It’s always been easy to align compensation with performance in sales roles because performance is typically dictated by new accounts and increased revenues. The greater issue for an agency is aligning compensation for other employees, such as creatives, on a plan based on the individual's performance and value to the agency.
I don’t know how many times I’ve had an employee come into my office and ask for a raise because some guy down the street makes more than he does or because he has been there X amount of time.
We live in a time of analytics and proving worth or ROI to our clients, so we should be able to apply similar ideas to employment. Entitlement is not a good enough reason for an employee to get a raise, and he should be able to get a higher rate of compensation based on the value he brings to the agency.
Over the years, our agency had unknowingly created an environment where some employees were undervalued in regards to the money they made versus the value they provided, while at the same time other employees were overcompensated based on factors such as seniority that don’t always relate to the quality of the work they performed. I doubt we are the only agency with this issue.
I wanted to level the playing field by paying our employees what they deserved.
But we needed a new system. We revamped our compensation plan and provided salary growth opportunities to those who were showing improvements and contributions in critical areas we felt aligned with our company’s vision, mission, and values.
We started by identifying the most important aspects for success in our mission: The client is greater than the agency, and the agency is greater than the employee. We write this internally as C>A>E.
The client comes first, the agency is next, and the individual comes last. Without clients the agency couldn’t exist or continue to function. Without the agency, the individuals wouldn’t have jobs. If employees do what’s best for the agency, which is also doing what’s best for the client, they ultimately do what best for themselves.
The focus on client, agency, and employee allowed us to come up with four key points to review when evaluating employee compensation:
- Client satisfaction grade (A to F) for the team assigned to the account
- Client deadlines missed or made
- Marketing contribution to grow the agency
- Individual employee development
Because clients are the most important, we based half of our evaluations on them. Based on a survey we sent our clients, missing a deadline was the thing that upset them the most and was the main cause for being dissatisfied with a vendor’s performance. As such, the first two points are based on satisfaction and meeting deadlines.
The third point is based on the contribution each employee provides to the health of the agency. Everyone at our agency writes blog content and launches marketing campaigns for the agency itself.
The fourth and final point is based on the individual’s personal development on his career path.
Compensation is typically only connected to the individual’s own performance, which makes it hard to grade in an environment that’s highly focused on teamwork. In an effort to create team accountability, we tied the two client-focused points (No. 1 and 2) to any team that’s assigned to that client or to that client’s projects. If the team fails, every person who touches that client or one of their projects will receive poor marks during his quarterly review. This means that employees need to help each other to make sure deadlines are met. This is similar to team projects in school where everyone on the team gets the same grade.
We decided that we should only reward above-average performance so we can continue to be an above-average agency. We broke down the different levels of compensation increases like this:
- Rock Star – 8.25% Raise Annually (2% Quarterly)
- Above Average – 3% Raise Annually (0.75% Quarterly)
- Average – No Raise
- Below Average – Termination
The criteria for Rock Star is an average “A” client satisfaction rating for any clients the person deals with that quarter, zero deadlines missed on any team projects he is a part of, at least one internal agency campaign launched to improve the firm’s marketing, and taking one step forward on any of the areas in the 79-point career development chart we developed.
Those who show above-average performance earn an average grade of “B” in their client rating. They must not miss more than 90% of their team deadlines, they must launch a campaign, and must have made a move forward on their career path.
And finally, those who do average work get an average “C” rating from clients their team has worked with, will have at least met 80% of their team deadlines on any projects, and must have launched a marketing campaign. They may or may not have made a step forward on their individual development path.
Since implementing this structure, we have seen people working more closely together on projects and collaborating to make sure their group ratings are as good as possible so they can all succeed together. We have seen customer service and the "care" for the client increase since our employees know we will be asking our clients to give us a high grade on performance every quarter. We have also seen employees better themselves (get certifications, learn new skill sets, etc.) to move forward on their career development path. And everyone is helping to market the agency and bring in new business, which is helping to build his job security.
Now, when employees come into my office to discuss raises, they clearly know well in advance of their review if they are getting a raise or not and by exactly how much based on their performance. This gives them control over their growth financially based on the work they did the previous quarter. No longer are the “best of the best” being undervalued -- these employees see an increase in pay every 90 days, while those who do less than average work are slowly phasing themselves out of the agency.
If you want better performing employees and a more successful agency, then you need to consider how you are measuring your employees and the growth of your agency. Measure and track the actions you want to see, and reward people based on this, not some arbitrary formula.