Partner Compensation

Source: Inside Public Accounting (reporting on the Management Summit 2005 pre-conference workshop)

Partner compensation plans often promote discord rather than harmony. Each partner’s compensation should correlate with the firm’s overall strategic plan. This will result in better cooperation among partners, more accountability among partners, and a better bottom line. The plan must place more importance on the partners’ contributions to the bottom line than to the top line, high realization, and seniority.

Here is an outline of a recommended plan:

                   Draw                                60 percent to  70 percent

                   Return on capital                  5 percent to  10 percent

                   Incentive                          10 percent to  35 percent

The incentive should be based on profitability of the services for which the partner is responsible. The individual partner compensation plan has to be reached through collaboration and should focus on the partner’s strengths as they relate to the firm-wide strategy. Each partner should be accountable for executing selected parts of the strategic plan.

For the complete article, see Inside Public Accounting, February 2005 (Hudson Sawyer, www.hudsonsawyer.com), p. 4.