There Are Two Great Risks to Any Compensation Model

  1. Underpay excellence: We reside in an industry that actually doesn’t manufacture anything, so all you have is your intellectual capital and your client engagement model to separate you from the competition. There is no substitute for intellect. Always be willing to pay a little more for excellence, because in an increasingly commoditized world, mediocrity is death!
  2. Overpay mediocrity: Nothing destroys the morale of the team faster than someone not pulling their weight (especially if that someone is overpaid). Make sure they have the talent and the training necessary to do their job at an exceptional level first. If they do, it’s time to have a serious conversation, establish performance metrics and where possible tie their bonuses to their performance.

Our “yours, mine and ours” dating model is designed to last between 12-18 and 24 months. This allows you to “test the water” and ensure that the synergies you anticipate in forming your team actually materialize. When they do it is imperative that you move to a permanent compensation structure that unifies the team around the entire clientele. You will see this model below.

“Dating” Compensation Structure

When you are in the “dating phase” of a new relationship, you often have separate apartments, different circles of friends, definitely separate checking accounts and balance sheets. It is only after marriage, in most cases, that you bring these respective worlds together. We utilize the same sequencing model as you move from the exploratory phase, through the dating phase and ultimately into a synergistic marriage of your respective practices. This model allows you and your prospective partner(s) to test drive your new team structure without disrupting your respective practices.

Team Compensation

“Marriage” Compensation Structure

Usually after somewhere between 12 and 24 months of working together, only on your joint account business, you will come to the conclusion that there is in fact synergy (1+1 = 3) or just redundancy (1+1 = 2). If there is just redundancy you can simply split up the joint account business and go your separate ways with little difficulty. If you find there is in fact this synergy you anticipated (1+1 = 3), the next phase is to bring the entire business together, create splits that basically replicate each partner’s gross revenue.

Team Compensation

Leverage the Constructing a Synergistic Team Toolkit to delve deeper into the topic of developing long-term compensation structures.

Access the Toolkit, interactive tools and multimedia library of resources by downloading the CEO Advisor Institute App for iPad.