Put Your Money Where Your Mouth Is
I am a big fan of performance-based compensation models, not only for others, for myself included. And I was really excited to see a shift being pushed by a large corporation to promote performance-based compensation for advertising and PR firms.
Coca-Cola announced earlier this week they would promote “value-based” compensation for their ads/PR firms. Here’s how it works:
BEFORE: Agencies and Coke negotiate in advance how much profit the former will see on a given project.
AFTER: Agency is guaranteed only recouped costs, with any profit coming only if certain targets are met.
BEFORE: Agency decides what Coke should pay for a project based on the time it expects to expend on it.
AFTER: Coke tells agencies how valuable a project is based on strategic importance, whether other agencies could deliver the same outcome, and other factors.
In other words, you will recoup costs but if you exceed targets, you can get 30% profit margin in bonus.
How is performance-based compensation going to change things for the overall industry? It will force large ads firms who control the advertising market to put their money where their mouth is. Will it change things? Yes, it will force creative people to understand the idea behind value, targets, objectives and reality.
I strongly believe we should introduce similar systems for any employee in every company, but the importance of setting real targets and objectives is key.
Dakx
