Firms are Not Ready for Succession
Source: Accounting Today
Founders of accounting firms are keeping control too long. They don’t want to accept their looming retirement. Entrepreneurial firms are especially vulnerable and should start planning early. One firm started 20 years before the expected retirement of the founding partner.
That firm, JFS Wealth Advisors in Hermitage, Pa. identified four prospective partners and set up a five-year plan to distribute equity to them, provided they achieved certain milestones. These individuals now own 10 percent each. The goal was to get them to act like owners, and the approach worked.
Marks Paneth & Shron, in New York, has a co-managing partner arrangement resulting from a merger in 1999. The agreement called for both managing partners to step down by the end of 2007. Four individuals were identified as potential successors, and all worked on the operating committee. Two of the four were selected by the partnership to fill the managing partner role, keeping the original co-managing partner structure in place. Those two worked with the two retiring managing partners. In essence, their succession has been consummated.
Identifying successors (stars) early helps keep them with the firm and helps them develop.
A study by the AICPA PCPS reveals that only 76 percent of stars being groomed by firms for the top position had a goal of filling that role. That means a lot of firms are not selecting the right successors. They must identify people who are both able and willing to fill the role.
Jim Metzler, AICPA vice president for small firm interests, believes an outside consultant is necessary for creating a good succession plan. A good consultant will uncover information needed for the selection and bring it into the open. He or she will also help overcome emotional issues present any time a long-time partner is planning to leave.
From Accounting Today, September 10, 2007, p. 1, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809. For the complete article click here, then select the article Succeeding at Succession.