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Green umbrella

Bonuses and profitability: The profession lacks imagination

19th Mar 2018
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A recent article inspired by a survey from Hays ascertained that over 50% of finance professionals were apparently unhappy with their salary (what’s wrong with them? Why not 100%?) and a similar percentage expects to change jobs in the next year.

It also contained the telling statement: “two-thirds of finance professionals admitted that they had not received a performance-related bonus over the past year”.

I am a firm believer in rewarding accountants based on their performance. In particular, those in senior roles are likely to respond positively to an incentive-based payment for bringing in new clients or working efficiently, even when this is attached to a lower base salary.

In my opinion, anyone who is aspiring to become partner or as already a salaried partner and is happy to settle for a handsome pay package that involves no element of risk if they underperform is probably not worth having.

Over the years, I have been rewarded in almost every way that anyone can conjure up. A long time ago now, I was a junior employee paid a basic salary but with the hope of at least a modest bonus every Christmas.

Subsequently, I climbed the ladder to senior managerial status and then salaried partner, at which point it was agreed that a reasonable proportion of my salary would be geared to new work that I managed to generate for the practice.

After that, I was relatively quickly promoted to equity partner, where for the most part my remuneration was determined by the (poor) performance of colleagues rather than my own achievements. This could be frustrating, to say the least. and latterly I was given the opportunity to change my status and pay structure such that, once again, and to a greater extent than ever before, my reward was geared to the goals of the firm in my own level of achievement.

This proved to be mutually beneficial, as I received the most that I had at any time in my career, including all of the years when I was an equity partner.

I would urge anyone running a firm of accountants to look at their staff members and determine which ones are the most valuable. They should immediately be sounded out not only about long-term career prospects but also the extent to which they are willing to back their own skills.

Anyone who regards themselves as a potential highflyer should be willing to take (say) a 10% cut in pay in exchange for a contractual bonus arrangement that will indisputably give them two or three times as much, should they deliver on the promises. Clearly, this is something of a risky strategy for all parties, particularly in an uncertain economic climate. However, I would be willing to wager quite a handsome sum on the fact that this kind of approach will increase the income and profitability of any firm that is willing to back its best performers to take it to the stars.

In reality, far too many firms are staid and shortsighted, meaning that they are unwilling to offer any kind of meaningful bonuses to employees. This is because they perceive a bonus to be an additional cost, rather than looking at the other side of the equation and determining that even if they offer 25% of additional income to those who bring it in, they will be much better off in the long run. Not only will they benefit from the extra 25% but if the new clients are there for the duration, recurring fees will keep the firm going for years to come, with the promise of a handsome payment if the client needs significant help, for example on a company sale or tax investigation.

As far as I can see, there is no downside to this advice, if it is used judiciously to encourage good managers to aspire to become the partners of the future. You know it makes sense so why not take action now?

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