Bonus and Incentive Schemes
The future for any business rests largely on its ability to attract and retain high calibre staff, and accountancy practices are no exception. Smaller, independent firms - some of whom are also facing retirement and succession issues - have the added problem of competition for their home produced "high flyers" from the large national and international practices that invariably offer higher salaries and the prospect of jam today is often too good to turn down. If firms are to maximise their profitability and, indeed, secure the future of their businesses, then a more robust approach to recruitment and retention of staff is required.
Motivation and a tangible acknowledgement of effort should be considered as vital elements in the firm's remuneration packages for senior staff. Highly motivated staff will perform better in terms of both speed and efficiency which will, in turn, impact on the firm's growth rate and profitability.
In the past any bonus may have been discretionary for the individual, but to encourage teamwork, improve performance and increase profit contribution it is necessary to bind in everyone who can influence the process. Any scheme should therefore be departmentally (team) based. The KPIs to which each person must relate have to be achieved through the collective, not the individual effort. As an extreme example, if a fee target it set and the team fails to meet it by (say) £1, then the bonus would not be paid!
The benefits that the firm will be seeking will include some or all of the following:
- Fee recoveries
- Fee targets
- Time utilisation
- WIP and debtor levels
- Cash collection
- New business introduced
The benefits to be derived will include improved planning, delegation and control of work, better billing and smarter pricing, improved cash collection, opportunities to add value and cross-sell services and greater awareness and communication in the staff team.
A corollary of this is that every firm should decide as part of their HR strategy what benefits are important either to enable them to compete in the marketplace or to assist the firm in the delivery of its overall business objectives. Whatever the policy adopted it is important to communicate the real rewards to staff so that they are aware of the true value of their remuneration package.
The biggest problem with benefits is that employees tend to view their package in terms of base salary and do not take account of benefits provided by and paid for by the firm, such as the provision of a car or a car allowance, pension contribution or private medical insurance.
The partners must clearly set out the timing of bonus payments. A delay on paying quarterly or annual bonuses can help with retention as can a process of part payment of bonuses on a deferral basis. Where staff are always due payment for a bonus earned it can make them think twice about leaving if their reasons are primarily financial.
In an increasingly competitive environment it is important to construct a remuneration package that will benefit both the individual and the business. Experience shows that the introduction of bonus and incentive schemes will result in increased profitability, lower staff turnover and better morale.