Compensation as a Strategic Asset

CHAPTER 12PAY FOR PERFORMANCE: ALIGN COMPENSATION TO FIRM INITIATIVES

“While many compensation systems are constructed to be fair, few are ever constructed to be strategic.”

—August Aquila

According to a white paper titled “Best Practices in Recruiting and Retaining Talented Staff,” from the AICPA Private Companies Practice Section, the AICPA Alliance for CPA Firms, 75 percent of responding firms do not have a documented pay for performance plan that aligns compensation with firm strategic initiatives. The fact that 53 percent of the firms responding to our 2006 Compensation Survey do not tie owner compensation to achievement of their strategic plans was one of the most surprising findings. Almost 10 percent of the firms responding to our survey tie compensation to achievement of their strategic plans, and the rest (37.5 percent) responded by saying the owner compensation system is tied to achievement of the strategic plan to some extent.

As a result of Coral’s work with Conner Ash P.C., we have evidence that firms can significantly increase net income per owner when owners and employees are aligned with the firm’s strategic plan and have cascading performance goals. According to Howard Rosen, principal and president, “The results have been better than we ever expected. Our associates have really embraced the program, and everyone’s income is up far more than would have otherwise been possible. Nonowner bonuses have averaged more than 17 percent of compensation, and owner income ...