AICPA Suggests Entities to Connect Payment to Performance

Tuesday, September 25, 2012 Print Email

A recent book released by the AICPA stated that the accounting organizations should put right their policies pertaining to compensation that consists of several flaws by connecting payment to performance. The American Institute of CPAs book also clarified that simply modifying the pay related policies will do no good. The book titled, ‘Performance is Everything: The Why, What, and How of Designing Compensation Plans,’ also states that entities should adopt a holistic method of compensation, which links payment to performance. Companies that follow this approach not only reward their best performing employees but also make sure they remain in competition as well as make their entity far more appealing to accomplished recruits.

Coral Rice and August Aquila, co-authors of the book released by the American Institute of CPAs stated that rewards should not be considered at the year end, as they are an important part of the company management. AICPA’s aim is to make the firms realize this and further incorporate a reward based system in their practice.

Rice and Aquila also stated that many companies can make the most of their compensation framework. Compensation is supposed to be a company’s biggest form of expenditure and therefore it is important to ensure that the money is spent in a productive way.

According to the authors, very few companies are able to manage their payment related policies well and more than fifty per cent of the company owners are not very satisfied with their existing compensation framework.

Most of the companies have set no goals in writing, which are connected with bonus related compensation. Providing a spontaneous rewarding system produces erratic results. Besides, overhauling compensation is not a 1 or 2 year procedure. It needs a lot of exchange of information between employees and company leaders. Some of the staff members may find the changes annoying and consequently leave the company.

This is AICPA’s 2nd book related to compensation that has been authored by Rice and Aquila. While Aquila heads the Aquila Global Advisors, a consulting entity for accounting related entities. On the other hand, Rice works as an executive and consultant for the profession of accounting.

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