The Good and Bad News on Succession Planning
Source: Accounting Office Management & Administration Report
If you expect to deal with succession by merging up, you may find that your prospects are not favorable. Firms that run independently of the principal partners are better merger candidates, and to achieve that status succession planning is required. Furthermore, there may be too many firms seeking mergers as their exit strategies, and that may depress the values of firms, according to consultant William Reeb ([email protected], San Antonio,Texas).
Succession is more than finding a replacement for the managing partner. All significant leaders in the firm must arrange for their successors and help them develop into the roles.
Successors should be identified for all management and administrative functions such as firm administrator, marketing director, IT manager, service department heads, and controller.
The succession plan should start with an assessment of the responsibilities of each leader so there is clarity on the expectations of the new leaders.
Deferred compensation for retiring leaders should be accrued (though few firms do this). There should be sufficient time allowed for the succession process to turn the firm into a service-based, rather than a partner-relationship-based practice. The former are more valuable.
Partners who operate on a relationship basis should be paid out before they leave the firm.
Part-time partners increase the successor selection possibilities in many cases.
Clients should be prepared well in advance of the departure of the partner in charge of their accounts.
Future leaders need training in leadership, administration, marketing, sales, and interpersonal relations.
From Accounting Office Management & Administration Report, May 2005, p. 1.
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