Table of Contents

FOREWORD xi
PREFACE xiii


ACKNOWLEDGMENTS xvii


CHAPTER 1 Why We Need a New Compensation Paradigm 1


Paradigm Shifts in the Accounting Profession 1


Paradigm Shifts in Owner Compensation 7


Final Thoughts 11


CHAPTER 2 How to Grow the Compensation Pie: The Leadership Factor 15


What It Takes to Be a Leader 16


What Leaders Do 16


How to Be a Leader 20


Final Thoughts 20


CHAPTER 3 Growing the Compensation Pie: The Big Picture Factor 23


The 7S Model 23


Applying the 7S Elements to Accounting Firms 25


The Organizational Effectiveness Cycle 26


Final Thoughts 28


CHAPTER 4 How to Grow the Compensation Pie: The Mission/Vision/Values Factor 31


Determining Mission and Vision 31


Developing Values 34


Final Thoughts 35


CHAPTER 5 How to Grow the Compensation Pie: The Balanced Scorecard Factor 37


The Balanced Scorecard 37


Building the Scorecard 41


Strategy Maps 46


Final Thoughts 48


CHAPTER 6 Compensation Terminology and Criteria 51


Compensation Terminology 51


Total Compensation 57


Compensation Criteria 58


Final Thoughts 66


CHAPTER 7 Current Compensation Methods 71


Formula Method 73


Equal Pay Method 75


Lockstep Method 76


Hybrid Approach Method 77


Managing Owner Decides Method 77


All Owners Decide Method 78


Ownership Percentage Method 79


Pay for Performance Method 80


Eat What You Kill Method 80


Compensation Committee Method 81


Executive Committee Method 83


Pen and Paper Method 83


Final Thoughts 83


CHAPTER 8 Designing a New Compensation System: It’s About People 95


The War for Talent Is Not Over 95


Get the Right People on the Bus 98


Final Thoughts 101


CHAPTER 9 Designing a New Compensation System: Attract, Reward, and Retain Top Performers 103


Key Learnings 103


What Makes a Good Plan 105


Designing a Compensation Plan 107


Rolling Out the Plan 109


Incentive Plan Success Factors 109


Include Noncash Rewards 110


Final Thoughts 111


CHAPTER 10 Setting Goals and Managing Performance 113


“Line of Sight” or Cascading Performance Goals 113


Set Cascading Performance Goals 115


Prepare to Write Cascading Performance Goals 116


Write Cascading Performance Goals 117


Define Measures of Success for Cascading Performance Goals 118


Categories of Cascading Goal Measures 119


Set Tasks and Action Steps 123


Determine Personal Readiness Level 124


Prepare Final Cascading Performance Goals 125


Manage Performance 125


Final Thoughts 127


CHAPTER 11 Is a Pay for Performance System Right for You? 133


Pay for Performance Challenges 133


Performance-Based Compensation Is Not a Silver Bullet 135


Getting Started—Diagnose Before You Design 136


Goals and Attributes of an Effective Compensation System 136


Building a Pay for Performance Plan 137


Structuring a Pay for Performance Compensation System 140


Providing Feedback in a Pay for Performance


Compensation System 143


Translating Performance Into Compensation 144


Effects of a Pay for Performance Compensation System 144


Final Thoughts 144


CHAPTER 12 Pay for Performance: Align Compensation to Firm Initiatives 151


Only Performance Is Reality 152


Align Compensation to Strategic Goals 152


Real-Life Example One—A Firm in Transition 153


Real-Life Example Two—One Managing Owner’s Wake-Up Call 154


Real-Life Example Three—Needed: Firm Growth; Challenge: How to Get There 156


Real-Life Example Four—Tiered Reward System 157


Real-Life Example Five—Compensation System in a Mid-Sized Firm 157


Real-Life Example Six—Using the Balanced Scorecard 158


Final Thoughts 159


CHAPTER 13 Compensating the Managing Owner 167


What Is a Managing Owner Worth? 167


What Is an Administrative Owner? 173


What Is a Real Managing Owner Worth? 173


What Are Managing Owners Paid? 173


Final Thoughts 173


CHAPTER 14 What Will You Do Tomorrow? 175


Four Keys to Success 175


Considerations 176


Benefits 177


Final Thoughts 177


APPENDIX 2006 Owner Compensation Survey 179


BIBLIOGRAPHY 187

About the Author

August J Aquila, an internationally known consultant, speaker, and author, has held leading positions in the accounting profession for more than 25 years. He currently heads AQUILA Global Advisors, LLC, a full-service consulting firm to accounting and other professional services firms.


Coral L. Rice is one of the accounting profession’s top consultants and executive coaches in the areas of organizational development, compensation, and learning. She serves as a global senior consultant in FranklinCovery’s 4 Disciplines of Execution practice and has served both Fortune 100 and smaller clients in a variety of consulting roles.