Agency Bonus Structure

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Agency Bonus Structure

Types of bonus structures generally available for senior leadership in mid-sized U.S. companies include annual individual bonuses, performance share bonuses, and profit-sharing bonuses. There was, however, no direct information or figures on bonus structures of specific mid-size marketing agencies in the U.S.

Annual Individual Bonuses

  • This type of bonus is a cash incentive given to individuals after achieving set annual goals. This is the most common bonus structure.
  • For senior management, these bonuses are typically implemented after achieving performance goals like surpassing set profit goals, threshold goals like maintaining a 90% success rate in customer service or maximum goals like netting the biggest client in the market.
  • For senior management, such as CEOs and CFOs, these individual bonuses can skew upwards to 30% and 20% of their annual salaries respectively.

Performance Sharing Bonuses

  • This type of bonus is an incentive, cash or stock, that is guaranteed if specific targets are met over a 3 to 5 year period.
  • For performance shares paid in cash, industry standards recommend that these bonuses are set as a percentage of senior management's base salary. They are akin to longer-term annual bonuses.
  • Performance shares that come in the form of stock compensation are awarded to senior management executives after set organization-wide performance goals are met, for example, earnings per share targets.
  • Performance shares are typically used to incentivize senior management to prioritize company activities that will realize profitable shareholder value.

Profit-Sharing Bonuses

  • This type of bonus structure involves giving employees a predetermined percentage of the company’s quarterly or annual profits.
  • Typical industry bonus percentages range between 2.5% and 7.5% of payroll but can go as high as 15% for senior management executives.
  • This is used to create a sense of ownership in the company, which serves to motivate employees to work even harder to achieve organizational goals since they own a stake in the company.

Additional Helpful Information

  • In 2018, about 80% of CEO compensation was tied to bonuses.
  • This 2018 survey found that the majority of mid-sized marketing agencies interviewed had no predetermined strategy as it pertained bonuses. 72% of the companies based their bonus decision-making on general factors as opposed to a predetermined list of criteria.
  • In 2018, total direct compensation increased by 3.6% and 3.7% respectively for the 2 top senior management executives; CEOs and CFOs.

Research Strategy

To establish the different bonus structures employed by mid-size marketing agencies for senior management, your research team began a web search for information on marketing agencies. The top 5 mid-sized agencies identified cut across advertising, branding, digital and full-service marketing. They include Smartsites, Jacob Tyler, REQ, BayCreative, and GKV. All these companies have between 50-100 employees and had estimated revenue between $10-$50 million. Our search did not yield information on any direct compensation or bonus structure.
We then searched job postings on verified websites such as LinkedIn, Glassdoor, and Indeed for senior management positions in these mid-sized companies, to ascertain compensation. While we found job postings, there was no mention of compensation in any of the job postings, much less on bonuses.
A search for mid-size marketing agencies’ bonus structures yielded some useful information, but it was not specific enough. The information gave a general view of the industry, with helpful information that does give insight into the bonus structures employed in mid-sized companies and marketing agencies, but nothing was specific to a particular company.