{"id":131807,"date":"2024-09-29t15:00:44","date_gmt":"2024-09-29t19:00:44","guid":{"rendered":"\/\/www.g005e.com\/?p=131807"},"modified":"2024-10-25t13:01:08","modified_gmt":"2024-10-25t17:01:08","slug":"partner-comp-earnings-gap-whats-the-right-spread","status":"publish","type":"post","link":"\/\/www.g005e.com\/2024\/09\/29\/partner-comp-earnings-gap-whats-the-right-spread\/","title":{"rendered":"partner comp earnings gap: what\u2019s the right spread?"},"content":{"rendered":"

\"people<\/strong><\/p>\n

how do you get it right at your firm?<\/strong><\/p>\n

by kristen rampe
\n<\/em>partner comp: art & science<\/i><\/a><\/p>\n

there are many reasons for a sizeable spread in partner income at a cpa firm. for example, at a firm with both a founder nearing retirement and a first-year partner, the spread would be wide. some firms are the opposite, with two to four founding partners agreeing to share all profits equally. there is no spread there.<\/p>\n

more on partners: <\/b>thirteen traits of partners you\u2019ll want to keep<\/a> | six rules for keeping partners happy and productive<\/a> | five keys in compensating new managing partners<\/a> | top 20 tough choices for the partner comp committee<\/a> | voting on ownership basis? three better methods<\/a> | what partners do and don\u2019t deserve<\/a> | tell potentials what partnership takes<\/a> | five steps to transition to partnership<\/a>
\n\"goprocpa.com\"exclusively for pro members. <\/span><\/strong>log in here<\/a> or 2022世界杯足球排名 today<\/a>.<\/span><\/h4>\n

 <\/p>\n

for most multipartner and multigeneration accounting firms, the situation gets more complicated. you\u2019ll have some high performers and some who are on cruise control. you\u2019ll have ones contributing notably more dollars to the bottom line and more to future leaders’ development.<\/p>\n

but what about two partners who contribute relatively the same? should their income allocation be similar? how similar?
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\nearnings gap philosophy check<\/strong><\/p>\n

in our work with firms on partner compensation, we often ask this question:<\/p>\n

assume you have two line partners in the same department who manage a similar amount of billings and realization and have skills in business and people development. both have a history of similar performance over their tenure as partners. the difference is that one has been a partner for five years; the other, 20 years. should they be awarded the same compensation? different? how different?<\/p>\n

does this exact scenario exist? no. do you have questions about what else they do for the firm? of course. but to explore the comp gap philosophy at your firm, assume these two people are \u201cthe same,\u201d except for the number of years of service as a partner.<\/p>\n

this is a difficult question for many cpa firm owners. current-year performance is essentially the same. but there has been historical value creation over time. what\u2019s that worth? what, if anything, should the partner be paid in the current year for that value? how would the firm determine that value?<\/p>\n

like all things partner-comp, there is no one right answer. what matters is what aligns with your firm\u2019s values, and what\u2019s competitive in the market (assuming you wish to attract and retain partner-level talent with longer career runways). given current changes in the industry with private equity and fair value models, and less loyalty-at-all-costs mentality demonstrated by newer partners, optimizing your compensation plan may be more important than in the past.<\/p>\n

industry data<\/strong><\/p>\n

considering partners at all performance and seniority levels, earnings gaps vary widely.<\/p>\n

below is data for equity partner compensation, excluding firms that pay all partners equally.<\/p>\n

the rosenberg survey <\/strong>(available here<\/a>), ratios of highest to lowest partner compensation:<\/strong><\/p>\n

firms $5 million to $10 million<\/p>\n