O f late there’s been considerable chatter about a recent Ad Age article on “new” thinking around how agencies should be paid for their ideas or media content they create – as opposed to pay for hours of labor. Other pundits in the PR space have also weighed in on the subject with assorted thoughts on linking payment to editorial media placement results. The notion conveyed is that motivation to succeed is supplied to the agency by taking a gamble on partial or full payment of fees against delivered results. Sounds good on face value to some I’m sure – but this along with other current hourly rate schemes works to heap more commoditization on an increasingly commoditized business. We hasten to add editorial media is just one tactical component, but surely not all of the value we provide to clients.

Certainly, pay-per-hit would be an interesting alternative given that the power of editorial media is found in the very fundamental and uniquely American notion that the “not for sale” sign looms large around the perimeter of an editor’s office – this makes the whole placement process organic and not transactional – a.k.a. harder to get.

If agency fees were tied to editorial media hits, what are we saying to clients about what we provide? Should we hire Casino pit bosses as account directors to help settle on relative risks going in about “placement worthiness” of a story idea and then set the odds bar for payouts based on top box placements like the Today Show versus community newspapers? Are we media gunslingers whose compensation should be set against “PR-by-the-pound” objectives? I hope not. What business are we in anyway?

What in the end constitutes fair value for the services served?

The standard model in the PR business that’s been around for decades is hourly billing. Rates generally configured around a productivity model of 1,500 to 1,600 billable hours per year, divided by salary and then multiplied by a factor to cover overhead and profit. However, unlike the predominant equation in the legal world where most client relationships are based around specific projects/issues/needs that come and go, our business is fundamentally geared to creating long-term partnerships with clients that immerse the agency in their business issues on a day-in, day-out basis.

In our view the hourly model is a dinosaur that, by definition, works to commoditize what we offer and operates subtly to undermine the deep dive relationship we should be creating with clients. If we were in the arms and legs business then hourly rates might be appropriate. Or if we define ourselves as media placement tacticians, then perhaps the dice roll model is best. Or perhaps it should be no to all of the above.

Client brands are facing an era of incredible and rapid change. More is at stake than ever before in the business of persuasion. As we’ve said before in this blog, today “everything matters” – every point of contact the world has with a brand matters. If we are to provide the kind of solutions that will truly build brands and businesses, then the answers must be strategic, holistic and built on insight. This level of thinking is best developed when agencies and clients operate in partnership at the highest and deepest level. We’re on the hunt for transformational ideas and paradigm-shifting answers that can help lead businesses to greater success.

Certainly there’s more going on here than just editorial media placement by itself or other mechanics of PR that can be purchased by the hour virtually anywhere. For our part, we base compensation on assets required to think, consider, research and reason as well as execute. We don’t bill clients by the hour. We don’t devote ourselves to timesheet-centric behavior. All budgets are based around strategic and tactical deliverables so clients know what they’re buying from us. But we don’t live by the clock – as that model not only works to prevent senior level brains being focused on a client’s business, but also takes the eyes off the prize for tactical outcomes. We think results are the goal – not the time required to secure them.

What’s helpful and important in this dialogue about compensation is this: ideas and insight are extremely valuable and should be properly compensated for. Agencies routinely give away their thinking in return for payment to execute. That’s wrong headed. Great clients understand when compensation rewards thinking as well as doing there’s much to be gained – and anything less than that may be playing fast and loose with company assets, because going through the marketing motions isn’t good enough anymore. Great ideas are table stakes. Compensation that encourages this kind of relationship can redefine that value equation of what agencies provide – and therefore what business we are in.