History of Compensation: Hourly Rates Go Mainstream

Compensation Data Facts - What's What in Compensation

History of compensation... Once the value of "time" became a widely accepted increment of payment for legal and accounting firms, other industries started to notice. Service-based businesses began charging by the hour and outperformed those that charged on the basis of the service sold. By the end of the 1950's, the move to billable hours was hailed as the greatest business change since the Industrial Revolution.

David Oglivy, regarded as "The Father of Advertising" and the inspiration for Mad Men’s Don Draper, is regarded as the first person to utilize billable hours beyond the legal and accounting industries. In the 1960s, Ogilvy used hourly billing to win a pitch with Shell Oil, who had became frustrated with their current advertising agency. At the time, agencies were paid commission in addition to a percentage of the media they purchased, but Ogilvy & Mather negotiated with Shell to be paid on a fee basis, rather than on commission. The ad agency won the account and the groundbreaking deal allowed equitable payments to be calculated on projects whose time and resources were constantly changing.

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