Want Better Performance? Fix Your Firm’s Pay Policies

Jack Humphrey, Regulatory journalist
September 25, 2012 /

You can’t run a successful business without a sound strategic plan tied to established goals. Yet many leaders of professional services firms fail to create that same alignment when it comes to the compensation of employees who carry out the plan. The result: Missed opportunities for driving consistent, superior performance.

Merely tweaking flawed pay policies won’t help, according to the authors ofPerformance is Everything: The Why, What, and How of Designing Compensation Plans, a new book from the American Institute of CPAs. Firms should be taking a holistic approach to compensation that explicitly ties pay to performance.  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 the help. Among the book’s findings:

  • 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, and they know it – over 50 percent of firm owners are dissatisfied with their current compensation system.
  • Most firms don’t have written goals in place that tie back to bonus compensation. Using seat-of-the-pants rewards often guarantees haphazard results.
  • A compensation overhaul is not a one- or two-year process, and requires plenty of one-on-one communication between firm leaders and employees. Some staffers may not buy into 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 top consultant and executive coach for the accounting profession.


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