Partner compensation, often one of the most difficultaspects of operating a CPA firm in terms of determining who brings value anddrives growth, must be clearly defined and tied to accountability.
"Too often, a firm's partner compensation programoften drives different objectives," said Tim Michel, principal of MichelConsulting Group and a former managing partner at a Top 100 Firm. "A planneeds to reward results, not just efforts."
Michel's remarks came during a session titled"Linking Partner Accountability and Compensation Structure" duringthe AICPA Practitioners Symposium & Tech+ Information TechnologyConference, here.
"You need to keep the plan simple," Michelsaid. "Differentiate between the top and average partners. Determine ifthe partner goals are aligned with the firm goals. You also have to decide ifyou want an open or closed compensation system."
He advised against such compensation plan types as equalpay systems, which can encourage complacency and may result in the exit oftop-performers, or plans in which the ownership percentage is heavily weighted,as that both creates a sense of entitlement and removes valuable dollars fromthe bonus pool.
Conversely, plans that are heavily weighted toward highproduction often result in the creation of "silos" or"empires" and may spark high-producing partners to assume a"Lone Ranger" mentality in going after new business.
"Partner activities that bring value to the firminclude things like leadership, creating a vision and growth culture,developing a good client base, and coaching/mentoring," Michel said."A partner accountability plan is basically a contract between the partnerand the firm, and the design is a joint effort. The goals must be SMART(specific, measurable, attainable, realistic and timely) and it must beunderstood by all partners. Clear communication is essential."
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