Beware CMOs: Tying Marketing Pay to Metrics Can Backfire, Here’s Why

Key Takeaways

• Performance-based pay for marketers can lead to decreased lead quality, team friction, short-term focus, suppressed innovation, and unsustainability in high-growth organizations.
• Alternatives to performance-based pay include stock options, profit sharing, raises, promotions, and annual bonuses.
• Marketing is about more than just numbers; it’s about building relationships, inspiring audiences, and creating a lasting impact, and a culture of creativity, innovation, and purpose should be fostered.

Imagine this: you’re a talented marketer, brimming with creativity and passion. But your boss decides to tie your pay to the number of leads you generate. What happens? You might start churning out leads like a factory, but are they any good? Probably not.

The Problem with Performance-Based Pay

Tying marketing compensation to specific metrics (e.g., leads generated) can be counterproductive. Marketing tasks require creativity, long-term thinking, and a sense of purpose, which can be hindered by performance-based pay. Here’s how:

Decreased lead quality: Marketers may prioritize quantity over quality to meet goals.

Team friction: Disputes arise over lead allocation and credit.

Short-term focus: Marketers may neglect long-term strategies for immediate results.

Suppressed innovation: Incentives for specific outcomes discourage experimentation and new approaches.

Unsustainability in high- growth organizations: As the business evolves, compensation plans may become outdated and difficult to adjust.

Supporting Evidence

Research by Daniel Pink shows that rewards tied to specific outcomes work well for tasks with clear rules and goals, but not for creative and complex tasks like marketing. Marketers tend to value creativity, purpose, and a sense of accomplishment more than financial rewards.

Alternatives to Performance-Based Pay

Instead of tying pay to specific metrics, consider these alternatives:

Stock options or profit sharing: Ties compensation to the company’s overall success.

Raises, promotion, and annual bonus: Rewards performance without directly tying it to specific metrics.

Bonus: Remember, marketing is about more than just numbers. It’s about building relationships, inspiring audiences, and creating a lasting impact. As CMOs, it’s our responsibility to foster a culture of creativity, innovation, and purpose, not stifle it with performance-based pay.

Conclusion: Tying marketing pay to metrics may seem like a quick fix, but it can lead to long-term problems. Instead, let’s focus on creating a work environment that empowers marketers to do their best work.

Frequently Asked Questions:

What if my CEO insists on performance-based pay?

Emphasize the long-term consequences and the potential for unintended consequences. Suggest alternative performance measures that align with the company’s strategic goals.

How do I measure marketing performance without specific metrics?

Use a balanced scorecard approach that includes both qualitative and quantitative measures. Track customer satisfaction, brand awareness, lead quality, and overall business impact.

[and so on… ]