nexia international admission, evaluation and remuneration of partners in an accountancy practice 22...
TRANSCRIPT
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