Compensating Factors

Source: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog post by Marc Rosenberg.

Question: We are trying to restructure our compensation plan. I was wondering if you have any insight on “compensation theory” that might help us.

Rosenberg's response:

1. All compensation systems must start with strategic planning. There should be a strong link between the compensation of partners and the extent to which each partner helped achieve the vision.
2. Partners should be evaluated and compensated based primarily on:
3. Fulfilling their roles in the firm; and
4. Achieving their written goals.
5. An important factor in compensating partners is the extent to which young staff members have developed and advanced under their tutelage.
6. Formal, written performance evaluations for partners should never stop.
7. Performance criteria should be crystal clear. There are two types of performance criteria for most organizations: Production and intangibles.
8. One's total compensation should be balanced between two components: (a) base salary, which recognizes a partner's cumulative set of skills, ability, and knowhow; and (b) a bonus (at least 20 percent) for recent achievements.
9. Compensation is one way to motivate performance and behavior, but often is not the best motivator. Some partners are motivated more by the desire for acceptance and approval from their peers than by money.
10. Communication between top management and partners throughout the year is critical.

All of the above items need the leadership of strong management. It's the “glue” that holds everything together.

For the original post, read “CPA Firm Partner Compensation Theory.”

From The Marc Rosenberg Blog, August 14, 2012, http://blog.rosenbergassoc.com.