Tailoring Your Partner Compensation Plan

A partner compensation plan is one of your most effective management tools and yet many firms don’t maximize its usefulness. According to Esposito CEO2CEO advisory firm, your partner group can be visualized on a bell curve, falling into four quartiles. Understanding where they fall can help improve your compensation design to make it vital to your bottom line.

In the first quartile, you have the high performers who produce outstanding contributions to the firm on a consistent basis, your go getters. Their contributions might be in maintaining excellent client relationships, consistent new business development or mentoring younger staff and firm administration. These are the partners who receive large year-end bonuses and generally are the firm’s highest earners.

In the second quartile, you have the solid performers. They are reliable team players who do their best and are sincere in furthering the success of the firm. More than likely these partners are a combination of seasoned equity partners and up and coming non-equity partners. They are worth every penny that they get in compensation.

In the third quartile, you have the journey men. These partners give you a solid performance and do what they can to further the firm but may possess qualities of an employee rather than an owner of the business. They usually aren’t the lead partners on client relationships because they are not as effective, only occasionally bringing new business.

In the fourth quartile, you have partners who are poor performers for a host of different reasons. Perhaps they no longer possess the necessary drive, or never had it to begin with.

Esposito CEO2CEO believes that firms need more than 50% of its partners in the first and second quartile to realize your firm’s full potential and should make changes as necessary, especially if it has more than half of your partners in the third and fourth quartiles.

To continue this momentum, using your partner compensation plan to reward desired behaviors can move the firm’s bottom line. Esposito CEO2CEO suggests:

  • Rewarding partners who covet clients for their own rather than for the firm does nothing to encourage a cohesive atmosphere. Similarly, rewarding an “eat what you kill” environment, won’t build a firm that can remain independent in the long run.
  • Tolerating poor client billing and collecting habits not only tells the compliant partners that you aren’t serious about the firm’s stated policies, but you may risk losing other high performers who don’t respect leadership with inconsistent management.
  • Staff evaluations should be timely to cut down on unnecessary turnover. This should also include the ability to have upward partner evaluations to moderate potential staff abuses.
  • Make sure you are paying your top performers their market value, rather than sprinkling the bonus pool to fourth quartile partners.

Of course, there is no perfect partner compensation plan, but if your plan doesn’t address these success factors, you probably aren’t rewarding the necessary behaviors that will enable you to compete in the future.

IPA Spotlight On … Dan Gardiner, P&N

Name: Dan Gardiner
Firm: Postlethwaite & Netterville (P&N)
Title: CEO and Managing Director-Elect

Accomplishments:

Dan Gardiner

Dan Gardiner

  • Selected as incoming Chief Executive Officer and Managing Director of one of the largest CPA and consulting firms in the Gulf Coast and the only IPA 100 firm based in Louisiana
  • Leads P&N’s tax and consulting services groups to provide innovative business consulting services for clients throughout Louisiana
  • Serves as president of the Baton Rouge Chapter of the Society of Louisiana CPAs.
  • Served as corporate controller for a regional consumer packaged goods and distributions company and as corporate controller and financial reporting manager for a publicly traded international leasing company

It will be one year until you take over the top role at the firm. How are you preparing now?

Our firm has a well-defined succession process, which began over a year ago. In this last year of the transition, I will continue to work alongside P&N’s current CEO, Bill Balhoff, and the executive team on the strategic initiatives of our firm. Our firm was founded on the principle of providing the highest quality client service and that principle has been the hallmark of our growth and success over the years. A good portion of my time this year will be spent ensuring that our team knows that our culture and our foundation will not change with this transition.

P&N is a fast-growing firm and the largest based in Louisiana. With one office outside the state, in Houston, is the firm planning to expand in that area?

While we’ve had a Houston office for just over two years, we have had a strong client base for much longer, and are continuing our plans for growth in that market. Our main focus is ensuring our clients receive the highest in quality service. We have very talented resources in Houston and expect to continue our expansion of all service areas, assurance, tax, consulting and technology, in the greater Houston area. While we have growth goals for each our markets, we are more focused as a practice on having the right talent in place to ensure healthy growth that will lead to long-term relationships. Fortunately, given the close ties between Louisiana and Houston, we already have strong brand recognition, which is helping attract great talent.

You took an eight-year hiatus from the firm to work in industry. What did that experience teach you that you brought back to the firm?

I’ve always enjoyed the accounting profession, but in industry I did not feel the same level of passion about my work as in public accounting and consulting. For me the relationships you build with clients, the diversity of the engagements, and the focus on continual improvement are what drew me back to professional services. P&N’s consulting practice was the perfect fit for me and my experience, as it allowed me to leverage many of the experiences I had in industry. Additionally, being on the client side of the equation has reinforced to me the client service values our firm lives. I have plenty of real world experiences to share with our team members as they learn how to become trusted advisors.

