Source: Possibilities for CPA Firm Leaders

Following are excerpts from a blog entry by Rita Keller, reproduced with permission.

THE BONUS NIGHTMARE

Rita Keller writes that the bonus plan saga is like a nightmare that keeps repeating itself.

• A partner has a great idea, “Let’s put in a bonus plan! It will inspire our people to do better.” Wrong.
• The ones who don’t get a bonus become jealous.
• Then CPA firm leaders feel guilty because they are not being fair to everyone.
• The ones who do get the bonus usually get it because they can figure out how to beat almost any bonus system.
• Eventually (and it doesn’t take too long) the plan begins to demotivate people.
• Then, the bright idea becomes: “Let’s do away with our bonus plan and build it back into their salaries.” Everyone gets an unexpected raise.
• Several years later, “Let’s put in a bonus plan!”—same thing all over again.

That’s why an article, "Why Incentives Are Irresistible, Effective, and Likely to Backfire," in Fast Company magazine struck a chord with me.

The article gives some great examples of incentives that were counter-productive. Example: Football quarterback being penalized for throwing interceptions. Thus, he quits throwing the ball at all.

Many managers resort to incentives because they think they’re smart enough to create the perfect carrot. Doesn’t work that way!

Take this thought process into a CPA firm. Provide incentives for billable time and you will get lots of billable time. Also, every client engagement will be over budget.

To read the entire blog entry, click here.

From Possibilities for CPA Firm Leaders, February 9, 2009, the blog of Rita Keller, president of Keller Advisors, LLC, rkeller@ritakeller.com. Visit http://cpamanagement.blogspot.com.

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