THE PARTNERSHIP

Top 20 Tough Choices for the Partner Comp Committee

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man, woman, man having serious discussion around conference table

Production isn’t all that matters.

By Marc Rosenberg
The Rosenberg Practice Management Library

Increasingly, CPA firms are adopting the compensation committee system for allocating partner income. Firms are finding that systems such as formulas, pay based on ownership percentage or pay-equal no longer work.

MORE: Voting on Ownership Basis? Three Better Methods | What Partners Do and Don’t Deserve | Tell Potentials What Partnership Takes | Fifteen Big Questions for Your Next Strategy Session | Five Steps to Transition to Partnership | Disturb the Present to Improve the Future
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If there is one overarching cause for this significant trend, it’s that firms are understanding that their partners need to be something more than production machines. In addition to bringing in business, managing a client base and working billable hours (all of which continue to be important values in a compensation committee), partners need to excel in intangible areas such as helping staff grow and develop, developing specialized expertise and teamwork. The compensation committee is one of the best systems available to CPA firms to allocate income based on this diverse array of performance criteria.
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Voting on Ownership Basis? Three Better Methods

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four people seated around conference table, one with thumb pointed down

Maybe one-partner, one-vote isn’t working.

By Marc Rosenberg
The Rosenberg Practice Management Library

Most firms vote on a one-person, one-vote basis despite varying ownership percentages.

But is that always the best way? Here are three better ways.

MORE: What Partners Do and Don’t Deserve | Tell Potentials What Partnership Takes | Fifteen Big Questions for Your Next Strategy Session | Five Steps to Transition to Partnership | Disturb the Present to Improve the Future
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Voting done on an ownership percentage basis:

  1. Essentially “disenfranchises” the minority owners. Their vote doesn’t mean much, and it becomes tantamount to not having a vote at all. When they have no vote, they tend to get disenchanted and cease acting like partners. They may eventually leave.
  2. Gives too much power to the majority owners.

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What Partners Do and Don’t Deserve

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man wearing suit, pointing one thumb up, one down

Yes, there are limits. 

By Marc Rosenberg
The Rosenberg Practice Management Library

Partners are entitled to a lot. At some firms, they are virtually royalty. But that’s no way to run a firm these days.

A partner IS entitled to:

1. Attend partner meetings and retreats.

MORE: Tell Potentials What Partnership Takes | Fifteen Big Questions for Your Next Strategy Session | Five Steps to Transition to Partnership | Disturb the Present to Improve the Future
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2. Have access to all confidential firm financial data.

3. Receive a return on capital; repayment of capital when he/she leaves the firm.
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Thirteen Ways to Show Commitment

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High angle view of business people stacking hands in a teamwork gesture

Let the partners see that you mean business.

By Martin Bissett
Passport to Partnership

Rising from senior manager to partner often means being promoted ahead of our peers and contemporaries. It creates a gap in earnings, stature and influence compared to those who were our colleagues on a level playing field just yesterday.

MORE: Five Ways to Make Selling Easier | Three Questions about Conversion | Six Keys to Turning Prospects into Clients | Don’t Overlook Internal Communication | Four Reasons People Struggle with Communication | Why Firm Culture Matters for Partners | Competence Is Step One of Seven | Three Things That Rich Accountants Do | Four Reasons It’s Hard to Sell | Eight Questions to Hold Yourself Accountable | Win Your First Client: Yourself | Perception Is Reality, Client Version
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It can also mean that if we are coming into a firm from the outside, we are being promoted over people who have served at that firm for many years and understand the firm’s culture much better than we do now. We may have to lead these people as the head of a department and if so, they’d better be on our side.

This is where the principle of commitment is applied.
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Tell Potentials What Partnership Takes

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Senior businessman mentoring two younger workers

BONUS: 27 suggestions.

By Marc Rosenberg
The Rosenberg Practice Management Library

CPA firm partners keep lots of things secret at their firms that should be open. One of them is a written document stating the firm’s criteria for making partner.

MORE: Fifteen Big Questions for Your Next Strategy Session | Five Steps to Transition to Partnership | Disturb the Present to Improve the Future
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The main explanation we hear for not having such a document is that they are afraid creation of this document will backfire. They are afraid that an underperforming staff will wave this document in front of the managing partner’s face, informing him/her that they have fulfilled all the criteria for making partner and demanding a date for coronation.
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Fifteen Big Questions for Your Next Strategy Session

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six people meeting around a table

Focus everyone on the big issues.

By Marc Rosenberg
The Rosenberg Practice Management Library

Most firms spend their time at retreats planning for the future, forming goals and addressing pressing issues and problem areas. The problem areas aren’t day-to-day issues such as purchasing a new copy machine or revising the policy on sick days. The problem areas are more strategic: morale issues, recruiting problems, profitability, etc.

MORE: Five Steps to Transition to Partnership | Disturb the Present to Improve the Future
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Here are some specific examples:
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Five Steps to Transition to Partnership

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man pointing at laptop screen as woman looks on

Get your senior managers ready.

By Marc Rosenberg
The Rosenberg Practice Management Library

How are the duties and responsibilities of a new partner different from those of a manager? This is one of the grayest areas in bringing in new partners.

MORE: Disturb the Present to Improve the Future
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Ideally, there should be a gradual transition for new partners from their last two to three years as a manager to the first few years as a partner.
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Uncooperative Partner Might Not Be the Problem

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WHY are they unwilling to help?

By Ed Mendlowitz
202 Questions and Answers: Managing an Accounting Practice

QUESTION: My tax partner gives me a hard time when I ask her for assistance. Is there anything I can do to get her to be more responsive?

MORE:  Merge in Lower-Priced Work without Losing Out | 20 Things You Need for a Business Valuation
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RESPONSE: This can apply to every research question asked by anyone in the firm. Besides tax, it can be for audit, internal controls, succession planning or any other client service area.

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