As tax leader for the firm, are you concerned about automation changing the way you do business? Excited? Both?

Cognitive computing is predicted to automate or eliminate up to 40% of basic accounting work by 2020, according to Accenture. I believe that technology is going to be one of our greatest opportunities in the years to come. Automation can benefit our teams and clients by providing efficient and consistent delivery of service. In our own practice, we focus on integrating technology into business and accounting processes, which has helped many of our clients overcome significant challenges. However, I am certain that now more than ever we must have more personal relationships with our clients. Clients still want someone who can sit across the table and give them confidence that they have the professional team that can solve their challenges.

Final thoughts?

Our industry is going through tremendous change. We are doing things differently than ever before and thinking of things in different ways. And it is going to take our talented professionals to bring about the change that we need to continue to thrive as a firm. With innovation and a focus on our clients’ needs, we will be able to compete now and into the future.

Do you know someone else who would make a good Spotlight? Contact Christina Camara.

RyanSharkey Grows Assurance and Advisory Practice

RyanSharkey (FY16 net revenue of $7.6 million) of Reston, Va., welcomes Michael Davis as a director in its assurance and advisory practice.

Davis has more than 18 years of experience partnering with management teams of both public and privately held entities, assisting them with their accounting, financial reporting and other business needs. He has extensive experience working with companies in manufacturing and distribution, government contracting, emerging technology and life sciences industries.

Davis advises executive management teams, ownership groups and board of directors in such areas as complex financial reporting and regulatory landscapes both domestically and internationally. Specific areas of his expertise include revenue recognition, stock-based compensation, debt and equity transactions, and compliance with SEC regulations.

“Mike has demonstrated remarkable expertise, resourcefulness and leadership in advising clients on complex accounting, financial reporting, mergers and acquisitions, and other domestic and international business matters throughout his career,” says Edward Ryan, financial advisory partner and co-founder.

New ACCA Report: Ethical Behavior Should Be at Core of Business in Digital Age

The Association of Chartered Certified Accountants (ACCA) released a global survey, “Ethics and Trust in a Digital Age.” It raises questions about how prepared businesses are to face new ethical challenges, such as ransomware attacks, crypto-currency transactions, intellectual property disputes and customer privacy.

“Professional accountants are often on the front line of facing ethical questions in business,” says Maggie McGhee, director of professional insights at ACCA. “What is clear is that the digital age creates new dilemmas where there are no easy answers. If you’re working in a business considering whether to start accepting bitcoin payments, or implementing cloud-based customer records, these are crucial questions. In the digital age, there needs to be more – not less – importance placed on the ethical and professional judgment of individuals.

“What many are calling for is guidance and leadership on how to respond. All those involved in decision-making levels in business should be aware of how new technologies can affect their reputation and consider how to support their employees in doing the right thing.”

The report features a series of short case studies exploring the ethical questions raised for accountants and auditors by digital technology. It offers guidance through assessing the scenarios alongside the five fundamental principles for professional accountants established by the International Ethics Standards Board of Accountants.

The survey explores six digital themes:

  • Cybersecurity
  • Platform-based business models
  • Big Data and analytics
  • Crypto currencies and distributed ledgers
  • Automation, artificial intelligence and machine learning
  • Procurement of technology solutions

The survey found that while 77% noted that ethics was a “very important” skill in the digital age, about one in five respondents reported that they had personally felt pressure to compromise their ethical principles in the preceding year. These responses revealed that the most commonly compromised principle was that of integrity, being straightforward and honest in all professional and business relationships.

“The professional accountants of the future will need, in addition to technical capability, a rounded skill set that demonstrates key quotients for success in areas such as experience, intelligence, creativity, digital skills, emotional intelligence and vision. And at the heart of these lies the ethical quotient,” says ACCA’s Warner Johnston.

The survey found that in the United States:

  • 90% noted that strong ethical principles and behavior will become more important in the digital age.
  • 94% found that ethical behavior helps to build trust in the digital age.
  • 89% felt professional accountants act in the public interest.
  • 92% felt that professional accountants upholding their code contributes to organizations’ abilities to uphold ethics.
  • 99% felt that International Ethics Standards Board of Accountants principles still apply and remain relevant in the digital age.

LBMC Admits Hendrickson as Partner in Information Security Division

Drew Hendrickson

Drew Hendrickson

Brentwood, Tenn.-based LBMC (FY17 net revenue of $89.8 million) admitted Drew Hendrickson as a partner in the firm’s information security division.

Hendrickson has more than 12 years of experience as an information security professional and IT assurance expert helping clients manage their security program within the context of the business’ overall risk environment.

