Bad Times are Good Times to Upgrade Your Partner Compensation

In healthy economic times, base compensation for partners in professional service firms creeps upward. This is because recruiting talent to build practices can require paying premiums to attract successful new partners and key players.

| August 24, 2010

Raining Money By David Rhoads, Stuart Sadick and Alex Zabrosky

In healthy economic times, base compensation for partners in professional service firms creeps upward. This is because recruiting talent to build practices can require paying premiums to attract successful new partners and key players. Special salary adjustments and "one-off" deals are frequently used to keep key contributors. Overall salary structures can become bloated to preserve the relationship between base pay for senior, mid-tier and newly promoted partners and to keep everybody happy.

But when the economy turns weak, too much "fixed" (base) compensation can overwhelm the bottom line and make a difficult situation worse. When fixed pay is high, consultant and staff reductions must happen sooner and go deeper. And then there is little room to pay bonuses to reflect firm profitability or individual contribution to the firm, or to reinforce desired behaviors such as teamwork and strong client relationships. If client revenue dries up further, salaries are cut, and partners are asked to fund staff payroll. Lean times erode morale and undermine efforts to retain top performers when business eventually picks up: a lag effect.

To continue reading, become an ALM digital reader

Benefits include:

  • Complimentary access to Consulting Magazine Online and digital edition
  • Bi-monthly digital newsletter delivered to your inbox
  • 1 free article* every 30 days to Consulting Magazine's sister publications
  • Exclusive discounts on events and publications produced by ALM

You Might Like

For RSM, Serving the Middle Market  Brings Big Changes, Major Opportunity

For RSM, Serving the Middle Market Brings Big Changes, Major Opportunity

"Mind-boggling." That's one way to describe the pace of change in today's business environment. To succeed, businesses have to be willing to change, innovate and take educated risks. And the old adage "opportunity rarely knocks twice" is still around, simply because it happens to be true.

Terms of UsePrivacy Policy

Copyright © 2024 ALM Global, LLC. All Rights Reserved.