One of the underrated benefits of working with a marketing agency is it’s much easier to align incentives and pay for perfomance.

There’s a never ending debate about whether it’s better for brands to in-house marketing expertise or work with external agency partners. I’m not going to try to engage with that here. But I do think the fact that it’s easier to incentivize agency partners is under-discussed.

Effective marketing is the lifeblood of any consumer company. If there is a person or group responsible for marketing your company effectively, they should be paid a large fraction of the incremental profit they are generating for the brand. For larger companies, this fraction could potentially be hundreds of thousands of dollars a year–or more.

And, of course, incentives really affect behavior. If a great marketer knows they have the ability to make 10x more with superb performance, they’ll understandably work way harder than if they can only be paid within a much narrower band. Probably even more important, providing proper incentives attracts the type or person who knows they can outperform and earn massively more.

Why does this incentive point favor external agencies?

Because paying an effective marketer several hundreds of thousands of dollars a year or more is much easier when that marketer is external to the company. There are a few reasons why this is. Partially, it’s because massive pay discrepancies inside a company are often frowned upon; an amazing CMO earning 10x anyone else in the company just seems wrong, even if she deserves it.

But when these types of payments are made to an external party, it feels less uncouth. After all, the marketing agency is a company not a person, even if effectively the vast majority of the payment is going to one or two people inside of the organization.

This principle applies in less extreme cases too. It’s pretty hard to get a mid-career marketing professional to agree to, say, a base salary of $50K with the potential for $250K of upside. They’ll understandably want more assurance they’ll be paid at least their prevailing salary. But I can easily imagine an agency agreeing to this setup–in fact, many I’ve worked with have.

This insight also applies in the downside case. If a marketer isn’t performing well, it’s much easier for many reasons to part ways with them if they are part of an agency rather than an employee you just hired.

Incentivizing performance directly is difficult to do across most parts of an organization. Fortunately, it’s easier to judge and therefore reward phenomenal marketing production. That it’s easier to do this externally is a big point in favor of marketing agencies.