Compensation in the Professional Knowledge Firm

David Maister recently posted about Compensation Systems and it got me to thinking. (Oh no.) What should a compensation system look like in a professional knowledge firm (PKF).

Since I believe as Jason Jennings believes that compensation is an imponderable of life. With the caveat that I reserve the right to change my mind in five minutes on this, I humbly submit the following – compensation systems in PKFs should have these elements:

  1. A base salary in line with the experience and perceived value of the person.
  2. A quarterly or trimester variable amount based on the acquistion and/or demostratation of increased knowledge. For example, the passing of a certification test.
  3. A quarter or trimester amount based on the achievement of profitability of the entire firm.
  4. A descretionary bonus of varing amounts for work performed above and beyond. (We at VeraSage would call this a TIP clause, if it were paid by a customer.)

Notice I do not propose amounts or percentage mix for any of these. They are just the elements I would have in a plan.

What are your thoughts?


  1. Eric Fetterolf says:

    The second point needs to make that quarterly/trimester varaible part of the base salary for the following year. As the PKW gains in experience and proves competency, their value to the firm goes up and should reflect in the base.

  2. Eric, yes certainly there should be an annual adjustment made to the base salary. It might not be the total of the variable component, but you are correct in thinking that it should be accounted for.

    Thank you so much for posting your comment. You are a black swan! Your very existance disproves most of the current theories on compensation!

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