Compensation

The Multiple of Compensation Method, Fully Explained

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Those who aren’t rainmakers still need to have their contributions recognized.

By Marc RosenbergExtreme close up of female hand with pen pointing on cash flow document.
Retirements & Buyouts

There are numerous methods used to calculate the goodwill payable to a retiring partner.

Multiple of compensation is the most common method, especially among firms with five or more partners. Each partner’s retirement benefits are equal to their compensation immediately prior to retirement times a predetermined and approved multiple.

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Why Is It Always about Partner Compensation?

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Good service needs to be rewarded as much as business development.

By August Aquila

It seems like no matter what the topic is at partner meetings, it always reverts to compensation. There isn’t a partner out there who is not interested in his or her compensation, and maybe even more interested in what the other partners make. READ MORE →

How to Use Compensation to Keep Partners Engaged

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Finding the perfect compensation system

By Robert J. Lees
and August J. Aquila
Creating the Effective Partnership

A critical element in keeping partners engaged is having a compensation system that rewards them for doing the right things. Every compensation plan should be constructed to help the firm enhance its ability to service clients, achieve its strategic goals and attract, reward and retain the right people. If a firm’s plan does not accomplish these objectives, it needs to be restructured. READ MORE →

Solving the Partner Compensation Puzzle

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Start with this 20-item checklist.

By Marc Rosenberg
Author of “CPA Firm Management & Governance“

If you ask the partners, they will tell you that the most critical and sensitive aspect of CPA firm practice management is the allocation of partner income.

Because of the sensitivity of partner compensation, firms change various aspects of their allocation system quite often.  For this reason, the smart firms include wording in their partnership agreements on partner compensation that is very short and quite general.  This way, the firm doesn’t have to revise the partnership agreement every time a change is made.

It’s a complicated task. There are seven different systems in use today, three basic tiers, a couple ways firms are calculating bonuses, and at least a dozen other items to ponder and work through.

Here is a checklist of decisions that the best firms are making to determine the compensation of each partner:

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12 Best Practices for a CPA Firm Compensation Committee

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With more firms adopting a compensation committee system to sort out a partnership’s touchiest issues, Marc Rosenberg provides a 12-item checklist of best practices.

The list covers how to frame the committee’s mandate (“full reign”) to how its decisions should be treated (“No appeals. No approval needed.”). READ MORE →

The 16-Point Partner Compensation Checkup

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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:  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:

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The Keys to Success for Compensation Committees

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Why firms need comp committees and how some of them do it right.

by Marc Rosenberg, CPA
Author of How to Operate a Compensation Committee

CPA firms are increasingly turning to the use of formal compensation committees for a number of reasons. Chief among them: It’s the best way to achieve a balance between recognizing traditional production accomplishments and rewarding intangibles.

The Convergence of Three Aspects of CPA Firm Management

The compensation committee approach aligns the firm’s (1) strategic plan and core values with how partners are (2) evaluated and how they are (3) compensated. It motivates partners to produce what the firm needs them to produce.

Related:  Compensation Issues for the New Managing Partner  |  20 Decisions for Your Firm’s New Partner Compensation Committee  | Three Ways to Break Partner Gridlock in an Accounting Firm  | What Partners Are Entitled To, and What They’re NOT Entitled To | How to Make Partner?  |  Why Accounting Firm Partners Are “Popping Prozac like M&M’s”  | More…

At most firms, there is a disconnect between these three functions. But at the better managed firms, they are integrated.

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Compensation Issues for the New Managing Partner

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Five factors to consider in their new compensation plan. And five key responsibilities for the new managing partner.

by Marc Rosenberg, CPA
Author of How to Operate a Compensation Committee

Baby boomer partners are rapidly approaching retirement age, creating a huge demographic shift. One result of this is a dramatic increase in new managing partners at firms.

Many firms are skipping a generation and turning the reins over to “younger” partners. Firms are also asking their new MPs to divest themselves of a significant part of their client base to enable them to focus more on managing the firm.

How should the new MP be compensated?

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