Compensation as a Strategic Asset

CHAPTER 7CURRENT COMPENSATION METHODS

“Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.”

—Donald Trump

“The Donald” perhaps understood the nature and culture of public accounting firms when he wrote the above. While money isn’t the be all and end all, it certainly influences owner behavior.

In the beginning of time, two CPAs came together, decided to share profits, and began the never-ending evolution of owner compensation systems.

It goes without saying that many of the compensation systems we discuss in this chapter have served firms well over the years and have served as a catalyst for accomplishing firm goals. At the same time, however, they may have inadvertently served as roadblocks that prevent firms from reaching their full potential.

In our 2006 Compensation Survey, we identified 10 often-used compensation systems and asked respondents to identify their plan if it was not listed. Of the 423 respondents, 55 selected the “other” category, which demonstrates the great variety of compensation systems. The “other” category was the third most selected.

The following chart shows responses to our 2006 Compensation Survey, ranked from highest to lowest, to the question, “What type of owner compensation system does the firm currently use?”

Method	Response Percent	Response Total
Formula (firm uses algebraic formula to determine compensation)	17.7%	75
Equal pay	15.8%	67
Other (combinations of the other methods) ...