Successful management of assurance and advisory (A&A) services practices require a firm to meticulously track and measure profitability factors. The factors that contribute to profitability: productivity, realization, leverage, overhead, and compensation can be observed as interior angles of a pentagon—the center being profit per partner.
The performance pentagon is a framework that graphically represents the profitability factors and is used to supplement monthly financial statements and budgets to actual comparisons. In addition, it allows the firm to juxtapose the current relationships between the factors and the partners' profitability. Any A&A firm, or its individual practice offerings, can use the pentagon to set targets for the factors and monitor progress in achieving them. A&A practices that offer various niche services, such as healthcare, business valuation, or strategic planning, can also adopt the performance pentagon to review the profitability of the niche service. The performance pentagon can establish key metrics when projecting a particular service's expected profitability.
Productivity
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