CPA Firms’ Partner Compensation Systems
is the law of life. And those who look only to the past or present
are certain to miss the future.
- One changing area of the CPA profession is the allocation of
income among partners. A severe shortage of staff and the specter
of succession planning have led to a major new focus on staff
development and mentoring. CPA firms also continue to see the
benefits from effective management and leadership. Partners are
seeing that living and breathing their strategic plan and core
values, instead of giving them lip service, really pay off.
overlapping circles in the Exhibit
illustrate management practices that, historically, have been
largely disconnected. For years, many firms have diligently prepared
their strategic plans and outlined their core values, all encased
in a lovely booklet. Not only didn’t the partners live and
breathe the goals and core values, but the goals and values had
almost nothing to do with how the partners were paid or evaluated.
Today, firms see that strategic planning can make a difference,
but only if there is accountability for achieving goals, in the
form of partner compensation.
and mid-sized CPA firms, only a very small percentage of partners
are formally evaluated on their performance. And at firms that
do evaluate partners, very little if any of the firm’s income
is allocated based on the results of those evaluations. Today,
however, firms increasingly link performance assessment with partner
Income Based on Factors Other than Production
will always be an important factor in allocating income. But firms
need their partners to perform in a number of other areas as well:
and younger partners advancing under a partner’s tutelage;
clients to other firm members better able to serve the clients;
world-class service to clients;
that the firm’s larger clients have multiple relationships
within the firm; and
a good partner—treating people respectfully, representing
the firm’s core values, and complying with firm policies.
performance attributes are impacting income allocation, instead
of being ignored.
- For seven-partner
firms and up, formula methods are being abandoned in favor of
compensation committees, which are better able to reward intangible
is less emphasis on a “book of business,” more emphasis
on working as a team to service clients.
of strategic planning, partner evaluation, and partner compensation
occurs, instead of the three being disconnected.
Rosenberg, CPA, is president of Rosenberg Associates, a
management consulting firm serving the CPA profession. He works
with firms on partner compensation, retirement and succession planning,
mergers, retreats, strategic planning, and practice management review.
He can be reached at email@example.com.
This article is adapted from the firm’s newsletter, The
Management Catalyst. Used with permission.
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