Value-Based Compensation - Things to Check for

I was very interested to read Coca-Cola's plan to implement value-based compensation agreements with its agency partners.

On the one hand, there's a lot of merit to paying agencies relative to the success of their campaigns. Most other industries are compensated on the efficacy and efficiency of their work (think construction projects), and the fee or commission based agreements can sometimes (especially with the wrong kind of agency leadership) lead to a false sense of contentment, security and a lack of motivation to do the best work possible.

From an agency perspective, here's some things to look for and analyze when asked by the client to engage in a value-based agreement

•Trust. Be convinced of your client's trust in your agency and its abilities. The reason is that, just as some ideas will succeed, others won't. In a retainer system, failures don't have the same kind of financial impact. While sometimes inefficient, a fixed fee can also give you comfort in taking risks. Beyond reduced compensation, make sure you aren't penalized in your client's mind for taking educated, mutually agreed-upon risks. The last thing you want for your agency is to be walking on egg shells, trying to play it safe to make sure you meet minimal profit goals. That doesn't do anything except ensure that another agency will take a bigger, educated risk which will pay big dividends for your client, and, ultimately, them. If your client trusts your abilities, you'll jump right back into the mix with the same approach you had before.

•Understand the variables. Value-based compensation agreements can be very complicated when discussing what the agency can control vs. what the client can control. For example, if your agency delivers a campaign for a shoe store designed to increase floor traffic, only to have the store's poor customer service levels drive sales down, you shouldn't be held responsible. Even then, what happens to your compensation? The point is to make sure that key performance indicators on the client's part are at mutually agreed upon levels. Once you have those nailed down, you are left to your work being judged on its own merits.

As far as I'm concerned, there's no better way for your agency's work to be judged.

The type of people I want to work with

I've noticed a growing trend in the type of people I love working with. It lies around their reaction to ideas during brainstorms and client discussions. They are never immediately dismissive of any idea. Even if the idea thrown out makes no sense whatsoever, the merits are carefully considered and rejected based on sound judgment.

By not outright rejecting ideas (ESPECIALLY by saying "that's not the way we've done it before), further discussion often results in making the idea better or jumping off to different solutions.

I want to work with people who first ask how something can work vs. saying there's no way something can be done. I don't mind someone tempering an idea with words of caution...in fact you need those people. But there's a difference between "we need to make sure we have (x) to make this happen", vs. "that doesn't sound good, look at what you need to make it work"....what a buzzkill.

It's their connotation as much as it is what they're actually saying. Get those people out of the discussion and watch how much better you can stretch your ideas.

Two Great Lessons from Lincoln

I just finished reading Team of Rivals by Doris Kearns Goodwin. One of my personal passions is American history, and I was blown away by Goodwin’s portrayal of Lincoln’s assemblage and working relationship with his cabinet.

There were two critical lessons I was able to take away that have widespread application to those leading teams in our business.

1) The great communicators have the ability to distill complex issues in highly illustrative, yet easy-to-understand terms. Lincoln was surrounded in his cabinet by some of the most brilliant minds of his day. People who would walk out and win any world debate championship…provided the judges were all Ivy-league educated. Lincoln’s source of affection and resulting power came from the average citizen. While Lincoln’s speeches were heralded as utterly captivating in-person, the simplicity of his words when translated to print across the country were what won him national and worldwide acclaim.

The best communicators today often possess the same ability…take complex issues, simplify them, and offer a persuasive and equally simple solution

2) Many of Lincoln’s cabinet members despised each other, yet the two common bonds they all came to share were respect for their leader and an absolute desire to save the union. For all of their intelligence and thirst for power, none rivaled Lincoln’s uncanny ability to bring the best out of each person on the team in the interest of the common goal. Can there be a better definition of a team leader? Lincoln knew their personal motives, but was OK them so long as they coincided with the priorities he set forth. At the same time, he knew when the appropriate times were to deal with those who weren’t playing ball or were disrupting the team.

Many of us can relate to the idea of getting the best out of a collection of talented team members who are sometimes driven by personal goals and may not be in love with other members of the team. Yet, when presented with a goal everyone could rally around by a leader everyone respects, things tend to move in the right direction.

A good reminder for all of us that looking into our past can teach us all lessons we can apply today.