Building the future from the inside out - Succession Planning - evaluate needs and direct employee development

California CPA, June, 2003 by Mary W. Richardson

Succession planning goes beyond legal structures, practice valuation and the tax code. Succession planning, whether it is for your firm or your client's business, revolves around people--their talents and business maturity--as much as it includes the legal and financial aspects.

Succession planning involves looking at your people as part of the firm's resources (and therefore valuation), and securing a plan to identify and develop those individuals capable of executing the strategy for the future.

How many of us--from sole proprietors to members of corporations--are emotionally ready to find and groom our successor? It's interesting to note that the most difficult transition in a business is from the people who created the business to the people who will run the business. There is a name for this: Founder's Syndrome. So, when we want to begin the conversation on succession planning, we need to talk about Founder's Syndrome as a potential barrier to success. Once we have overcome this barrier, the details of the planning process, including development of your people to successfully succeed your involvement in your firm, are pretty simple and self-evident.

WHY IS IT SO TOUGH TO LET GO?

You are good at what you do. So good, in fact, that you have built a practice from the ground up. You have successfully competed against your peers in your area of specialization--and won. You have brought people in to support your success and--here is the difference--they have been brought in to support you.

Now you need to make a shift and learn how to support them.

If you are going to successfully transition your clients to other individuals who will be running the business, you must be confident that they will be as competent in their practice as you have been in yours. And you need to have them working with those clients while you are still around so you can get feedback on their performance, help them learn how to manage the crises that appear and align their goals and yours to ensure the firm's continuing success.

It's difficult to shift your attention from you and your success to that of your successors. Even some of the smartest people around have trouble with this. I know you can think of at least one example of an organization, firm or partnership where the need for a business leader was painfully evident, yet the practitioner could not trust someone enough to take over the business. Or an entrepreneur who could not let the professionals manage the business and the clients while developing new markets and product ideas.

The results are usually painful to watch. And the symptoms are pretty predictable: a firm that grows and declines in perfect step with the economy; an organization with a charismatic leader and no peers within the organization; a firm that cannot break a certain revenue barrier; or a firm that has turnover just at the point of partnership.

AVOIDING FOUNDER'S SYNDROME

How do we face our personal future with enough joy that we can create a future for our firm that does not include us? One answer is to begin early and make succession planning a part of your business strategy so you can develop your people as you develop your business. Sound complex?

As we will see, it's really not much more than good delegation taken to a strategic level. And part of the strategy involves the opposite of planned obsolesce--you need to imagine the additional skills that will be necessary in the future so you are not just replicating yourself (today's successful skill set), but creating a skill set for future success.

There are five elements to a good succession plan:

Take the long view. Put a stake in the sand five years out for business and strategic planning and look at your people needs in five years. How do you anticipate the business growing? What trends will require what skills?

Then take a look at the demographics in the labor pool and project them out five years. What challenges do you see? Then review your employees. How will they grow in five years, both in professional skill and business maturity? Are they specialists or generalists? And will you need specialists or generalists? Most plans will have you look at the holes you have, but I encourage you to look at the holes you anticipate you will have--and then create a strategy to manage that.

Reap near-term results. Look first to develop the people you have. Where is the low hanging fruit? What simple shifts today--CPE, cross training, project shadowing--will have the most impact in your plan? By giving your people developmental opportunities, you are telling them they are valuable.

Strengthen your talent pool. Development takes a lot of different routes. In addition to traditional classroom or computer-based training, there is the category of on-the-job types of training, including project work and progressive assignments.

Employees can be encouraged to become specialists in their area, with progressively larger assignments, or generalists, with the focus on breadth of experience. A strong organization will have a mix of specialists and generalists, so development tracks should have both processes in mind.