Is Your Compensation System Making a Difference?

Source: Partner Insights

Following are excerpts from an article by August Aquila, reproduced with permission:

Some of the best compensation systems require that firms:

• Know what creates value. In accounting firms, value is created by identifying and satisfying client needs in a profitable manner and by developing processes and systems that improve work flow efficiencies.
• Create and hold people accountable to competency maps that outline needed skills and behaviors.
• Focus on criteria that improve both top line and bottom line.
• Reward skills and behaviors that drive results (for example, developing more efficient processes, training others, billing in a timely fashion). You can only create permanent behavior change by first changing the culture and the environment, then using compensation to reinforce those changes.
• Measure and reward individual, team, departmental, and firm-wide objectives.

To how many of these questions can you answer "yes" when it comes to your current compensation plan?

1. Is the system fair?
2. Is it fairly applied?
3. Have you involved those most affected by the plan?
4. Does everyone understand how it works?
5. Does it promote the most profitable work for the firm?
6. Does it create a one-firm concept, rather than silos?
7. Does it encourage the owners to live the firm's core values?
8. Does it encourage everyone to do what's best for the clients?
9. Is there some flexibility to reward exceptional performance?
10. Does it substantially reward performers over nonperformers?
11. Does it reward for current production as well as building future capacity?
12. Is the compensation system tied to the firm's strategic goals?
13. Does the system usually provide for predictability in total compensation year over year?
14. Is the system modified from time to time based on the changing needs of the firm?
15. Will the system keep the firm alive after the retirement of the senior owners?

For the complete article, click here.

From Partner Insights, Aquila Global Advisors, LLC, June 30, 2009, www.aquilaadvisors.com.