Vol. 7 No. 7, July 2015
The Leadership Forum is a panel of the most prominent thought leaders in the profession. Each month we ask them to respond to a question dealing with CPA firm management and leadership.
This month's question is:
Some firms' partner compensation has both a base and bonus, mutually exclusive. Other firms have only one income number for each partner; they get a salary or draw during the year and a year-end distribution that adjusts the salary or draw to what it should be, based on each partner's performance for the year. What's better: A one-tier or a two-tier compensation system?
Consultants and Other Prominent Observers
| August Aquila | AQUILA Global Advisors, LLC | www.aquilaadvisors.com [email protected] |
| ...A good compensation system aligns a partner's compensation with the firm's strategic or annual goals - increasing revenue and profitability, bringing in new business, developing people and adding value to the enterprise. Partners who help the firm achieve these goals should be rewarded more... More | ||
| Rich Rinehart | Grant Partners, LLC | www.grantptrs.com [email protected] |
| In my experience, a two tier system provides certainty through base compensation, rewards individual performance through bonuses and offers flexibility to the firm to adjust for fluctuations in cash flow and firm performance... More | ||
| Marc Rosenberg | The Rosenberg Associates | www.rosenbergassoc.com [email protected] |
| ...The key question: How important is it to the firm to avoid partners becoming complacent and/or coast? If it's very important, then the two tier system is the way to go. But if it's not important, then perhaps the one tier system will work best... More | ||
| Rick Telberg | CPA Trendlines Research | www.cpatrendlines.com .com |
| ...It could be one-tier, two, three or more. The details will be unique to every firm, and maybe even every partner. The fact is, no business can remain static; neither can the strategy or the comp system. Every partner has a role to play... More | ||
| Jennifer Wilson | ConvergenceCoaching, LLC | www.convergencecoaching.com [email protected] |
| I think a compensation system that offers a clear incentive component -- based on specific, individualized success measures (results) is always best... More | ||
Firm Leaders
| Ed Fahey | RINA | |
| We are a corporation and use the salary plus bonus. Salaries are set based on contributions to the firm over time. Bonus is based on accomplishment of goals and annual success of the firm... More | ||
| Steve Wasserman | Gursey Schneider LLP | |
| Compensation systems should be in place to motivate and reward partners to do what is in the best interest of the firm. If the base compensation is too large in a two-tier system then there is not enough at risk compensation (bonus) to motivate partners to perform... More | ||