Planning During a Crisis Is Not Succession Planning

by Carolyn K. Carlson and Richard Stanger | Jun 05, 2017
Pennsylvania CPA Journal
The CPA profession today ignores succession planning, unless there is a crisis. When we ask managing partners what they would wish for if they had a magic wand, we get the same answer: “I’d want to solve our leadership succession challenges.” Yet most firms’ business strategies do not include succession as an important element.

When we ask managing partners how important it is for their firms to remain independent, we almost always are told that this is a top priority. Lack of succession at the top, however, poses a significant threat to the independence of these firms, and many are likely to be acquired by larger firms in the next few years.

Understandable forces create these issues. Firms below the mid-tier generally do not have fixed retirement ages and pension arrangements that allow the managing partner to retire or a mechanism for the other partners to buy the managing partner out. The managing partner is in no rush to leave the firm that he or she founded, and believes that the best strategy is to keep working and then monetize his or her interest in the firm through a sale when ready to retire. In some firms, the managing partner is the sole owner of the firm’s equity. In many firms, valuable partner talent may depart to join larger firms where succession is addressed and retirement benefits will be available. This departure of talent weakens the firm and reduces the ability of the managing partner to monetize his or her interest through a sale.

The best approach is for firms to address succession issues in a strategic way, with earlier planning rather than waiting for a crisis. This column offers a few thoughts on how to do this effectively.

As the partners approach age 55, make a deliberate effort to groom or add at least two potential successors for their roles. If the firm is too small for this approach, adopt a strategy to grow the firm to a critical mass where succession planning is possible. Consider both organic growth and growth through merger. These kinds of mergers can have other benefits:

  • If the firms are in the same location, a merger may eliminate a competitor.
  • The merger may add new specialties to the firm or bring depth to an existing practice area.
  • The combination will provide the opportunity to share overhead and support expenses, including space consolidation and technology costs.
Directly address the difficult subjects of partner retirement dates and partner retirement plans. There are many transition possibilities for dealing effectively with these issues in the short run while also phasing to effective longer-term solutions. Here are a few of them:

  • Adopt a sliding-scale partner retirement date that lowers over time, such as from 75 to 65 over 10 years.
  • Use a combination of qualified retirement programs, unfunded partner retirement plans, and extended part-time work to fund short-term retirement needs.
  • Critically look at your book of business, excising low-profit clients while making a hard push to replace them with high-margin accounts. The extra cash will help fund retirement benefits as well as increase current partner pay.
  • Explore executive coaching programs targeted to helping partners plan for their post-retirement lives.
Analyze the roles of your partners – rainmakers, client service partners, technical specialists, etc. – and establish staff development and recruiting programs to fill these roles for the future:
  • Establish effective staff performance and development programs.

  • Adopt formal, simple career development frameworks that clarify capabilities, by role, at different levels of career advancement.

  • Address the “where” and the “how” of recruiting and interviewing differently to attract targeted staff personalities and capabilities to fill different future roles.
You will probably need some outside consulting help to get these things done, but the benefits will be worth the cost.

Involve several partners in firm governance so future leaders will have the experience they will need:
  • Establish leadership roles for different industries and service areas, and give the leaders ambitious but achievable growth goals.
  • Schedule regular leadership team meetings and make them strategic rather than just reporting results.
  • Hire executive coaches to work with your partners and challenge them to think big. This may bring fresh ideas to the firm.

The strong message is that when it comes to succession, business as usual is not good enough. That often leads to decisions being made in crisis mode. Instead, start a succession call to action as early as possible. Be bold and energize your firm around new possibilities for the future. It’s time to move from status quo to strategic planning and action. 

Carolyn K. Carlson is president of StangerCarlson in New York. She can be reached at or on Twitter @carolynkcarlson.

Richard Stanger is chief executive officer of StangerCarlson. He can be reached at or on Twitter @RichardStanger.

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