Just Say “No!” to Pay for Performance PR Programs

Just Say “No!” to Pay for Performance PR Programs

By: Jordan R. Chanofsky, Fusion PR President & CEO

Some would have us believe that we are entering into a new world of innovative payments and programs of unprecedented creativity in our marketing world. No doubt, ‘new’ and ‘creative’ are good words. They represent a challenge to the system and a fresh perspective for improving the status quo. But not all change is productive and not all challenge is healthy.

Public relations is still a relatively young industry compared with many others. Implicitly therefore, we in PR should be prepared for some of the more unpredictable and extreme quantum jumps in everything from media to metrics. Some of this transformation will produce more effective ways of communicating and more comprehensive client relationships. Some will simply muddy the waters for a while, create some level of aggravation and then be cryogenically stored away again until those who had not been part of the earlier experience resurrect them. And nowhere do we find more varying opinions than in the area of agency billing and pay-for-play PR.

Pay-for-performance billing is one of the ugliest beasts in the industry and every few years someone insists on attempting to undermine the well established practices that have protected the interests of agencies and clients. Such time honored billing methods, including retainer and hourly fees, have made it possible for agencies to thrive on the success of their work and be rewarded for their efforts, which go beyond hits.

Perhaps it is best to describe the problems with pay-for-performance billing in order to understand the benefits of alternative mechanisms.

1. We’re Not Used Car Salespeople: PR (when done right) is a practice of counsel and strategy, intellect, education and hard work at selling ideas. Notice, that the selling part came last and does not stand alone. Like attorneys, engineers, architects and accountants who are paid for the hours that they work regardless of whether they win the case or save more or less money on tax returns, PR professionals are paid for their counsel and work. Many factors go into getting press and there exist an equal number of reasons as to why a reporter may decide not to cover a story and have nothing to do with the agency, client, product or service. People who look for success as measured solely by the number of ‘hits’ they get turn PR into used car salespeople closing deals at any cost.

I was formerly an electrical engineer and physicist and joined the PR field with the goal of building a practice based on intellectual rigor. We make positioning, and messaging, branding, analyzing, researching, strategy and the quality of the outcome as much part of our effort as the media itself. I am offended by anyone else who belittles the field with even a hint of professional erosion.

2. The Performance Paradox: Some ideas sound great at first blush and then fall apart in the implementation. When client and agency come together to adopt a measurement guideline in a pay-for-performance environment, they begin to realize the pitfalls immediately.

Imagine the questions…which article is worth how much? Is a good article in a trade publication worth the same as a somewhat balanced-negative article in the Journal? And what is a good or bad article? If a competitor is mentioned first but the main portion of the article covers a client, is this a good outcome (this happens to be one of classics that agencies run into after the fact)? If it’s a great article on the worst page in a publication, is that going to yield the same pay-performance reward that the same article as the centerpiece of the publication would? How many times should the client name be mentioned before the agency gets paid as a special-bonus pay-performance? If the reporter ends with a statement of caution or warning after a great article about the client does that reduce the payout by, say, 20%? What if one article that’s deemed negative comes out at the same time as one that’s seen as positive, then is it a wash? Do you see the problem? It is an endless, painful, relationship-destabilizing, short-sighted paradox.

3. The Double Standard: Assume for a moment that somehow all of the clever minds of the world were to attack this problem of mapping out payments versus performance and solve it. Then should we assume that when all goes well the client will pay what they are supposed to pay (listen for the buzzer because it’s sounding off) the answer is NO! This client-agency relationship will work just fine (under my hypothetical and completely unrealistic assumption keep in mind) until the agency actually produces a hefty truckload of top media in a month and the client is faced with paying three or four times the bill that they had budgeted. That’s where it all goes to hell in a hand basket. Frankly, it’s a dead end street because the agency will very likely either over perform or under perform, something not suffered by hourly and retainer fee relationships (they can under perform but not over perform).

4. The Agency Killer: One of the most dangerous aspects of pay-for-performance is that it puts the agency at high risk. I’m talking about people’s lives, careers and the existence of the agency itself. Why is this so? If you run a business you must have some level of revenue predictability. Notwithstanding the realities of life which make forecasting accuracy an oxymoron
, some reasonable forecast is acceptable. Performance pay means for the agency that there is no predictable revenue for the any period of time into the future. It also means that the agency won’t be making any money for months into the future taking into account, startup activities (such as strategic activities, messaging, media training and so on), publishing turnaround and client payment terms. It could very realistically mean that the agency is not going to be paid for 3-6 months. It also does not assume any conflict with the client over media success evaluation, something that the agency will face sure as the sun will rise and set.

So…what might agencies practicing pay-for-performance do to mitigate this risk? They might hire freelancers who might accept and arrange for payments in arrears. They might bypass important up-front strategic steps in order to get to the result stage faster. They might accept a higher level of debt to cover months prior to which they are not paid for the performance they supposedly have not yet achieved. I also imagine them to be very intense, irritable, unhappy people to work with as a result of the uncertainty and additional stress that they’ve accepted upon themselves. If agencies are put at risk and forced to exist in a frenetic state it is then bad for the clients too.

Clients want profitable, satisfied, stable agencies because that means a driven, open minded, creative, and determined partner on their side that, oh by way, will be around in a few months. I, and may many of my colleagues consider the pay-for-performance players to be naïve and often are startup agencies looking for a way to get attention. Nothing wrong with that, but for the fact that their practice interrupts the good flow of an industry that is still growing and thriving and puts good people and solid agencies at risk of having to accept something that is inherently flawed and high risk. If clients start to ask for performance-pay en masse, agencies will be forced to succumb to it for a period of time until everyone sees it for the pitfall that it is but during which the quality of the industry and its people shall be compromised unnecessarily.

Note that nowhere in the above have I said that, both as an industry and at the agency level our feet should not be held to the fire when it comes to performance. We make setting goals and tracking performance a critical part of every program; this typically involves effort up front, as well as periodic reviews and adjustments. The point is, “pay-per-clip” programs might cause the industry to scrimp on activities not immediately tied to generating results— e.g. general corporate communications– to the detriment of the programs and our client sponsors.

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