Agency Performance

Blood, Baseball & Business

What Motivates Championship Team Performance?

The Cleveland Indians are a high performance team that continues to give their blood, sweat and tears this postseason. Fans are acutely aware that the close-knit brotherhood keeps their sights on the bigger picture: Winning the World Series – for the first time since 1948.

Like our beloved Cavs, ending a championship drought brings rich emotional reward, recognition and pride for players to share with the Cleveland faithful. Good feelings flows generously, not unlike the celebratory autumnal beer on tap across Ohio’s many craft breweries.

Importantly, economic rewards follows. After winning the World Series in 2015 the Kansas City Royals players split 25.6 million in bonuses. Championship sports teams elevate local economies.

Potential reward for winning performance is a major factor that inspires compelling effort in baseball, and in business. The same motivators apply to advertisers working with their advertising agencies, forging teams to collaborate and build winning brands.

Let’s Get Real

With 2017 a blink away, it’s time to budget for meaningful reward systems that inspire championship performance within our marketing organizations and in partnership with agencies.

Many companies (and agencies) espouse mantras intended to inspire team behavior. Former IBM Chairman Lou Gerstener writes in the Wall Street Journal, “Look inside these companies and you will learn that a common vocabulary does not lead to common behavior.”

He argues that employees don’t do what you merely expect them to. He recognizes company culture, a “derivative of behavior”, is shaped by what one measures, with compensation playing a major role.

Gerstener contends that the cumulative effect of compensation, performance measurement and recognition shapes what we accomplish together, and our corporate culture merely reflects that.

The same thinking extends to the way companies engage their ad agency resources. Most positive company-agency relationships we see include a fair dose of recognition reward. Some include planned efforts for formal performance measurement; few include reward-based compensation systems that bonus agencies for big wins in the marketplace.

The First Step is the Hardest

Most compensation arrangements companies have with their ad agencies are fee-based and reflect an agreed upon scope of work. Estimates are rationalized by the assumption of hours it takes to complete the work. Not much rewards the agency for delivering exceptional work above business goals, or sooner than planned.

Within the industry, incentive-based compensation plans are few and far between. Successful ones are organized around the metrics that mean the most to clients. Yet the carrot-like bonus often equates to less than 10 percent of total agency revenue. Ambiguity clouds what performance effort is viewed as expected, and what business results represent the proverbial grand slam.

Change is on the horizon. Mega-advertisers with buying clout, like McDonald’s, continue innovative (albeit controversial) design for integrated client-agency teams to work on common performance goals. Compensation upside is tied to mutual success. McDonald’s CMO Deborah Wahl articulated during Advertising Week 2016 what every CMO experiences during a company’s annual budget season. Referring to agency income, she explains,

“I don’t think anyone’s budgets can go up dramatically unless their sales go up dramatically. We’ve got to get a lot smarter.”

Other innovations to performance incentive models do exist. Some agencies are financially incented by clients for better ways of working. Duffey Petrosky, a fast-growing, fully integrated agency outside of Detroit, has clients that reward the agency for performance optimization.

“We find some client procurement personnel open to compensation incentives in the form of ‘payment for value,’ explains President Jeff Scott. “Especially with complex work, extended timelines and significant metric goals, if we accomplish what they want accomplished sooner than planned, we receive above and beyond financial rewards.”

Winning Plays: Simple to understand, difficult to execute.

With continued scrutiny on marketing ROI, agency performance management systems are a means for marketing leaders to demonstrate accountability internally and, heeding Gerstener’s advice, impact a desired culture of performance.

Rojek advise its clients to architect an incentive-based agency compensation program to benefit each party. For starters, the dialogue should include:

  • Corporate culture, shared values and desired ways of working together
  • Clear definition of agency roles, responsibilities and scope of work
  • Specific Metrics to measure goals, supported by quality data reporting systems
  • Periodic advertiser/agency performance 360 assessments, with continuous improvement

Pitch Perfect

The powerful elixir of incentive-based reward systems, with both emotional and financial components, can inspire employees to align, dig deeper, try harder. With their eye on the prize, people bond with tribe-like culture, working as one team, with one goal. Mutual success usually follows.

The thrill of winning something very special together can inspire championship performance in all of us. This can happen anywhere (and this year, the stars may align for Cleveland).

Photo cred: Nathan Denette/Canadian Press, Oct. 18, 2016