Topic at Hand

Planning for Succession, Providing a Future

Irma Zaldivar, BDO

Did you know that 80% of first generation firms never make it to the second?  In recent years, there has been an influx of mergers and acquisitions because of that statistic.  Why does that happen?  Unfortunately, CPA firms have non-existent or ineffective succession plans. Multi-owner firms are developing initiatives to hand more work to lower-ranked members of their staff, but those staff members aren’t prepared to handle important tasks. Clearly, partners are spending too much time doing manager level or staff level work and not training their rising stars. It’s time to pass the baton but there is nobody to pass it to.

Although there are no alarming statistics as mentioned above for the Marketing Director role, it’s vital to have a clear understanding of the job duties in that department. At a small firm, the Marketing Director should create a Marketing handbook. Should they leave the firm, a new Marketing Director can come in and hit the ground running.  At a larger firm, the Marketing Director should train her Marketing Coordinators. Should the Marketing Director leave the firm, the Marketing Coordinators can keep the department afloat while they hire a replacement.

Selecting a successor for a Partner or a Marketing Director in an accounting firm is no easy task. As you begin to develop a strategy for succession planning, these steps will help you mitigate that process:

  • Select the successor
    • For a Partner: Baby Boomers are heading into retirement and in charge of most accounting firms. More so than ever, accounting firms should develop a plan of transferring clients and internal responsibilities of the retiring Partner. This decision can be made by an individual CPA or by the firm leadership. When accessing internal candidates, look at their track record. Have they shown an ability to develop and retain clients? Put them in a position to prove they are up for the task. If you’re a smaller firm and have no emerging leaders to pass the baton to, do you want to merge up?
    • For a Marketing Director: If this position is leaving due to retirement or because of a better job opportunity, it’s important to gain an understanding of their role within the firm.  Understand the qualities the firm thinks are most important for the candidate. Will you promote within? Is there a Marketing Coordinator that has proven that they can pick up things quickly? Has the Marketing Coordinator gained enough experience to take charge and lead the firms marketing strategy?
  • Don’t promote for the sake of promoting
    • For a Partner: Don’t promote a Senior Manager or Principal simply because they’ve been with the firm for quite some time. Some people are better suited in other roles, whether that be a technical expert or customer service extraordinaire. Identify the criteria to become partner, such as (1) being able to develop great client relationship skills (2) trust that they will make good decisions (3) contribute in some manner to marketing and business development (4) and most importantly, they need to be a good mentor. This ensures that the firm will transition in the future.
    • For a Marketing Director: The same applies. Don’t promote a Marketing Coordinator because there’s a vacant spot for the Director of Marketing function. If they are still “pretty green” you’re setting them up for failure. The marketing initiatives set in place will not be successful. Identify the criteria for a Marketing Director, such as (1) accounting marketing experience (2) being able to develop successful marketing strategies (3) bringing new marketing initiatives to the table.
  • Chemistry is key
    • For a Partner: When choosing a successor, it’s important to choose someone Partners would like to eat lunch with. It’s always difficult to transition clients over. Wouldn’t clients be more comfortable with someone that is a pleasure to be around? Don’t forget about the staff. Key staff have significant contact with the client. That means the staff will have significant contact with the successor. Thus, once again, the firm wants to choose a successor the staff will be comfortable with. If the new relationship doesn’t stick, the firm has time to re-assign the client to another Partner in-house.
    • For a Marking Director: Chemistry between the Partner group and the Marketing Director is vital to the firm’s success and growth. When both parties support each other, they are more likely to engage in driving their marketing initiatives. A cohesive work environment will help the Partners and Marketing Director perform their job duties more effectively and create a collaborative workplace.
  • Passing on their knowledge
    • For a Partner: Starting early is key! The most important duties of the retiring Partner that needs to be addressed early is client relationships. To best utilize the time spent passing on these client relationships, develop a client matrix that lists all the clients that will be passed to the successor. Go over each one and discuss the details of the client. Does the client require a lot of attention? Do they want to meet with our firm face to face “X” amount of times? Do they want us to offer value-added services for their business? Are they fee sensitive when offered new value-added services? Having these answers beforehand will make for a better client transition. Usually, it takes at least two years to provide enough time for clients to become familiar and comfortable with the successor and vice versa.
    • For a Marking Director: Passing on what you know early one, will also give you more opportunities to come up with new marketing initiatives that you’d like to implement the following year. The more your Coordinators know, the more time you can spend on the high-level initiatives that sit at your desk, but you never get around to.

Who will take over?  If you don’t know, it’s time to focus on planning out who will.  Best of luck!