Compensation

Solve the Partner Comp Problem

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Dial with arrow pointing to word "strategy"Now is the time to take a hard look at your partners and your compensation model.

By Domenick J. Esposito
8 Steps to Great

Let’s take a deep dive into both a firm’s partner mix and its compensation model.

MORE ON STRATEGIC PLANNING: 21 Questions to Help Unlock Accelerated Growth | Growth: The Difference between the Disruptor and the Disrupted? | Use Compensation to Shape Partner Behavior | The Importance of M&A Culture Due Diligence | Are You Attracting the New Breed of Equity Partners?
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In a “Good to Great” research study on high-performing organizations performed by Jim Collins, it was concluded that the method of compensation, as a causal factor for high and sustained performance, is largely irrelevant. The study concluded that whatever system is in use, it simply must be rational and equitably managed and that high sustained performance is largely the result of doing many things well.
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Use Compensation to Shape Partner Behavior

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Do you have the right mix of partners?

By Domenick J. Esposito
8 Steps to Great

Visualize your partner group fitting into a bell curve.

MORE ON STRATEGIC PLANNING: AI Likely to Accelerate Merger Mania | What a Value Proposition Truly Is (and Isn’t) | Does Your Firm Need an Independent Executive Committee Member? | 10 Ways to Link Compensation and Strategy | Develop Home-Grown Future Leaders | How to Capitalize on the Trusted Business Advisor Opportunity | Leadership Must Be Persistent and Consistent
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In Quartile #1, you have the stallions – the very high performers who produce outstanding contributions to the firm year in and year out. These equity partners want to win and know how to do it.
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Is It Time for a Partner Compensation Tune-up?

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Six questions to ask, nine standards to follow.

By August J. Aquila
What Makes a Great Partnership

Ever wonder what the most appropriate partner compensation system is for your firm and how to assess partner performance?

MORE ON GREAT PARTNERSHIPS: The 3 Types of Partners You Need | 6 Focuses for Managing Partners | 10 Steps to Transitioning to a New MP | What Managing Partners Should Be Doing | Do Your Partners Pay Their Own Way? | 7 Keys to Becoming an Equity Partner | How and Why to Achieve Partner Unity | How You Can Get Partners to Change | Why Expectations Must Be Defined | Are You Driving Your Best Partners Crazy? | 7 Warning Signs for Your Firm
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A firm’s compensation system is a reflection of its culture and external competitive factors.

When was the last time you gave your partner compensation system a checkup?
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13 Points of a Good Compensation Plan

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Man counting $100 bills into three pilesDoes your plan pit partners against each other?

By August J. Aquila
What Makes a Great Partnership

During the last 13 years I have focused a large part of my practice on helping firms develop compensation plans.

MORE ON GREAT PARTNERSHIPS: How MPs Can Make a Real Difference | 10 Steps to Transitioning to a New MP | What Managing Partners Should Be Doing | Do Your Partners Pay Their Own Way? | 7 Keys to Becoming an Equity Partner | How and Why to Achieve Partner Unity
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A critical element in keeping partners engaged is having a compensation system that rewards them for doing the right things. Here’s what I found to be some of the best practices.
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The Struggles of Hitting Market Compensation … Fairly

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Four empty metal bucketsAvoid the temptation to “sprinkle” among “buckets.”

By Domenick J. Esposito
8 Steps to Great

For the most part, managing partners at a large number of the best-run Top 100 firms below the Giant Four do an excellent job in splitting up their compensation pies.

MORE ON STRATEGIC PLANNING: Ineffective Partners and How to Address Them | Develop Home-Grown Future Leaders | How to Capitalize on the Trusted Business Advisor Opportunity | Leadership Must Be Persistent and Consistent | Using a High-Performance Business Framework | What a Client Service Plan Can Add | 36 Consulting Services You Might Be Overlooking | How to Drive Consistent Partner Behavior | CPA Firm Partner Performance: Different Activities, Different Metrics
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Their partner compensation system rewards performance and, at the same time, nurtures rising stars with lots of potential.
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Compensation: Money and Beyond

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Chef garnishing a platePlus 6 types of bonuses and 12 extraordinary benefits.

