valued by the bean counters of corporate America. Great advertising gets people to like or even love a company, and the process can sometimes take years. A visionary CEO or CMO knows to trust the investment in creativity, but even with this knowledge, the pressure to meet quarterly projections and get buy-in from the Board of Directors is huge.
Until advertising is seen as a must-have and as essential to a company’s success as staffing, manufacturing, quality control, sales and the like, the ad industry is fighting an uphill battle. On the other hand, when and where there is proof that an ad campaign or series of campaigns created real economic value for the client, then a simple business conversation can be had.