Advantages And Disadvantages Of Compensation

There are two distinct aspects of compensation which impact on collegiality: one is the profitability of the firm and the other is how profits are distributed. If a firm cannot achieve reasonable profitability on a per partner basis, great pressure is placed on the distribution process. Management 's role is not only to encourage the steps which produce reasonable profitability, but also to manage expectations so that they will be in line with profitability. A compensation system should (a) motivate employees to perform in ways that maximize firm profits and to cause the firm to achieve its other objectives; (b) reward performance and contribution; and (c) solidify the ties with partners who are critical to the ongoing success of the institution. Fairness as an abstract concept is probably less important than rewarding (keeping happy) those partners who are vital to the preservation and success of the venture.

9. Trust

The vast majority of employees in organization are hard working, ethical, competent and honest. There should be an atmosphere of trust among partners and between the management of the firm and its partners. The necessity of rules and procedures should be carefully examined, and there should be a distinct bias against controls on partner behaviour. Communicated expectations are more effective generally than proscriptions. In a milieu of trust, however, there must be the capacity to sanction behaviour amounting to a lack of trust. Moreover, a