Future Success Will Depend on Value Pricing and New Compensation Systems

Source: Accounting Today

L. Gary Boomer (Boomer Consulting in Manhattan, Kansas) says future winners among accounting firms will have formal strategic plans tied in with their compensation systems and will bill pursuant to engagement letters with fixed prices (and change orders).

Client value will depend on whether they use several services, appreciate the service, pay timely and without regret, and refer other clients.

But partners who are compensated based on book of business (as opposed to a system integrated into the strategic plan) are reluctant to do anything about clients that don’t meet the above profile. Book of business is important, but only one of many factors that should be incorporated into the compensation system. Modern compensation systems use the Balanced Scorecard, which focuses on client satisfaction, recruiting and developing talent, and developing systems to overcome personnel shortages.

Making the transition to a new compensation plan is extremely difficult. Boomer suggests using the current compensation, or perhaps 80 percent of it, as a starting point. Any compensation beyond that should be determined by the Balanced Scorecard system.

Firms are tending to keep compensation secret, thus avoiding invidious comparisons among partners.

For the complete article, click here and select the article Pricing and Partner Compensation from the December 17, 2007, issue.

From Accounting Today, December 17, 2007, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.

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