Agency Bonus Structure
The Agency Management Institute provides detailed guidelines for agencies on structuring bonuses. Unfortunately, actual bonuses as structured by marketing agencies, nor how they are calculated, are available in the public realm.
- The Agency Management Institute (AMI) states that agencies should have a bonus program that serves the agency every single day, whether the agency pays out any money or not.
- AMI teaches a specific bonus program based on AGI (Adjusted gross income). AGI is the only money agencies actually get to spend — so that’s the only money that matters in calculating bonuses. AMI recommends setting a monthly AGI goal and that should be the first number a team has to reach to be eligible for any bonus money to be paid out/banked for a year-end pay out.
- AMI’s suggested process in calculating AGI was to subtract COGS from gross billings. What’s left is the AGI, which is usually spent on three things:
- Salaries (including all costs related to having a person on staff, such as benefits, payroll taxes, and perks.
- Overhead including rent, supplies, travel, entertainment, insurance.
- Profit which should be divided in four equal parts:
- The AMI then gives specific calculations for four quarters from a sample agency.
We began our search looking on the web sites for mid-size marketing agency web sites, such as Glytch, Primacy, and Saffron Brand Consultants. All have between 50-100 employees and had revenue between $10-$50 million in revenue. We found no information on compensation structure. Next we researched LinkedIn, Glassdoor, and Indeed looking for job postings for senior leadership at marketing agencies. While we found job postings, there was no mention of compensation in any of the job postings.
We searched the business press, including Forbes, Business Insider, Wall Street Journal and other business websites, looking for articles written by industry experts. There was no information about bonuses for mid-size agencies of any sort. We then turned to academia to determine if there were any research studies in this area. While there were some studies in other areas, such as German chemical plants, there were no studies on marketing agencies.
Finally, we checked the Agency Management Institute. While they did not have specific information on actual bonuses paid, they did provide a comprehensive discussion on bonus structures and the program they teach for advertising agencies on that topic. A short synopsis of that information is presented in the key findings and the full content is available here.