How to slice the profits pie.
Ever wonder about revamping the partner compensation system for your firm? But how to assess partner performance? And how to reward the right things?
A firm’s compensation system is a reflection of its culture and competitive realities, according to August Aquila, a regular CPA Trendlines contributor and leading practice management consultant.
More for CPA firm partner groups at CPA Trendlines PRO members [ Go PRO here ] : Seven Ways to Build the Right Culture | How to Change a Partner | How a Founding Partner Passes the Baton to a New Managing Partner | Six Reasons NOT to Plan for Succession | How to Apply Sam Walton’s 10 Rules for Success at Your Firm | Nine Steps to Effective Succession Planning for the Small Firm | Thinking Merger? Look Before You Leap
If it’s been a while since you gave your comp system a checkup, then you might be interested in Aquila’s 16-point partner compensation checkup questionnaire to get you thinking about how effective your current compensation plan is:
1. Does the system reward the partners for supporting the firm’s short and long term strategic initiatives?
2. Does the system reward fairly fee producing work and non-billable contributions that add value to the firm?
3. Does the system place the betterment of the firm ahead of the betterment of any individual partner?
4. Has the firm developed performance standards for partners?
5. How are the performance standards measured?
6. Who in the firm (Compensation Committee, Executive Committee) determines how well a partner has achieved the standards?
Typical Partner Compensation Standards
1. Business Development. New business is the livelihood of any business.
2. Client Retention. Keeping clients through quality client service and expanding services to your existing clients.
3. Timeliness. Meeting client deadlines and expectation needs to be considered.
4. Productivity. This is more than just billable hours. It includes leverage, efficiency, A/R and WIP management.
5. Firm Management and Leadership. Partners who hold positions as department heads, team leaders, and firm management should be rewarded and evaluated base on team or firm success.
7. Being a Good Partner. Partners must live the firm’s values and follow all policies, e.g., time keeping, participating in firm events, etc.
8. Being a Team Member. Successful firms are building teams and rewarding partners for playing their role on the team.
9. Professional Growth. In any professional service firm skills decline over time. Hence continual learning for partners is a critical standard.
10. Developing Others. Investing in younger professionals is the key for future success. All partners need to participate in some fashion.
The secret is building your compensation system around these standards so that it is fair and fairly administered.
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