Nexia International
Admission, evaluation and remuneration of partners in an accountancy practice
22 September 2011
Jeremy Boadle
Nexia International Board Member
Smith & Williamson, UK, Executive Board Member
Contents
• Admissions – making partner
• Two main routes to equity partnership
• The process of admission
• The practical things…
• Reward arrangements
• Components of remuneration
• Performance management and evaluation
• Key performance criteria
• Expulsion, de-equitisation and retirement
Admissions - making partner
• Career ambition for most in practice
• Signals to peers that have “made the grade”
• Implies authority
• Sufficiently able and experienced
• Salaried, fixed share or equity
Two main routes to equity partnership
• Home grown – salaried or fixed share and then to equity
• Lateral hire – join directly to equity
The process of admission
• Procedures vary from formal to informal
– submission of application
– presentation / manifesto
• Partnership voting, management decision, selection committee
The practical things…
• Needs to absorb a significant amount of information
– Financial position of the firm
– Terms of the Partnership deed
– Legal structure
– Profit sharing arrangements
– Capital provisions
– Tax position
– Additional responsibilities
Reward arrangements
• Fixed percentages or formulae based on seniority
• ‘Lock-step’ / ‘snakes & ladders’
• Equal sharing system
• Meritocratic eg. base salaries plus bonuses
• The impact of unfair profit sharing
Components of remuneration
• First charge on profits
• Balance divided amongst the profit sharing partners
• Monthly drawings vs top up payments
• Provision for taxation
• Benefits and expenses
• Provisions for retirement and/or annuities
Performance management and evaluation
• Transparency
• Agree performance criteria – objective & subjective
• Setting targets
• Reviewing performance
• 360 degree feedback
• Impact of results
Key performance criteria
• New business generation
• Profitability of work – billable hours, recovery rates
• Lock up – work in progress and debt collection
• Developing the skills of others
• Contribution to the firm’s external reputation/brand
• Client satisfaction
• Intellectual and technical contribution
• Contribution to firm management
• Other intangible qualities – eg cultural
Expulsion , de-equitisation and retirement
• A powerful tool for management
• Board decision or majority voting
• Restrictive covenants
• Notice periods
• Gardening leave clauses
• Retirement age
Nexia International
Admission, evaluation and remuneration of partners in an accountancy practice
22 September 2011
Jeremy Boadle
Nexia International Board Member
Smith & Williamson, UK, Executive Board Member