Source: RedZone, Play of the Month

Excerpts reprinted with permission from Accountants Advisory Group.

An important and often overlooked aspect of distributing annual profits is the message each partner receives. Communicating how year-end distributions were computed and why those methods were used can, in many cases, be more important than the actual computation.

Here are some ways to avoid erroneous perceptions about partner compensation:

• Develop, and communicate, a strategic game plan that's aligned with the compensation program.
• Document and communicate partner evaluation methods.
• Let partners know the statistics management will review and analyze as part of the decision-making process.
• Establish and document objectives for each partner before the year begins and do a mid-year status review.
• Have each partner complete a performance self-evaluation.
• Be sure that those responsible for determining partner compensation are fair, take time to review all available information, and are trusted by the partners.

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From RedZone, Play of the Month, Accountants Advisory Group LLC, www.accountantsadvisory.com, May 2009.