Compensation as a Strategic Asset: The New Paradigm.* Compensation as a Strategic Asset: The New Paradigm New Paradigm In the investing world, a totally new way of doing things that has a huge effect on business. Notes: The word "paradigm" is defined as a pattern or model, and it has been used in science to refer to a theoretical framework. by August J. Aquila and Coral L. Rice AICPA AICPA See American Institute of Certified Public Accountants (AICPA). , 2007, 190 pp. Compensation is a complex matter for most firms, with money being only one aspect of the equation. This book begins with a look at recent (past 25 years or so) paradigm shifts A dramatic change in methodology or practice. It often refers to a major change in thinking and planning, which ultimately changes the way projects are implemented. For example, accessing applications and data from the Web instead of from local servers is a paradigm shift. See paradigm. that have contributed to changes in the accounting profession including: a global economy and outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. ; increased regulation; technological advancements; work/life balance; talent shortages; and fee pressures. As consultants to the profession, the authors have also witnessed paradigm shifts in public accounting firm owner compensation plans that revolve around Verb 1. revolve around - center upon; "Her entire attention centered on her children"; "Our day revolved around our work" center, center on, concentrate on, focus on, revolve about attracting, rewarding and retaining top performers. "Successful firms develop and implement processes that fundamentally change and nurture NURTURE. The act of taking care of children and educating them: the right to the nurture of children generally belongs to the father till the child shall arrive at the age of fourteen years, and not longer. Till then, he is guardian by nurture. Co. Litt. 38 b. the relationship between owners and employees and the firms for which they both work," they say. The new approach moves beyond traditional measurements and focuses on people by linking performance with effective compensation plans and aligning financial rewards with strategic direction. Evaluations based on customized criteria and goals, current production and future capacity, and at-risk compensation are a few examples of the changing approaches. [ILLUSTRATION OMITTED] The authors break down compensation components in Chapter 6 (base pay, return on capital, bonus and return on equity) and examine the cur cur a derogatory term for a mongrel dog. rent criteria that many firms use to evaluate performance. The base pay discussion strives to answer these difficult questions: * What is the base value of any given position? * How much should you pay? * How do you determine what pay should be? An assessment of current compensation methods in Chapter 7 helps the reader understand how these methods have contributed to firms' success or prevented firms from reaching their full potential. The methods discussed include formula, equal pay, the managing owner's choice of method and compensation committee methods. Recognizing that no single compensation system will solve the problems of every firm, the authors describe the elements of a good plan and best practices to consider in designing a new system. As the accounting profession continues to adapt to evolving complexities, it is clear that compensation is another area where firms must embrace change. The book lays out a framework and methodology for firm leaders and owners who are interested in learning how to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. compensation to their firm's mission, vision, values and goals. When compensation is used effectively as a strategic asset, a firm will see improvement in the recruitment and retention of valuable staff as well as its overall profitability. By JofA staff member Loanna Overcash |
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