Partner Comp Pearls of Wisdom

Woman holding paper and standing next to seated man in officeDon’t forget how you got where you are.

By Marc Rosenberg
Partner Comp: Art & Science

During my 20-year consulting career, I have been privileged to meet many amazing managing partners, who were very generous in sharing their knowledge with me. I wanted to share them with you.

“The best way to make a lot of money is to build a great team beneath you.”

Rosenberg’s take: Eat-what-you-kill may work out fine for small firms, and may maximize short-term earnings for all firms. But CPA firms operate much more effectively and profitably with the one-firm concept, with all firm personnel working as a team.

MORE ON PARTNER COMPENSATION: Paying for Current vs. Historical Performance | Partner Pay in Retirement Transition Period | How to Pay Non-Equity Partners | How Large and Small Firms Allocate Income | Partner Pay: Recapping the Compensation Systems | 3 Tiers of Compensation | Partner Compensation: An Art, Not a Science
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“If you’re weak at client service and good citizenship, you flunk and you’re out.”

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How to Become the Firm of Choice

August Aquila: "At the end of the day, the partners are the culture of the firm."3 steps to take now.

By August J. Aquila
What Makes a Great Partnership

Just think for a moment. Your firm reaches the lofty goal of becoming the firm of choice in your given markets.

MORE ON GREAT PARTNERSHIPS: Why Partners Need Written Goals | 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 | 7 Warning Signs for Your Firm | Don’t Weed Out the Roses | 3 Ways to Halt a Poor Leader | 8 Financial Ducks to Line Up Now
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You now win the best clients, you are able to recruit and retain the best people and you increase firm profitability. What’s not to like about this?
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5 Cautionary Tales in Partner Compensation

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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When Partners Need Written Goals

Undervater shoot of swimming pool with swimmer holding both thumbs upThree questions to ask yourself.

By August J. Aquila
What Makes a Great Partnership

If we achieve what we measure, then is it true that we become what we think about most of the time?

MORE ON GREAT PARTNERSHIPS: Five Factors for Measuring a Partner’s Value | Why Accountability Counts | Communication Goes Both Ways | Why Shared Values Are Important | Why ‘Walking Together’ Is So Important | How to Build a Better Firm Through Teamwork | 8 Questions to Analyze Your Pricing | 5 Questions for Every MP to Answer Honestly
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Philip E. Humbert, Ph.D. wrote, “The human brain is a goal-seeking, problem-solving machine, and the things we think about, focus on and worry about inevitably shape our destiny.”
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7 Keys to Becoming an Equity Partner

Woman and man silhouetted against office windowDoes everyone in your firm know what the expectations are?

By August J. Aquila
What Makes a Great Partnership

With the recent turn in the economy, equity partners are finding that there is no longer a lifelong tenure guarantee. Senior managers and non-equity partners are wondering whether or not they even want to become equity partners.

MORE ON GREAT PARTNERSHIPS: Five Factors for Measuring a Partner’s Value | The 6-Step Plan for Transitioning Clients | Fighting Restraining Forces | Chemistry and Mutual Respect Matter | Great CPA Firm Partnerships Begin with Trust | Work Together Better in 11 Steps | What Makes a Successful Strategic Plan? | Innovate or Die | Partners Love, Hate Leadership | 8 Ways Leaders Destroy Firms
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For the most part, firms have been selective about who they take into the partnership. However, when the economy was running hot and finding a warm body to fill spots was a real challenge, the partnership bar was certainly lowered in many firms. Today, that bar is being raised again.
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Does Compensation Motivate Performance?

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

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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How Business Entity Type Affects Partner Income

Hands tear money isolated on white backgroundNot as much as you might think.

By Marc Rosenberg
Partner Comp: Art & Science

Here’s the challenge: Firms are rarely able to complete their internal accounting in time to finalize their income and make final partner distributions prior to the end of their fiscal year, which for 90 percent of all firms is Dec. 31.

MORE ON PARTNER COMPENSATION: When a Firm Tanks While a Partner Soars | When Partner Vacation Becomes Excessive | Management Stipends: Who, How and Why | Paying Part-Time Partners | The 8 Basics for Data-Based Partner Performance Evaluations | Crash Course: Operating a Compensation Committee | Why Firms Use Partner Comp Formulas

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On Dec. 31 of each year, firms still have a sizeable bonus pool to allocate. By the time the entire compensation process is completed, it could be February or March.
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