Remuneration: What's Next Now for Agencies - 4As

Rethinking Workflows

Remuneration must follow value. Hours remain useful internally for understanding cost, capacity and profitability, but they are an increasingly poor measure of what an agency’s contribution is worth. Cost informs the agency; value should help determine the price.

That does not mean replacing one model with another. There is no universal successor to hourly billing. Agencies create different kinds of value for different clients, and the right commercial model will vary by agency, assignment and relationship.

The 4As believes agencies should independently assess which compensation models best fit their services and develop a clear pricing philosophy of their own where they create differentiated value, determine how they price it and where their commercial boundaries lie.

Agencies should bring a clear point of view into client conversations. Co-creation is ideal, but agencies should be prepared to lead when clients do not.

The future will likely require a broader remuneration toolkit, sometimes using multiple models within the same relationship.

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Incentive compensation is one important tool, not the destination.

Where an agency can materially influence a measurable outcome, it should have an opportunity to participate in incremental value, vs. an all-or-nothing compensation model. And if an agency decides to put a portion of its revenue at risk for the opportunity to gain a further reward, it should be a portion of the anticipated profit on the business.

Greater accountability requires greater visibility and influence: shared KPIs, access to the business data required to measure them and sufficient agency control over the outcome are prerequisites—not optional extras.

AI makes this shift more urgent in two ways.

First, it further weakens effort as a proxy for value. AI is relocating agency value away from production and toward judgment, orchestration, systems and the ability to combine human and machine capabilities effectively.

Second, AI may change the agency cost base itself. Agencies have so far absorbed much of AI as a cost of doing business, but the economics of AI infrastructure are still evolving. If computing, energy, infrastructure and regulatory costs rise, agencies will need a clearer understanding of which AI investments are simply operating costs and which enable differentiated capabilities, IP or offerings that should be valued and monetized differently.

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That does not mean charging clients simply for using AI.

The opportunity is to identify what AI makes possible: better intelligence, faster and sharper decision-making, proprietary capabilities, new products and stronger client outcomes and overall impact for the brand. Agencies should evaluate whether any of those capabilities can be productized, but productization is an opportunity—not a mandate.

The larger reset is about language. Agencies need to become better at articulating their contribution in terms clients recognize: business and marketing value, not just hours, utilization or campaign delivery metrics.

Where value is measurable, agencies and clients should establish shared KPIs and shared visibility into the data that supports them. Where it is not directly attributable, pricing can still recognize expertise, strategic importance, complexity, IP and other value factors.

Ultimately, remuneration must work economically for both sides. The goal is not simply to increase agency fees or transfer more risk to clients. It is to ensure that the commercial model recognizes, through compensation, the value the agency creates—and gives both parties an incentive to create more of it together.

"If we're brought in in more of a consulting capacity and as a true partner to solve business problems and to build what the business looks like in the future, I think that's where we provide the most value."
Liz Vance
iProspect
“The agencies that will thrive are the ones that treated their commercial model as a product to redesign, not as a legacy to defend."
Bruno Gralpois
Agency Mania Solutions
"We really want to be paid for the thinking and partner on the doing, but we don't have to be the doers anymore."
Amanda Forgione
Morrison Agency