“Drew’s promotion to shareholder is well deserved and a tremendous asset to our clients and LBMC,” says Thomas Lewis, shareholder-in-charge of information security division. “Drew’s expertise in assurance services, along with his leadership with the AICPA IT assurance and information security specialty groups, is unmatched in our local marketplace.”

Hendrickson has contributed to the growth of the firm through his leadership in both service organization control and health information trust alliance practices. He has worked directly with the AICPA in the development of training materials for information security advisors with a CPA or financial accounting background. Additionally, Hendrickson led the information security team in the development of the new AICPA cybersecurity advisory course.

PKF O’Connor Davies Expands Harrison Leadership Team

George Whitehead

George Whitehead

New York-based PKF O’Connor Davies (FY16 net revenue of $146.6 million) has promoted George Whitehead and Ann Buscaglia to leadership roles in their Harrison, N.Y., office.

Whitehead was named PIC of the Harrison office, while Buscaglia was named PIC of tax in that same office. The newly created roles are designed to create greater levels of collaboration and oversight as the firm continues to grow its Harrison presence and expand the firm more broadly moving forward.

“We continue to grow as a firm, and promoting partners of this caliber is the logical next step as we look to foster new levels of collaboration, mentorship and leadership amid this ongoing expansion,” says Kevin Keane, MP.

Ann Buscaglia

Ann Buscaglia

In his new role, Whitehead will oversee the day-to-day management of the Harrison office, focusing on growth and the surrounding efficiencies, including scheduling, staffing, budgeting and forecasting. Whitehead brings more than 20 years of leadership and administration expertise to the role. He is also a member of the firm’s quality control team and accounting and auditing committees.

Buscaglia, who has more than 20 years of tax experience, will oversee the day-to-day management of the office’s tax group, including staffing, training, scheduling and systems to be used within this group.

PKF International Announces JLK Rosenberger as New Member

PKF International announced the addition of Irvine, Calif.-based JLK Rosenberger (FY16 net revenue of $8.8 million) as a new member firm in North America.

“With a global network of over 400 offices operating in 150 countries across five regions, our PKF membership strengthens our clients’ opportunities as they expand their businesses into international markets,” says Mike French, MP of JLK Rosenberger.

“This addition is a valuable continuation of our strategic plan to develop in the key economic centers of Los Angeles and Dallas. JLK Rosenberger demonstrates specialized industry knowledge, attentive service and a comprehensive understanding of the value of the PKF brand,” says John Sim, CEO of PKF International.

Scarborough Joins Whitley Penn as Tax Partner

Gary Scarborough

Gary Scarborough

Fort Worth, Texas-based Whitley Penn (FY16 net revenue of 83.6 million) announced that Gary Scarborough has joined the firm’s Austin, Texas, office as a tax partner.

Scarborough has more than 16 years of experience providing accounting, tax and financial planning services. His areas of practice include tax compliance, consulting and financial planning for closely held and family-owned businesses, high-net-worth individuals, and medical and professional services firms.

Frazier & Deeter Opens Las Vegas Office

Atlanta-based Frazier & Deeter (FY16 net revenue of $74 million) announced a new office in Las Vegas.

“As we have grown to serve clients in all 50 states and internationally, we’ve recognized the need for a physical office in the western region,” says Seth McDaniel, MP.

The Las Vegas office will be led by Brandon Sherman, a partner in the process, risk and governance practice and the leader of the firm’s hospitality and gaming practice.

Tax partner Andy Burnett will provide leadership for the Las Vegas tax practice. Burnett specializes in assisting privately held businesses and high-net-worth entrepreneurs and executives with tax strategies. He is one the leaders of the firm’s family office practice.

Frazier & Deeter offers a suite of services that include public and private company audit, business and personal tax advisory, forensic accounting, transaction advisory, governance/compliance, cybersecurity and IT audit. The firm’s clients include public and private companies across all industries, as well as high-net-worth individuals, trusts and investment funds.

Accounting for Corporate Culture

According to a Robert Half Management Resources survey, 51% of CFOs said they play at least some role in shaping corporate culture. Executives reported taking several steps, including using their firm’s values to guide their actions and helping develop the organization’s mission and define the desired environment.

CFOs who reported being somewhat or very involved also were asked, “How are you involved in shaping your company’s corporate culture?” Their responses:

  • 83% use company principles and values to guide actions
  • 79% contribute to the development of the company’s mission
  • 78% collaborate with other executives to define the desired culture
  • 76% speak regularly with employees about the culture
  • 72% contribute to training and onboarding programs

“CFOs enjoy vast influence throughout their organizations – more than many people probably realize. Proper financial reporting and management set a model for the firm’s business, ethics and corporate culture,” says Tim Hird, executive director of Robert Half Management Resources. “Financial executives looking to advance must go beyond leading the finance function and show an ability to foster a positive corporate culture. Start by setting the right example and grow your involvement from there, including working with employees to define what is best for the firm.”