How to structure bonuses for account managers in an agency

Who this is for

This applies to anybody in a client-facing role, which is typically account management, client services or client success, whatever you happen to call it in your agency.

The job in those roles is to make sure the agency retains its clients and helps those clients see success. On top of that, it's their job to help the agency grow those accounts. As an owner, you can incentivise people to do more of the second part if you wish, and that's usually in the form of a bonus.

Don't pay twice for retention

What you shouldn't be doing is paying twice for the same thing, and client retention is the usual example. If you hire an account manager, their purpose is to retain clients. They do that through exceptional communication, and by organising the team internally so that everyone has what they need to deliver on the strategy for that client.

So if you then add a bonus for retention on top, you've paid for it once in the salary and again in the bonus. Truthfully, this is a mistake I made myself long before I started advising anyone on it. We paid people extra to hold on to clients, and all it did was pay them more money for doing their job well.

The way I'd say it to a team is that retention is the job, and growth is the bonus.

2 things that need to be true first

I think it's very hard to incentivise client-facing roles if 2 things aren't in place.

The first is that those people are directly involved in the strategic work. Most account managers see tasks where an owner sees a commercial opportunity, and closing that gap usually takes a few months of deliberate work. If you put commission on upselling before anyone has been taught how to spot an opening, what tends to come back is pitches the client didn't ask for.

The second is that they understand their job is primarily retention. The bonus is the extra bit, for capitalising on opportunities to upsell and cross-sell.

Before you design anything, I'd also get 2 numbers:

1. How long do you keep a client, on average? Take 1 average for your long-standing clients and another for the ones who leave inside a year.
2. How many of your clients generate more revenue now than when they started with you?

Without those you don't have a baseline for growth, so there's nothing for the scheme to sit on.

Which revenue to pay a bonus on

There are 3 types of extra revenue that can come from an existing client, and I'd only pay for 2 of them.

The third one is where a lot of schemes fall over. If you don't separate it out, you end up paying for things that were going to happen anyway.

A structure that works

The reason I'd cap one and not the other is that if someone oversees 15 accounts and they all grow, that's very rarely down to them alone, and it's usually good delivery. New work is revenue you'd never have had, so you can afford to be generous with it.

What it costs you

Take an account on £2,500 a month. At month 6 your account manager spots an opening, pitches a new channel, and the account moves to £4,000 a month. That's an extra £1,500 a month, or £18,000 a year, that you wouldn't have had. If you pay 10% of the increase, it costs you £150 a month, and you're still up 54% on that account.

Or take a one-off project. 2% of a £25,000 project is £500, and I think it's worth asking yourself what you'd happily pay someone to go and win a £25,000 project.

Where schemes go wrong

• Paying for retention on its own. People can hold on to clients while the revenue falls, and they can hold on to the wrong clients too.
• Pushing spend that shouldn't move. You don't want someone encouraging a client to spend more when the current spend is right for them.
• Bonusing KPIs and not revenue. I'd keep it on revenue and keep it simple, so it motivates people and doesn't become another thing to manage.
• Stacking. If you already have a profit share or a sales commission, check you're not paying 2 or 3 times for the same outcome.
• Individual commission on team work. Where the result is collective, I'd make it a team incentive.

When you roll it out, I'd tell the team it's version 1 and that you'll adjust it. People are generally fine with that, and it's a lot easier than trying to take an incentive away later.

Questions owners ask about this

Should account managers get commission?

I think so, but only on growth they've created themselves. I wouldn't pay commission on retention, because retaining clients is what the role is for.

Should the bonus be capped or uncapped?

I'd cap the part that's tied to growth across their whole portfolio, and leave new work they've brought in themselves uncapped.

Is it better to give a bonus or a salary increase?

If you're choosing between them, usually salary. People tend to discount bonuses, and a bonus doesn't count towards a mortgage. I'd pay a strong base and keep the incentive for the part that's exceptional.

What about new starters?

I wouldn't pay commission during probation, or in the first 6 months. It gives you time to see whether the growth is theirs.

Someone is asking for commission on retention. What do I say?

I'd say that retention is what the role is for, and that you'll pay well for growth on top of it. I'd say it clearly and once, because leaving it half-open is worse for both of you.

If you'd like a hand with it

If you'd like to talk through what would work for your team and your clients, drop me a note or, by all means, book a call. If you're not sure whether this is the right thing to work on first, the Agency Health Check will give you a steer.