Compensation

Use Smart Compensation to Drive Partner Performance

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$100 bill being built of blocks

Five management objectives to address.

By Domenick J. Esposito
8 Steps to Great

“Show me your compensation plan and I’ll show you your strategy.” – Dom Esposito

As you strive to become a mid-market sustainable brand, your firm needs to become a performance-driven organization if you want to take advantage of future opportunities and drive growth and profitability. An effective performance management and compensation plan (PMCP) is critical to making your firm’s strategic plan a reality.

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The basic premise is that compensation rewards first look to:

  1. how successful the entire firm is,

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Keep Ownership Percentage Out of Partnership Agreements

By

man writing in notebook

Twelve best practices for compensation committees.

By Marc Rosenberg
The Rosenberg Practice Management Library

“If you like a person, you say, ‘Let’s go into business together.’ Humans are a social animal after all, but such partnerships are fraught with danger.” – Brian Tracy

Buying a family home is one of the the biggest investments most people make in their lives. And because most of us are not real estate experts, we protect ourselves by engaging an attorney to ensure that the purchase is handled correctly. We don’t hesitate for a moment to invest a nominal amount of attorney fees to hire an expert.

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Protecting Your Business

Being a partner in a CPA firm should be no different. Think about it. Based on data from a recent Rosenberg MAP Survey, here is a rough idea of the value of a partner’s ownership in a $10 million firm:
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Dominic Piscopo: Clear Pay=Bargaining Power | The Disruptors

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“If you can’t afford fair salaries, it’s time to fix your machine—not squeeze your people.”

This is a preview. The complete 1-hour video episode, with commentary and transcript, is first available exclusively to PRO Members | Go PRO here
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The Disruptors
With Liz Farr

Like many accountants, Dominic Piscopo, the founder of Big4Transparency.com, was frustrated by the lack of transparency in salary data. “I’d found it really, really frustrating trying to get good quality data on what to expect, looking ahead for my salary,” Piscopo explains. Before creating the platform, Piscopo discovered his firm offered the lowest starting salaries in his city. By gathering compensation data from peers and presenting it to leadership, he secured “a little bit under a 10% pay bump” for his entire cohort.

MORE PODCASTS and VIDEOS: Debbie Kilsheimer: Stop Thinking Small | Dave Kersting: Collaborate with Co-Firming | Ashley Francis: AI’s a Partner, Not a Replacement | Richard Roppa-Roberts: Collaboration Over Competition | Ira Rosenbloom: M&A Numbers Are Easy – Culture Fit Is Hard | Roman Villard: Ditch the Suit & Shine | Monique Swansen: Align Firm Values with Services | Tina McGill: How to Create Lasting Client Impact | Stefan van Duyvendijk: Develop Operational Mindset | Steve Evans: Why Traditional Hiring Methods Fail | Roger Knecht: Can You Be an Accountrepreneur? | Beth Whitworth: Focus on Outcomes Not Hours |Mike Sylvester: Learn to Say No | Salim Omar: Identify Your Client’s $100,000 Problem | Jackie Meyer: Earn More with Fewer Clients | Jack Fleherty: Don’t Be a ‘Yes’ Person | Greg Adams: From Finance to Storytelling | The Disruptors | Jody Padar: Make Radical Changes Now If You Want to Be Relevant in 2030 | Rebecca Driscoll: Amplify Reach By Helping Other Firm Owners | Rory Henry: Create the Return on Relationships | Mike Maksymiw: Be the Leader You Wish You Had |

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“Data is so powerful,” he says. “If you can advocate for yourself and show real objective numbers, then it becomes a real conversation, versus just like, ‘Oh, my employee is throwing a fit.’”

What began as a simple spreadsheet shared on Reddit “went really, really viral, kind of right away,” confirming a significant need in the accounting community.

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Twelve Nuggets of Advice for the New Managing Partner

By

seated man wearing suit looking straight ahead

Plus some thoughts on compensation.

By Marc Rosenberg
The Rosenberg Practice Management Library

In an ideal world, a new managing partner will have been groomed and mentored by the existing managing partner for two or three years. A great way to do this is by executive committee participation. But alas, many things at firms under $30 million are not ideal. Unfortunately, we have seen many firms anoint their new managing partner with relatively little training and mentoring.

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So, our first piece of advice is to provide for a two- or three-year process of gradual transition from the current to the new managing partner. Regardless of the effectiveness of the transition period, here is advice that we always give to prospective managing partners:
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Kristen Rampe: Accountability and Simplicity in Partner Comp Drive Success | Gear Up For Growth

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“Compensation is one tool, not the tool, to change behaviors and outcomes.”

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Gear Up for Growth
With Jean Caragher
For CPA Trendlines

Kristen Rampe, managing partner of Rosenberg Associates, spotlights two key drivers for CPA firm success: accountability and simplicity in partner compensation systems. 

