Source: Practical Accountant

Findings from interviews of several firms and consultants:

• Marc Rosenberg of The Rosenberg Associates in Wilmette, Illinois notes that firms promote unqualified people to partnership out of fear of losing them.
• J.H. Cohn in Roseland N.J. no longer places as much importance on business development skills. Increasing importance is placed on technical knowledge in niches.
• The major criteria for partner selection, according to Rosenberg, are new business development, managing relationships with clients, retention of staff, and skill in special niches.
• Frazier & Deeter in Atlanta emphasizes new business, managing large clients, and teamwork. It uses psychological testing to profile partners.
• Gelman, Rosenberg& Freedman in Bethesda Maryland views partner selection as “golden handcuffs.”
• Stanbaugh Ness in Hanover, Pennsylvania, considers technical skills, administrative ability, and development of processes, along with business development abilities.

Compensating partners:

• Stanbaugh Ness—increasing focus on achievement of goals. Goals are different depending on skills. It uses an evaluation matrix that includes financial results, business controlled, leadership, and ownership.
• Rosenberg—Traditional criteria have been finding, minding, and grinding. Now there is emphasis on business development, mentoring, managing, and developing new services. He sees an “inverse relationship” between partner billable hours and firm profits.
• Gary Boomer of Boomer Consulting in Manhattan, Kansas, says there is an increased use of the balanced scorecard. Partners are rated on profits, training and learning, and meeting client needs.
• J.H. Cohn—compensation is subjective. Among the most important factors are technical competence and serving clients. Business development is also important. Soft skill such as speaking, recruiting, writing, and administration are also considered.
• Don Scholl of D.B. Scholl, Inc. in West Chester, Pennsylvania, says compensation programs are trending towards performance measurement. He warns that an improperly designed performance measurement program may ignore important contributions such as mentoring, public relations, and teamwork.
• Gelman, Rosenberg & Freedman rewards book of business in the traditional sense. If a partner generates a new client and another partner services it, they split the credit evenly in the first year. Thereafter the servicing partner picks up an additional 10 percent per year.
• LBA in Jacksonville, Florida, uses a subjective method of allocating profits among partners. This cultivates teamwork.
• Underperforming partners cannot be motivated through compensation, according to Scholl. J.H. Cohn uses mentoring and coaching. Compensation may be adjusted, but if there is no improvement, the partners are asked to leave.
• Scholl says retirement payments should be related to client retention.

Non-equity partners:

• Non-equity partnerships can be a method of transitioning people to full partnership.
• Scholl says this is a way to keep people who are contributing, but not qualified to be a full partner.
• Rosenberg expects increasing use of non-equity partnerships. It provides more leverage for full partners. It solves the need for a title for those who don’t generate business and/or who can’t or won’t make the necessary investment.
• J.H. Cohn has partial equity partners. Over time they may be moved to full equity.
• Boomer prefers the corporate form of organization as one that promotes a shared vision.
• TFG, CPAs in New York, believes senior partners should relinquish some compensation in favor of new partners who otherwise have no incentive to become partners.

From Practical Accountant, May 2006, 800-221-1809. For the complete article, click on the following link: http://www.webcpa.com/article.cfm?articleid=20001&;pg=pracacc.