Use a Bonus System to Generate Trust, Performance, and Profitability

Trust is important in retaining team members at every business, especially CPA firms—and one of the best ways to build and preserve trust is through an equitable, dynamic, transparent compensation system.

Many CPA firms put significant effort into performance reviews and gathering market information on salaries. But they spend little time on optimizing and upgrading a bonus plan that is clearly understood, results-based, and keeps the best interests of both team members and the firm in mind.

Summer is a perfect time to work on your bonus plan. Here are some valuable—and thought-provoking—components to address.

1. Reward teamwork. Firms have goals for tax season or the year. Meeting or exceeding the goal(s)—project-, department-, or firm-based—should result in bonuses for everyone. Assign achievements a value so all know the value and how the value will be allocated. Depending on the goal, if Partners are part of the project team, success should be a part of their individual bonus plan.

2. Motivate teams toward M&A integration/transition success. Getting two firms aligned takes a lot of work by everyone. Create a bonus for different elements of integration or engagement transition. The bonus can be a fixed amount or a percentage of billings. Again, Partners need to have skin in the game so they should be bonus-eligible for this goal.

3. Inspire creativity and collaboration. Bonuses usually rely on straightforward metrics. Think outside the box. Goals might focus on troubleshooting and avoiding common firm bottlenecks or team collaboration that benefits clients and the firm. Establish bonuses for different firm goals and successes.

4. Foster delegation and efficiency. Encourage more efficient ways to work. From involving other staff in client work to free up CPA time to offshoring common tasks and projects, tie bonuses to these types of successes and efforts.

5. Encourage self-growth. Whether team members want to become more knowledgeable (or certified) in new service offerings or they want to give back to communities to bolster firm reputation, encourage personal goals that provide a common win-win for all.

Of course, the firm must decide how large the bonus pool will be in total—and management should clearly and transparently articulate the goals and rewards to inspire effort, build trust, and add profitability.

Bonus plans, when engineered correctly, will produce a better business and the profits to handsomely reward. The Partners/Owners need to be programmed as much as the staff. Be creative and practical about what to stimulate and review your plan every year.

PE and other new investors are bringing new twists to compensation. All firms must do the same.