How agencies are adapting to the death of the timesheet

Brands are moving away from paying agencies based on hours and headcount, but agency leaders warn that new commercial models bring their own complications.

In a recent report, the World Federation of Advertisers (WFA) and Agency Mania Solutions found that only 17% of multinational companies now use labour-based remuneration as their standard model, down from 54% in 2011. Fixed-fee and output-based models have expanded in their place, while labour-plus-performance arrangements have more than doubled.

The shift is accelerating as AI speeds up production. Some 58% of respondents expect to increase their use of performance-based fees, while 36% plan to lean further into fixed or output-based fees.

This operational evolution is already reshaping agency structures, with holding company giants abandoning traditional silos, such as WPP’s push toward consolidated operating networks, to simplify back-end operations and offer better integration.

Don't miss: Brands move away from paying agencies for time as output models gain ground 

But as holding companies restructure to cut friction and AI speeds up execution, agency leaders told MARKETING-INTERACTIVE the core challenge isn't just working faster, it's  rethinking how value is defined when timesheets and simple outputs no longer tell the whole story.

Output and the AI gap

For media, the move towards outcome-based remuneration may be easier to make. Johnny Ng, vice president of marketing and growth at WPP Media Hong Kong, said media has been moving in this direction for some time, particularly because performance marketing makes it easier to connect investment to business results.

At WPP Media Hong Kong, outcome-based models can be tied to measures such as approved bank applications, hotel bookings, store visits or incremental retail sales.

"Output-based remuneration is a step forward from simply paying for time, but where we can, we want to go further and link our success to actual business outcomes," Ng said.

The latest WFA and Agency Mania Solutions research reflects this, finding that adoption of performance-linked models is highest across media-related disciplines. Labour-plus-performance models account for 41% of media planning and 34% of media buying arrangements, compared with 30% for paid social.

Even so, performance-based remuneration remains a relatively small part of overall agency compensation. Across most disciplines, between 64% and 80% of respondents said it makes up less than 20% of total agency fees, suggesting outcome-based models are adding to, rather than replacing, existing approaches.

For creative and social work, the connection between an agency's output and a business result can be less direct.

Chris Greenough, general manager and regional head of creative services at GrowthOps Asia, said there is still a role for time-based fees, particularly for ongoing support where scopes can evolve. Fixed fees can work when deliverables are clear, he said, while performance-linked fees make more sense when there is a credible connection between the agency's work and the measure.

However, that still leaves a question over what actually constitutes an output. "Paying per output isn't automatically fairer. It only works if the output is clearly defined," said Will Lee, managing director at That Marketing Guy.

Without clear boundaries, agencies can face multiple rounds of revisions without a defined point at which the work is considered complete, added Lee. The argument simply shifts from how many hours a job should take to what counts as an output and when the work is done.

AI adds another complication. As production becomes faster, the amount of time spent creating an asset becomes a less useful proxy for its value. For agencies that have traditionally sold execution, that could put further pressure on fees, said Lee.

The change is already affecting how agency teams work. Production may become faster, but agencies still need to manage more versions, align stakeholders and check quality. Some designers at GrowthOps are also building tools to automate parts of their own processes, Greenough said.

Brands should be paying not simply for the output, but for the strategy, creativity and experience that determine whether that output is the right one.

Jeffrey Lim, founder & MD, 8traordinary

The opportunity, he added, is not simply to produce the same work faster, but to use the time saved to raise the quality and ambition of the work.

For Jeffrey Lim, founder and managing director of 8traordinary, that puts greater weight on the strategic judgement behind the work. AI can accelerate production, research and execution, but the core value lies in identifying which problem is actually worth solving in the first place.

Understand strengths

As brands place greater emphasis on performance, the question is not only how agencies are paid, but how much of the eventual business outcome they can reasonably be held responsible for. 

That becomes particularly important when an agency's fee is tied directly to a result. Clients and agencies need to agree upfront on the outcome being measured, the data required to assess it and which parts of the process each party controls, Ng said.

An agency may be able to influence the channels it runs, the leads it generates and how quickly it learns, but factors such as product, pricing and the sales process sit outside its control. Clients also need to open up their data. "You can't hold someone accountable for a number they're not allowed to see," Lee said.

Pricing, distribution, customer experience, competitive activity and wider market conditions can similarly affect business outcomes without being within an agency's control. For Lim, the strongest agency relationships are built when clients understand the agency's strengths, provide clarity and allow it to do its job.

According to the report, agency relationships are also becoming harder to manage as scopes grow more complex. Some 36% of respondents said relationship management has become more difficult, compared with 12% who said it has become easier. More stakeholders, faster timelines and greater expectations around data, technology, integration and transparency are adding to that complexity.

Do you want a partner to help you navigate increasingly volatile conditions and build over time, or a transactional supplier judged on short-term results shaped by forces neither side fully controls?

Chris Greenough, GM, GrowthOps Asia

As commercial models become more sophisticated, however, a clearer contract alone may not be enough to resolve those challenges. Greenough said contracts can provide clarity around scope, roles and process, but cannot compensate for a weak brief, contradictory feedback or a lack of trust. That becomes particularly important when agencies are also being asked to take on more risk.

For the relationship to work, agencies need to be able to challenge the business assumption while clients need to give those challenges a fair hearing.

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