Tuesday, October 12th, 2021

The Bonus Dilemma

“Whenever there is a hard job to be done I assign it to a lazy man; he is sure to find an easy way of doing It.” – – Walter Chrysler

You have heard me say it often: I’ve been around a while.

One thing that I have lived through during my 30+ years in CPA firm management is the bonus plan saga. It is like a nightmare that keeps repeating itself (like in the movie Groundhog Day):

  • As a firm grows, it begins to hire more people.
  • At first, there is no bonus plan. People get paid for their over-all performance.
  • Then, a partner has a great idea, “Let’s put in a bonus plan! It will inspire our people to do better.”
  • And then, the ones who don’t get a bonus become jealous.
  • And then, CPA firm leaders feel guilty because they are not being fair to everyone.
  • The ones who do get the bonus usually are the top performers, however, some others may get a bonus because they are creative, intelligent people who can figure out how to “work” any bonus system ever designed for a CPA firm.
  • Eventually, (and it doesn’t take too long) the plan begins to demotivate people.
  • Then, the bright idea becomes: “Let’s do away with our bonus plan and build it back into their salaries.  We’ll reward top performers with larger compensation increases.” Thus, everyone gets an unexpected raise.
  • Several years later, “Let’s put in a bonus plan!” – – – same thing all over again, eventually it is dropped again because it really doesn’t work very well and it creates a huge amount of administrative work in tracking, measuring and analyzing.

I’ve actually been through this saga about 4 times during my career.

I have very mixed emotions about bonus/incentive plans relating to basic job performance.  However, I am very much in favor of incentives for special efforts like bringing in a great new client or recruiting a top-notch, experienced CPA to the firm.

Many partners and managers resort to incentives because they think they’re smart enough to create the perfect carrot. Doesn’t usually work that way in CPA firms.

Here’s what often happens inside the firm.  If you provide incentives for billable time you will get lots of billable time. Also, every client engagement will be over budget. You want them to get billable hours, yet you want them to perform the engagement more efficiently in less time than last year. It sends mixed messages.  We don’t live in a single-variable world – especially inside a CPA firm.

Much of the challenge with developing a highly productive team does not depend on incentives.  It relates back to having skilled, effective managers.  Winning firms have managers (and partners) who continually communicate, coach, and train the younger people in the firm so that everyone understands their role and the importance of quality, timely client service.  That is what will earn them a bigger paycheck.

While some bonus plans can demotivate your people, good managers do not. Good managers motivate.  Embrace the challenging activity of continually interacting and communicating with your team members.

  • "You know what Gordie Howe got for a signing bonus? A team jacket!"
  • Ed Lauter

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