Please ensure Javascript is enabled for purposes of website accessibility

Promotion and Bonus Watch ’12: Here’s a Confidential Guide for PwC’s Performance Review Process

Early last week we kicked off the compensation season 2012 discussion, thanks to the anxiety that is circling among the rank and file of accounting firms.

Along with concerns over cold hard cash, some of you are probably curious about promotions. Luckily, someone was kind enough to leak us PwC's "FY12 ARC [Annual Review Committee] Guidance Assurance Addendum" and it has lots of information related to performance rankings (aka Relative Performance Rankings or "RPR" in PwC parlance), promotion rates, the timing of promotions, its credential policy as it relates to promotions, required training and more. Oh! And there's a little reminder from Assurance Leader Tim Ryan's communication regarding the bonus program. So that's exciting. You can read the whole document in its entirety below, but we'll share some highlights first.

Starting with: RPR Ranges.

If you've got a decent memory, these numbers might look familiar to you. We published the same table way back in September when the firm announced new buckets for its performance review process. The only difference is the addition of "Project Team Specialists."

We spoke to a person familiar with the content in the ARC Guide, who explained that these ranges simply show what percentage of a particular level will fall in each bucket. For example, somewhere between 1 in 4 and just under one-third of managers will be ranked as "Top Performer."

What's most telling about this table are the TP and "High Performer" columns. Looking at the TP bucket first – you can see that achieving a high ranking becomes very important with as many as half of the professionals at the level receiving a TP ranking.

As for "High Performers," it's clear that you can slide by on this mediocre ranking for quite some time, but if you make it to the Director/Senior Manager level, you'll be expected to quit sandbagging.

Next! Promotion rates. Here's an excerpt from the document:   

Promotion recommendations
Promotion rates are anticipated to be similar to last year, with the promotion rate of associate to senior associate at 23%, senior associate to manager at 23%, and manager to director/senior manager at 20%.
These were a little confusing at first, so our source explained exactly what they should be interpreted and it turns out, the numbers aren't tremendously meaningful. For example, the 20% manager to director/senior manager rate means that of the entire manager group, 1 in 5 will be promoted to director/senior manager. It would be far more useful, in our opinion, if the firm disclosed the number of managers at the point of promotion who would be promoted. The rate is low precisely because so many managers aren't even eligible for promotion. This goes for the associate-to-senior and senior-to manager-promotion rates as well.
Credential Policy
Here's another handy table that shows exactly what is required for promotion to senior associate:
And, naturally, if you are up for promotion and haven't fulfilled the requirement, there are consequences. From the doc:

Individuals will be rated no higher than "High Performer" during the ARC process if they have completed three or more years experience (i.e. completion of 3 "busy seasons") or are an experienced hire or transfer to Assurance designated as a third year Associate and have not yet completed the required exam. "Top Performer" and "Outstanding Performer" ratings awarded by the ARC will be reinstated if passing exam results are received for exams taken before August 31. (e.g. The ARC recommends an "Top Performer" rating in May, but the rating is changed to "High Performer" because the exam is not completed. If the individual sits for the exam before August 31 and receives passing results, the "Top Performer" rating will be reinstated.)

So you do have a little bit of time to redeem yourself, but there's also this:
Associates proposed for promotion need to pass their required credential exam and provide their HR representative with proof of exam results by June 15, 2012 in order for their promotion and pay to be effective July 1, 2012. Staff receiving exam results after June 15, 2012 will be promoted on the next PeopleSoft effective date. Promotions and pay increases will not be back dated to July 1, 2012.
There is also an extensive section discussing credentials in order to be promoted to manager, which seems slightly like overkill, but our source insisted that the credential policies have been expanded to fit with the firm's commitment to more "transparency in the performance review process." 
Finally, we'll take a quick look at discussion of bonuses. First, here's a little bit from the section "Annual performance bonus consideration (for senior associates and above)":
Clearly capturing differentiating performance factors in the areas that impact quality, people, and business, is critical in assisting with determining allocation of discretionary bonus dollars. Contributions and differentiating performance factors that are distinctive within one's RPR category should be considered when allocating discretionary dollars.
For example, it could be due to a one-time event that had a significant impact on quality, our people or our business; a unique client situation that was effectively handled; technical skills that stood out or other skills, capabilities, or behaviors that are distinctive within one's RPR group.
In other words, there's no magic formula; bonuses are depedent largely on the situation, but RPR can have a significant impact. 
Secondly, here's how the bonus pool gets determined:
Funding for the Contribution Award and Annual Performance Bonus will be based on the quality results and financial performance of the Assurance practice. Each of you has the ability to influence the achievement of our goals, which will in turn enhance our service delivery to clients, our quality and, ultimately, the success of the firm. Specific quality and financial performance goals include:
Quality performance goals
  • Inspections: Reduce the number and severity of non-compliant audits identified through inspections
  • Training: Complete participation in all required training, including passing applicable assessments
  • Planning: Improve the timing of planning and phasing of our audit work, including the appropriate use and leverage of our delivery model.
Financial performance goals
  • Revenue: Achieve our annual revenue budget, which includes a 4.9% revenue growth target
  • Contribution Margin: Achieve our contribution margin budget
  • Cash Collections: Achieve our monthly cash collection plan

Whew! That's quite a bit for a Friday in May. Overall, not too many surprises (right?), but the source we spoke to wanted to make it clear that the firm is doing its best to make the performance review process continually more transparent. They just weren't really counting on making it this transparent. Enjoy.