Bob Lord, president of independent agency Horizon Media Holdings, called the full-time equivalent billing model the "old system" at an industry event earlier this month — and questioned whether agencies can abandon it on their own.

"The question for me is whether or not the business models, especially if you're a public company, can actually be broken without some kind of external force," Lord said.

His comments, reported in Adweek's Agencies Advantage, land at a moment when agencies face a structural choice. AI is compressing the economics of FTE-based work, the model in which clients pay according to the number of agency staff hours devoted to their business. As machines absorb tasks once billed by the head, that revenue base shrinks.

What are agencies proposing instead?

The industry's answer, according to the report, is outcome-based remuneration — commonly called performance pay. Under this model, agencies earn fees tied to measurable business results for clients rather than to staff time deployed.

The logic is straightforward. If AI reduces the labor an agency must commit to a piece of work, then billing for that labor no longer reflects the value delivered. Tying compensation to outcomes shifts the pricing anchor from input to impact.

Why does the shift remain stalled?

Lord's framing identifies the obstacle precisely. Public companies operate under quarterly scrutiny, and dismantling a proven billing system for an unproven one carries real financial risk. Without external pressure — from clients, investors or market disruption — incumbents have weak incentives to move first.

That is why his question matters. It suggests the transition to performance pay will not be driven by agency leadership alone. It will require a forcing event, likely on the client side, before the industry's revenue architecture changes at scale.

Brands, meanwhile, hold the decisive vote. Performance pay transfers execution risk from the client to the agency. Until marketers accept that trade in sufficient numbers, agencies that move unilaterally would sacrifice predictable FTE revenue without a guaranteed replacement.

The near-term implication for marketing leaders: expect procurement conversations to increasingly test outcome-linked structures, and expect the agencies that survive the transition to be those that can prove measurable results rather than headcount.