Partner Compensation Demands a Balanced Approach

Source: CPA Practice Management Forum

In this article, consultant August Aquila urges CPA firms to develop compensation plans that balance the many types of contributions partners make to the firm. Plans that focus on one type of contribution, such as rainmaking or production, are doomed to fail. After all, Aquila explains, "If all the partners were rainmakers, who would do the work? And if all the partners were production-oriented, who would bring in the business?"

Aquila also points out that some partners bring in new clients and some bring in new projects from existing clients, with each requiring different skills. Firms should seek -- and reward -- both types of partners. And partners who bring in business for others in the firm, not just themselves, should be "handsomely rewarded."

On the production side, good service should be rewarded as much as business development. The compensation plan should reward partners not just for their own production, but also for pushing down work to managers and to others in the firm. Doing so serves clients better and creates more value for the firm.

Finally, the plan should compensate firm leaders based on different criteria, such as their ability to establish the firm's vision and help other partners achieve their goals. And all partners should be rewarded for intangible contributions, such as marketing, training junior staff members, or creating new service lines.

The "art" of creating an effective compensation plan, Aquila says, is "to identify how each partner can make the firm better, stronger, and more profitable. Then, set goals . . . and set a performance budget to reward partners who achieve their goals."

For the complete article, read "Why Is It Always About Partner Compensation?"

From CPA Practice Management Forum, Vol. 8, No. 10, November 2012, p. 12.