'Worried about getting caught out': Sir Martin Sorrell on why CMOs are not ready to pay for outcome-based agencies

"In his telling, AI has yet to graduate from pilot programs into anything that materially reshapes how marketing departments are staffed, structured or paid. Until that changes, agency chiefs can stop bracing for a shift to outcome-based compensation. CMOs, he said, are still buying time and headcount. "Without naming names, I can remember a real situation where the marketer said 'of course we'll move to an output model' and then you get into a conversation with their procurement people and they're just worried about getting caught out," he continued. Which, in plain terms, means they're worried about paying agencies more than they have to."

"After all, outcome-based pay turns marketing from a predictable labor expense into a variable, performance-indexed cost that can swell when campaigns work, and in turn complicate budgeting, forecasting and cost control. The only force that changes that is the CFO. And that moment arrives only when companies can no longer meet near-term performance expectations by trimming headcount, tightening scopes and layering AI onto existing workflows."

"For now, there is little evidence it has arrived. Sorrell pointed to a set of economic signals that reinforce that inertia: S&P 500 third quarter earnings per share were up 12% and up 9% when excluding the hyperscalers. Morgan Stanley's internal forecasts also show double-digit earnings acceleration this year. Goldman Sachs has projected a similar trajectory."

AI adoption remains largely at pilot stage and has not materially changed how marketing departments are staffed, structured, or paid. Agency leaders need not yet brace for a widespread shift to outcome-based compensation because CMOs continue to maintain headcount and buy time. Procurement concerns center on the risk of overpaying if outcomes-based models escalate costs when campaigns succeed. A decisive move to variable, performance-indexed fees requires pressure from CFOs that arises only if companies can no longer hit near-term targets by cutting headcount, narrowing scopes, or adding AI to existing workflows. Current economic signals — including stronger S&P 500 earnings and bullish forecasts from Morgan Stanley and Goldman Sachs — reduce the immediate incentive for legacy companies to change.

Read at Digiday