In his book, Built to Last, Jim Collins studied companies that prospered over the long term like Ford, Hewlett-Packard, Johnson & Johnson, Marriott, Merck, Motorola, Nordstrom, Philip Morris, Procter & Gamble, Sony, Wal-Mart, and Disney. Each of these great companies were started by entrepreneurial founders who remained in the role of chief executive for an average of 37 years. Yet each of these founders were also great managers and company builders who developed their own successors—all homegrown insiders—who remained in office for 24 years on average.
History shows that if you want your company to live beyond your lifetime, you must develop a successor who is capable of continuing what you have started. You must be committed to succession.
Well-planned and executed succession is important for three reasons:
- First, it allows founders of companies to retire and leave a legacy.
- Second, it creates opportunity for future leaders to become owners and new hires to become future leaders who will carry on what the founders started.
- Last, but not least, it provides advanced preparation for the unanticipated loss of a key leader.
At ConvergenceCoaching LLC, our main focus is helping CPA firms achieve success, so we support the conclusion of the Private Companies Practice Section (PCPS) of the AICPA in their 2008 Succession Survey that, “Succession planning is about sustaining the firm throughout constant change. It should be a regular and ongoing practice.” We also believe that effective succession must be part of the day-to-day operation of the firm, not a “life event” that occurs once every generation.
Succession needs to be planned, so that client relationships can be properly transitioned, new roles can be properly learned, and the financial aspects can be properly covered. The major steps for effective succession planning for CPA firms (and their clients) are listed below:
- Define and understand the relationships and roles that need to be transitioned. As part of this, make a list of all that each partner knows and owns, including: clients, staff reporting, referral sources, community organization involvement, and internal assignments
- Identify what needs to occur in terms of ongoing training and development. Create a leadership development program for the potential successors who are changing roles
- Identify changes in your communications and marketing strategy. Consider both internal and external – consider marketing and firm brand implications – including changes to the firm name
- Evaluate timing. All partners need to annually declare the specific timing for their retirement to help determine the start and duration of each transition
Why is it more important than ever before for CPA firms to focus on succession planning? There are 76 million Baby Boomers looking to retire over the next 10-15 years (those born from 1946-1964) and only 41 million Gen Xer’s to succeed them (1965-1981). According to the Institute of Management and Administration, “an astonishing 86 percent of key partners in CPA firms with 66-100 full-time employees are between 50 and 60 years old; in smaller firms, 50 percent of partners are in that age range.” Similar demographics apply in industry. Clearly hiring, developing and retaining your successor are not tasks that can or should be deferred any longer. My advice: stop putting it off.
With all the historical evidence supporting the long-term value of succession planning, and the demographic evidence supporting the imperative of succession planning, why is it still so hard to get started?
Because retiring and letting go are hard things for anyone, especially for founding partners whose life and identity are tied up in the success of the firm they have started, nutured and built. Feelings of fear, insecurity and loss of self-worth are common and normal. You must overcome the tendency to “hang on” too long by facing the reality that the ultimate expression of your success is in leaving a legacy that lives beyond you. That is why there is no success without succession. For additional thoughts on “Letting Go Gracefully,” see my colleague Jen Wilson’s February 3, 2010 blog (http://blog.convergencecoaching.com/2010/02/letting-go-gracefully.html).
As a final inspiration on the topic of succession, I’ll close with the words of American intellectual, writer, reporter, and political commentator, Walter Lippman, who observed that “The final test of a leader is that he leaves behind him in other men the conviction and the will to go on.”
We will continue to help our clients succeed with their succession plans. In the meantime, if you have ideas or experiences on this subject, please post them so others can benefit. Thank you!