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Compensation as a Strategic Asset by Coral L. Rice, August J. Aquila

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CHAPTER 9DESIGNING A NEW COMPENSATION SYSTEM: ATTRACT, REWARD, AND RETAIN TOP PERFORMERS

“While compensation is unlikely to drive performance, inequitable compensation decisions hurt morale and consequently diminish performance.”

—James D. Cotterman

In this chapter we explore a process you can use to design the right compensation system for your firm. We provide you with the process rather than the answer because, as we have noted, there is no single best compensation system for every firm. Before we get into the design section of the chapter, we look at some key learnings about owner compensation. The chapter closes with suggestions on rolling out a new compensation plan, incentive plans, and noncash rewards.

KEY LEARNINGS

We review key learnings with the hope it will help you understand and evaluate your own compensation system before attempting to replace it with a new or improved system.

The Search for the Holy Grail

According to legend, people have been searching for the ideal—the Holy Grail, the Fountain of Youth, El Dorado—for ages, with little or no success. As far as we know, public accounting firm owners have also long searched for the perfect compensation system with limited success. While there are no doubt countless reasons for this lack of success, the primary reason is likely that compensation systems involve human beings. We could say there is no perfect compensation system because there are no perfect human beings, but we believe saying so is an oversimplification. ...

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