Incentive Program for Accounting Firm

[hrgurus]

I have been asked by a client to look at alternatives for an Incentive / Bonus program for a small accounting firm. Their current scheme is based on the following formula

5.1 Each month Participant’s achieve billable fees
5.2 Each time an invoice is raised time is allocated to each Participant at the sole discretion of the relevant partner
5.3 If a Participant‘s total fees billed per financial year is 2.8 greater than the base salary paid to that Participant the Participant will be entitled to the following proportion of the total amount to be paid in incentive payments:

5.3.1 First $5,000 eligible for 20%
5.3.2 Next $5,000 eligible for 25%
5.3.2 Remainder eligible for 30%

Example

Participant Base Salary: $80,000
Total Billable Hours 09/10 financial year: $235,000
Bonus start point (2.8 x $80k) $224,000
Amount to be calculated ($235k - $224k) $11,000

First $5,000 * 20%: $1,000
Next $5,000 * 25%: $1,250
Remaining $1,000 * 30%: $300
Total Bonus to be paid $2,550

As you can see the ability to earn is severely impacted by the partner's allocation of invoice $'s to particular employee's and then the actual amount paid to a participant is rather low.

Does anyone have any experience with Incentive Schemes in a similar industry that would drive growth but also reward exceptional performance?

Thanks

Emily

[Moz]

Emily,

To my mind there's an obvious way to improve the scheme - move away from discretionary revenue allocation, because it a sure-fire recipe for discontent!

Your client would need to think of some 'rules' govern how revenue is allocated so that the employees have more certainty about their earnings and know that they will be rewarded for exceptional performance.

These things are rarely easy to work out, you really need to have some measurable results (not just based on hours worked), plus you would also have to consider how 'rules' could be manipulated for individual gain (there's always one!)

Obviously they need to reserve the right to review such 'rules' if they don't feel they are working as intended.

Moz

[hrgurus]

Hey Moz
Thanks for this, have you ever created a scheme for an Accounting Firm? If so I would love to talk more? It would be great if I had some proven examples to show them. At the moment the Partners are happy with the scheme because it is all in their favour. What I am trying to show them is that it is not driving employee performance or Firm performance so what is the point!
Cheer
Emily

[Moz]

Hi Emily,
Sorry, my experience in creating this sort of scheme is limited to recruitment firms, which is a slightly different slant. Basically getting them to work as a team so that their best candidates go onto the database and are available across the team, rather than being kept in their bottom drawer!

I wouldn't really know where to start with an accounting firm.

Clearly you need to convince the partners that it needs to be done, but it is them that need to work out the "how", because only they are intimately involved in the business. I feel it would be very hard for an external 3rd party to come in and devise the rules, although you could put them together and then come up with some "what if" scenarios.

Let us know how you get on.

Moz

[hrgurus]

Thanks so much for your help!

[Moz]

I came across this blog post today which is quite relevant ...

[hrgurus]

Thanks I appreciate it