There. I said it.

The traditional agency compensation model of charging clients based on a cost rate and estimated time requirements is broken. It is based on the faulty premise that somehow effort (time) equals results. Not only are they not equal, they can often run counter to one another. And until recently, just about every agency in the country was doing it.

So why is it so wrong? Agencies are getting paid for getting things done, right?

I would suggest rewording the latter to say that yes, agencies are getting paid for doing things. But there’s no incentive (or accountability) for being successful in the things they do. This is the stuff that has always driven clients nuts because their jobs are on the line if they’re not successful. Agency jobs typically aren’t.

They’ve always gotten paid the same whether a project or initiative was successful for a client or not. Thanks to blended rates, the critical thinking and strategic work we do appears no more valuable than banging out mechanicals. And how many times have agencies had to quietly scale back resources or put fewer (or more junior) teams on projects just so they don’t go over the estimate?

If you can explain how this is good for a client’s business, I’ll explain nuclear physics.

The net of it is agencies need to be more accountable for the work they produce. Compensation agreements should work to align clients and agencies, not put them at odds. That’s the only way they’ll get, and see, the full value of a strong agency partner.

It’s called shared success.

The truth is, it’s not that hard. But we must be willing to break with convention to make it happen.