By Marc Rosenberg
On Staffing

Every CPA industry survey I’ve seen for decades shows that compensation is #1 to staff.

MORE ON STAFFING: 6 Keys to Advancement Programs | Making Flex Time Work in the Real World | 10 Winning Traits of Accounting Firm Leaders | The Importance of Great Bosses | The 12 Reasons Your Staff Hates Your Firm | What Happened to the Relevancy of the CPA Profession?
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For example, the AICPA/PCPS 2011 Top Talent Survey showed:

  • Salary was #2 for what attracts staff; #1 was career growth opportunities.
  • Salary was #1 for what retains staff.

My feeling is that compensation is ante to enter or stay in the game.
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5 Cautionary Tales in Partner Compensation

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Older man reading newspaper by fireplaceDo you see your firm here?

By Marc Rosenberg
Partner Comp: Art & Science

Here are five case studies to illustrate potential problems in partner compensation.

MORE ON PARTNER COMPENSATION: Does Compensation Motivate Performance? | Why Compensation and Buyout Plans Must Be Synchronized | When Partner Vacation Becomes Excessive | Management Stipends: Who, How and Why | The 8 Basics for Data-Based Partner Performance Evaluations | Crash Course: Operating a Compensation Committee | 11 Points in Designing a Partner Comp System | What Partners Earn and How They Earn It
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The Stressed-out MP.  This seven-partner firm had recently changed from having the “MP decides” method of income allocation to usage of a compensation committee because the burden of allocating income was too stressful for the MP. The ensuing problems with the compensation committee, all solvable, were:

  1. Mandatory rotation of CC members resulted in people on the CC who were not credible and used their role to boost their own income.
  2. No communication between the CC and the individual partners about expectations and income allocation.
  3. Frequent, bitter arguments among CC members.

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How to Offer Employment Compensation Assistance

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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: 9 Questions to Ask About Divorce and Taxes | Investment Clubs and How to Counsel Them | Offering Second Marriage Assistance | What You Need to Start a Financial Planning Discussion | Tax Projections: How and Why | How to Raise Client Awareness of Services
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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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Does Compensation Motivate Performance?

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Businesswoman throwing money into air in office3 times it works well … and 2 times it doesn’t.

By Marc Rosenberg
Partner Comp: Art & Science

The Harvard Business Review published an intriguing article on compensation titled “Rethinking Rewards” written by Alfi Kohn, who describes himself as a leading critic of competition.

MORE ON PARTNER COMPENSATION: Why Compensation and Buyout Plans Must Be Synchronized | How Business Entity Type Affects Partner Income | Paying for Current vs. Historical Performance | Partner Pay in Retirement Transition Period | How to Pay Non-Equity Partners | 5 Types of Partner Evaluations | How Large and Small Firms Allocate Income | Partner Pay: Recapping the Compensation Systems | Partner Pay: The Declining Importance of Book of Business | 3 Non-Performance-Based Comp Systems | 3 Subjective Compensation Systems | Partner Compensation 101 | How Partners View Compensation: It’s Not All about the Money
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Says Kohn: “It is difficult to overstate the extent to which most managers of people believe in the redemptive power of rewards. Certainly, the vast majority  of  companies  try  to  motivate  employees by tying compensation to performance. But research suggests that, by and large, rewards succeed at securing one thing only: temporary compliance. They do not create an enduring commitment to any value or actions. A kick in the pants may produce movement but never motivation. Rewards do not alter the attitudes that underlie our behaviors.”
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Why Compensation and Buyout Plans Must Be Synchronized

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Overhead view of people solving a large jigsaw puzzleTransitions can be affected, too, if you don’t handle this.

By Marc Rosenberg
Partner Comp: Art & Science

Coordinating how the partner compensation and partner retirement/buyout plans are structured is critical.

MORE ON PARTNER COMPENSATION: How Business Entity Type Affects Partner Income | When a Firm Tanks While a Partner Soars | How Profitability Affects Income Allocation | Paying New Partners and Lateral Hires | 3 Rules for Promotion to Partner | Should the MP Be the Highest Paid Partner? | Integrating Partner Comp with Strategic Planning
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One of the biggest complications for firms changing their partner compensation system is addressing the effect it will have on their partner retirement/buyout plan.
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