Operating-Model Flaws Guaranteed to Complicate Partner Compensation: Flaw 3 of 3

Marc Rosenberg, CPA / Oct 19, 2020

One of the nuances of partner compensation is how to reward partners who are able to add value to the firm in many ways. In our third blog on this topic, we discuss the inherent time conflict between managing a firm well, serving a large client base, and developing a significant amount of new business.

Image of a check mark and the letter xOperating Model Flaw #3: Partners trying to manage the firm and clients at the same time. It’s kind of comical. Often, the firm’s Managing Partner is the best business-getter or manages the largest client base AND is supposed to manage the firm at the same time. The math doesn’t work. Managing and growing a robust client base at a growing CPA firm is a full-time job and then some – partners average 2,450 total work hours every year. So it stands to reason that if one of these partners also serves as the MP, then something’s got to give – either they spend less time on client affairs or on managing the firm. The sad reality is almost always, firm management suffers.

How flaw #3 impacts partner compensation. Many firms’ partners are too narrow-minded about appreciating the value of their MP. They agree that one of them should be the MP, but to maintain the compensation of this person, the MP is often expected to carry close to the same client load as those who have no role in firm management. It’s not fair to the MP and especially, it’s not fair to the firm. Those serving as MP should not only be expected to reduce their client load, but they should be required to reduce it. In so doing, MPs’ compensation should never be in jeopardy as their management time goes up and their client time goes down. This needs to be a tenet of the firm’s partner compensation system.

CPA Partner Compensation:  The Art and the Science explains ►Partner comp 101 ► the 12 systems used by all firms ►how to design your firm’s system ►open vs. closed systems ►the role of “book of business” ►differences between large and small firms’ systems ► the MP’s compensation ► trends and controversies and ►overall best practices.

Delegating client work to qualified partners and senior managers is a key to allowing the managing partner to do their job. Firms that implement this well will see how the firm is able to grow and fund the MP’s management stipend.

See also our related post Is an Outdated Business Model Threatening the Relevancy of CPA Firms.

Read about Flaw #1 here related to measuring partner performance. Flaw #2, related to complacency, is here.

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