Gear Up for Growth spotlights the best strategies for smart and efficient growth in today’s competitive landscape. More Gear Up for Growth every Friday here | More Capstone Conversations with Jean Caragher every Monday | More Jean Caragher here | Get her best-selling handbook, The 90-Day Marketing Plan for CPA Firms, here | More CPA Trendlines videos and podcasts here

Rampe shares insights from Rosenberg Associates’ recent report, “Partner Compensation: Why Accountability Matters,” revealing a strong correlation between accountability and firm profitability. According to the report, firms with high accountability systems reported an average income per partner of $617,000, compared to $411,000 in firms with low accountability. 

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Salary and Compensation Outlook for Small CPA Firms 2025

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Cornerstone Report

The CPA Trendlines overview of what accountants can expect regarding annual salary and bonuses at small CPA firms – and what small CPA firms can expect to budget.

By CPA Trendlines Research

A combination of a talent shortage and the general economic environment could push payroll budgets up by as much as 16.9% in 2025 at small CPA firms, according to CPA Trendlines Research. But partners and owners could make even more.

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Six Tips for Setting Compensation

By

young woman holding giant dollar sign in modern office

Plus 17 extraordinary benefits to consider offering.

By Marc Rosenberg
CPA Firm Staff: Managing Your #1 Asset

“If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it, you almost don’t have to manage them.” – Jack Welch

“Pay your people the least possible and you’ll get from them the same.” – Malcolm Forbes

Every CPA industry survey we’ve seen for decades shows that compensation is either No. 1 in importance to staff or close to it.

MORE: Staff Crave Advancement and Challenge | What Leadership Looks and Feels at CPA Firms | Eleven Things That Good Mentors Do | Give the Recognition Your Staff Needs | The Importance of Great Bosses | How Remote Work Is Impacting Accounting Firms | Make Work Flexibility Work for Everyone | Why Staff Leave CPA Firms … and How to Stop Them | How to Solve the Big Disconnect in Talent Management | What Relevance Means for Staffing in Accounting | How Accounting Staffing Has Changed
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Our feeling is that compensation is the ante to enter or stay in the game. Put another way, according to Jeremy Wortman:

If college graduates are looking for their first job, or if a young person with a little experience is job hunting, compensation is huge. If a person has two offers, one for $60,000 and the other for $65,000, the higher offer will get the person almost every time. But if the offers are $500 apart and the person likes the firm offering the lower salary better, it’s likely that the lower-paying firm will get the nod.
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Partner Comp Earnings Gap: What’s the Right Spread?

By

people standing on stacks of coins, representing income gaps

How do you get it right at your firm?

By Kristen Rampe
Partner Comp: Art & Science

There are many reasons for a sizeable spread in partner income at a CPA firm. For example, at a firm with both a founder nearing retirement and a first-year partner, the spread would be wide. Some firms are the opposite, with two to four founding partners agreeing to share all profits equally. There is no spread there.

MORE ON PARTNERS: Thirteen Traits of Partners You’ll Want to Keep | Six Rules for Keeping Partners Happy and Productive | Five Keys in Compensating New Managing Partners | Top 20 Tough Choices for the Partner Comp Committee | Voting on Ownership Basis? Three Better Methods | What Partners Do and Don’t Deserve | Tell Potentials What Partnership Takes | Five Steps to Transition to Partnership
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For most multipartner and multigeneration accounting firms, the situation gets more complicated. You’ll have some high performers and some who are on cruise control. You’ll have ones contributing notably more dollars to the bottom line and more to future leaders’ development.

But what about two partners who contribute relatively the same? Should their income allocation be similar? How similar?
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S Corp Clients Beware

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“Reasonable comp” audits are coming.

By Eric Green
Tax Rep Network

“The IRS never audits reasonable comp, so don’t worry about it.”

Have you ever heard this phrase? Well, when it comes to IRS priorities and increasing enforcement, S corporations and their owners will find themselves in the crosshairs of the IRS.

MORE in TAX: Eight Steps to Getting Started with AI: A Guide for Tax Professionals | What’s Your Value to Your Tax Clients? | Are You Excited About Tax Season? | What the Corporate Transparency Act Means for Accountants | Train Now Before It Costs You Down the Road | Surge Pricing: What Works for Uber Could Work for CPA Firms | Uncooperative Partner Might Not Be the Problem | It’s Time to Fix the Problem of QTIPs and LLCs

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In 2020, the U.S. Treasury Inspector General for Tax Administration (TIGTA) reported more than 10 million non-filers, many of them high-income earners. Then, in 2021, a TIGTA Report told the IRS to begin cracking down on S corporation owners who take little to no compensation to avoid employment taxes effectively.

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Help Clients with Employment Compensation

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older man and younger man in meetingYou might find yourself negotiating a contract.

By Ed Mendlowitz
How to Build a Stronger Tax Practice

This service includes employment contract negotiations and executive compensation review and planning.

MORE ON MARKETING: How to Guide Clients through Divorce | How to Assist Investment Clubs | When Clients Remarry | Seven Questions to Suggest Estate Planning | Four Reasons to Perform Tax Projections
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Who needs this service

Every client employed by a mid- to large-size company or a public company will need some sort of employment compensation assistance.
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