Compensation as a Strategic Asset The New Paradigm

Everyone wants to work at a successful firm where the rewards are both financial and professional.  What makes the top firms successful is not merely superior execution, though that's a good place to start, what makes them stand out is excellence at hiring and keeping the best, and having a smart succession plan in place.  Partner compensation can be an effective tool in achieving these goals.

Authors Aquila and Rice show how to use recruiting, retention, goal-setting, evaluation, and pay for performance practices recommended by the top CPA firm management consultants.

This is the one guide you need, tailored specifically for professional practices, to implement the leading methods to align compensation with performance and strategic initiatives.

You get:

• Analysis of leading views on performance management, hiring, and retention
• Specific, step-by-step guidance on how to implement compensation systems that align to goal-setting and performance measurement
• Methods for growing the compensation pie to pay for excellent results

Compensation as a Strategic Asset shows how to align mission, vision, values, strategy, leadership, goal-setting, performance management and compensation to achieve long-term success at your firm.

August J Aquila, an internationally known consultant, speaker, and author, has held leading positions in the accounting profession for more than 25 years. He currently heads AQUILA Global Advisors, LLC, a full-service consulting firm to accounting and other professional services firms.

Coral L. Rice is one of the accounting profession’s top consultants and executive coaches in the areas of organizational development, compensation, and learning. She serves as a global senior consultant in FranklinCovery’s 4 Disciplines of Execution practice and has served both Fortune 100 and smaller clients in a variety of consulting roles.

PREFACE xiii

ACKNOWLEDGMENTS xvii

CHAPTER 1 Why We Need a New Compensation Paradigm 1

Paradigm Shifts in the Accounting Profession 1

Paradigm Shifts in Owner Compensation 7

Final Thoughts 11

CHAPTER 2 How to Grow the Compensation Pie: The Leadership Factor 15

What It Takes to Be a Leader 16

What Leaders Do 16

How to Be a Leader 20

Final Thoughts 20

CHAPTER 3 Growing the Compensation Pie: The Big Picture Factor 23

The 7S Model 23

Applying the 7S Elements to Accounting Firms 25

The Organizational Effectiveness Cycle 26

Final Thoughts 28

CHAPTER 4 How to Grow the Compensation Pie: The Mission/Vision/Values Factor 31

Determining Mission and Vision 31

Developing Values 34

Final Thoughts 35

CHAPTER 5 How to Grow the Compensation Pie: The Balanced Scorecard Factor 37

The Balanced Scorecard 37

Building the Scorecard 41

Strategy Maps 46

Final Thoughts 48

CHAPTER 6 Compensation Terminology and Criteria 51

Compensation Terminology 51

Total Compensation 57

Compensation Criteria 58

Final Thoughts 66

CHAPTER 7 Current Compensation Methods 71

Formula Method 73

Equal Pay Method 75

Lockstep Method 76

Hybrid Approach Method 77

Managing Owner Decides Method 77

All Owners Decide Method 78

Ownership Percentage Method 79

Pay for Performance Method 80

Eat What You Kill Method 80

Compensation Committee Method 81

Executive Committee Method 83

Pen and Paper Method 83

Final Thoughts 83

CHAPTER 8 Designing a New Compensation System: It’s About People 95

The War for Talent Is Not Over 95

Get the Right People on the Bus 98

Final Thoughts 101

CHAPTER 9 Designing a New Compensation System: Attract, Reward, and Retain Top Performers 103

Key Learnings 103

What Makes a Good Plan 105

Designing a Compensation Plan 107

Rolling Out the Plan 109

Incentive Plan Success Factors 109

Include Noncash Rewards 110

Final Thoughts 111

CHAPTER 10 Setting Goals and Managing Performance 113

“Line of Sight” or Cascading Performance Goals 113

Set Cascading Performance Goals 115

Prepare to Write Cascading Performance Goals 116

Write Cascading Performance Goals 117

Define Measures of Success for Cascading Performance Goals 118

Categories of Cascading Goal Measures 119

Set Tasks and Action Steps 123

Determine Personal Readiness Level 124

Prepare Final Cascading Performance Goals 125

Manage Performance 125

Final Thoughts 127

CHAPTER 11 Is a Pay for Performance System Right for You? 133

Pay for Performance Challenges 133

Performance-Based Compensation Is Not a Silver Bullet 135

Getting Started—Diagnose Before You Design 136

Goals and Attributes of an Effective Compensation System 136

Building a Pay for Performance Plan 137

Structuring a Pay for Performance Compensation System 140

Providing Feedback in a Pay for Performance

Compensation System 143

Translating Performance Into Compensation 144

Effects of a Pay for Performance Compensation System 144

Final Thoughts 144

CHAPTER 12 Pay for Performance: Align Compensation to Firm Initiatives 151

Only Performance Is Reality 152

Align Compensation to Strategic Goals 152

Real-Life Example One—A Firm in Transition 153

Real-Life Example Two—One Managing Owner’s Wake-Up Call 154

Real-Life Example Three—Needed: Firm Growth; Challenge: How to Get There 156

Real-Life Example Four—Tiered Reward System 157

Real-Life Example Five—Compensation System in a Mid-Sized Firm 157

Real-Life Example Six—Using the Balanced Scorecard 158

Final Thoughts 159

CHAPTER 13 Compensating the Managing Owner 167

What Is a Managing Owner Worth? 167

What Is an Administrative Owner? 173

What Is a Real Managing Owner Worth? 173

What Are Managing Owners Paid? 173

Final Thoughts 173

CHAPTER 14 What Will You Do Tomorrow? 175

Four Keys to Success 175

Considerations 176

Benefits 177

Final Thoughts 177

APPENDIX 2006 Owner Compensation Survey 179

BIBLIOGRAPHY 187

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