Accounting firms need to fix their flawed compensation policies by linking pay to performance, according to a new book published by the American Institute of CPAs.

Merely tweaking flawed pay policies won’t help, according to the authors of "Performance is Everything: The Why, What, and How of Designing Compensation Plans." Firms should be taking a holistic approach to compensation that explicitly ties pay to performance, the book argues. Systems that do this reward star employees, ensure they stay in the fold, and make the firm more attractive to talented recruits.

“Rewards are not something you consider at the end of the year, they are an integral part of firm management,” write the co-authors, August Aquila and Coral Rice. “Our objective is for you to take that understanding and mold it to your own practice.”

Many firms could use help with their compensation structures, according to Aquila and Rice. Compensation is a firm’s largest expenditure, so it’s critical to make sure the money gets spent productively.  Few firms do a good job managing pay policies, the authors noted, and over 50 percent of firm owners are dissatisfied with their current compensation system.

Most firms do not have written goals in place that link back to bonus compensation. Using an impromptu rewards system often guarantees haphazard results. A compensation overhaul is not a one- or two-year process, and requires a great deal of one-on-one communication between firm leaders and employees. Some staffers may not accept the changes and will leave the firm.

This is the second book on compensation by Aquila and Rice. Aquila leads Aquila Global Advisors, a full-service consulting firm for accounting and other professional services firms. Rice is a consultant and executive coach for the accounting profession.

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