Five Steps to a More Effective Compensation System

Source: The Marc Rosenberg Blog

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

Here are some observations based on my experiences consulting with hundreds of CPA firms on partner compensation:

Compensation systems must be performance-based. When performance doesn't impact compensation, it demotivates the better performers and encourages others to coast.

Helping staff grow must be an important factor in allocating income. The partners are the only ones who can develop and mentor the staff. Yet rare is the compensation system that gives even token recognition to the impact made by partners in retaining, training, and mentoring staff and helping them grow.

Strategic planning should play a critical role. It's no wonder that CPA firms struggle with strategic planning: there is very little incentive for partners to do what their firms need them to do.

Compensation levels of partners should reflect both historical and current performance. It's common for partners to build up impressive personal production statistics and then essentially rest on those laurels. The best way to address this is by splitting compensation into two parts: a base, recognizing historical or cumulative achievements, and a bonus that rewards current performance.

Individual production shouldn't be weighted so excessively as to render all other accomplishments unimportant. While few would argue the significance of partner production, firms make a big mistake when they fail to give meaningful recognition to intangible aspects of performance.

For the complete post, read “5 Secrets of Great CPA Partner Compensation Systems.”

From The Marc Rosenberg Blog, May 9, 2012, http://blog.rosenbergassoc.com/.