6 steps to sustainable succession management

6 steps to sustainable succession management

By Robert Traphagen, CPA, CGMA, Traphagen CPAs & Wealth Advisors

You can't spell "succession" without "success." So why is succession often such a challenge for CPA firms?

CPAs prioritize providing quality services to foster client relations and grow their firms; however, they relegate succession to the back burner. According to the 2020 Succession Planning Survey conducted by the AICPA Private Companies Practice Section and Succession Institute LLC, more than half of multi-owner firms (55%) said they are currently experiencing succession challenges, up from 26% in 2016, the last time the survey was conducted. Succession, in a sense, is viewed more often as an end game by many firms rather than a critical component of firm management.

It is imperative to focus on the future of the firm by adopting a strategy that builds sustainability. This will add value and allow a firm to be in a position of strength to determine its own destiny — through a sale, merger (upstream/ downstream), acquisition or internal succession supporting a legacy approach.

Here are six steps to creating a best-practice sustainability plan.

1. Identify the firm’s culture

Karl Nelson, a 1986 New York Giants Super Bowl winner,said the following when asked how the Giants won that year:“Each player on that team knew their role as well as eachother’s role on the team. We knew who we were as a team,and where we were going.” Every firm should know, live andbreathe its culture. Ask and answer the following questions:

• What is the firm’s mission statement? What does the firm actually do?

• What is the firm’s vision? Where is the firm going?

• What are the firm’s core values? Who is the firm and howdoes it operate?

2. Build infrastructure

Every structure or entity starts with a strong foundation.The following initiatives can help firms develop a pipeline oftalented, tech-savvy young professionals to nurture and growwith the firm:

• Offer a college ambassador program.

• Develop an onboarding process.

• Provide training and coaching.

• Promote professional networking for lateral growth.

3. Identify leadership

Identifying emerging leaders is an essential component of anysuccessful organization. Historically, many very successfulsmall-to-midsize firms were founded by partners who leftlarger firms in part because they were not looked at asleaders. Focus on the firm's leaders by using the followingapproach:

• Develop a firm competency model using existing frameworks as examples and communicate competencies that are needed for success.

• Establish a career path.

• Provide a road map for partner criteria.

• Offer alternative leadership roles such as non-equitypartners and devel opmental managers.

4. Professional development

The best firms invest in their staff’s professional development.Firm success is dependent upon having a system to monitorgoals and commitments. Firms that maximize the abilities oftheir members have a competitive advantage. Managementis a learned skill. Employ the following tactics:

• Use periodic performance management to provide feedback.

• Invest in entrepreneurial development (e.g., emerging leaders conferences, Dale Carnegie seminars).

• Delegate and empower others.

• Implement performance-based compensation.

5. Invest in technology

Accountants will need to step outside their comfort zone asthe profession evolves and new job-changing technologiesemerge. As David Ben-Gurion says, “It’s not enough to beup to date, you have to be up to tomorrow.” Consider thefollowing actions:

• Leverage technology.

• Review and update systems.

• Develop IT specialization within the firm.

• Facilitate technical upskilling at all levels.

6. Client transition

A successful transition should give clients peace of mindin knowing there is continuity to meet their businessand personal needs without disruption. According to theSuccession Institute, “Orderly succession is about creating asystem that supports change without change; organizational changes should always come from strategy redirection, not vacancies.” Sustainability is a success strategy, a mostrewarding and exciting one; it allows a firm and its teammembers to change and grow. Components of this includethe following:

• Developing a team service

• Having a “build-a-village” versus “eat-what-you-kill” mindset

• Building brand loyalty versus partner loyalty

• Redefining roles and responsibilities

Succession is a process that can take years, and it is nevertoo early to start planning.

Robert Traphagen, CPA, CGMA, is themanaging partner of Traphagen CPAs& Wealth Advisors. He is a past presidentof the NJCPA and is a trustee of the NJ-CPA-PAC. He can be reached atrobert@tfgllc.com.