Growth has been difficult to generate in the last four years. The average advisory firm targeted 10% growth in 2018 (a sign of lowered expectations in itself) but achieved a growth of only 9% according to research surveys by our firm, the Ensemble Practice. Gone are the days when firms targeted 20% growth and achieved 25%.

Many firms, hoping to energize their professionals and get them to contribute to growth, have considered incentive compensation (bonuses) for business development, and many have looked to enhance the value of existing programs.

Unfortunately, most of the time, the carrots are there but the bunnies don’t seem to be running. That warrants a discussion about whether the carrots work in the first place (they do, but only for bunnies) and how the bonuses ought to be structured.

Should You Pay for Clients In The First Place?

Paying bonuses to advisors for developing new business sends a clear signal that growth is very important and valuable to your organization. But bonuses can be expensive. Also, contrary to popular perception, they do not change people’s behavior. Bonuses don’t magically turn non-rainmakers into skilled networkers. Also, bonuses, like certain medicines, have some side effects. With medications, it could be headache and nausea. With bonuses, there could be some complications, some calculations, some commotions and some curmudgeons.

Why Bonuses Don’t Produce Rainmakers

Contrary to what many believe, by far most of the growth from business development incentives comes from those already good at developing business. Let me explain why in pseudoscientific terms using fake mathematics.

You could express the result in terms like these:

Business Development = Skill x Motivation

First of all, bonuses do not change skill—they may only change motivation. If the skill is not there, you won’t get any results. It doesn’t matter how much you pay me to sing karaoke, I will still be the worst singer you ever heard.

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