How To Select the New Managing Partner

QUESTION FROM A READER: I am looking for information on how second-generation firms select a successor managing partner. I’m also interested how this process plays out when a firm has multiple MP candidates. What role should the current MP play in the process? What if there is no obvious successor?

ROSENBERG RESPONSE:

What criteria should the MP meet?

To start, let’s understand what the qualifications are for the MP.

1. Charisma is nice, but many organizations, especially CPA firms, don’t have charismatic leaders. Jim Collins, in his legendary book Good to Great, said: “Great leaders are self-effacing, quiet, reserved, even shy, a paradoxical blend of personal humility and professional will. They act with quiet, calm determination, relying principally on inspired standards, not inspiring charisma, to motivate.”
2. Enjoy a high level of respect and credibility with the partner group. Perhaps the right person is one who, when they speak at a partner meeting, everyone listens.
3. Be an expert communicator. They should love working with people and have extensive experience managing people.
4. Have strong organizational, time management and multi-taking skills.
5. Delegate, not micro-manage.
6. Be skillful at using the duck principle: stay cool, calm and collected on top and paddle like crazy underneath.
7. Have a strong enough personality to hold partners accountable. This can be especially difficult when MP candidates consider many of the partners their friends and peers.
8. Have thick skin. An MP will never get the enthusiastic support of every partner on every In fact, on many choices, there’s a good chance that partners will not be happy with them both before and after the decision is made.

Democracy is no way to run a business, including a CPA firm

That isn’t as harsh as it sounds. The gist is that organizations must have leadership that drives – not dictates – important decisions. The worst thing is to throw every key decision up to a vote (except those few specified in the partner agreement such as mergers or admission of a partner). It’s the MP’s duty to recommend a successor and obtain the support of either the executive committee or a small group of power partners. A good trial attorney never asks a witness a question without knowing the answer. The same applies to getting approval from the partner group on the MP recommendation. A proposal by the MP, strongly supported by the EC, will almost never be voted down. If it is rejected, then the firm has the wrong leadership in place.

One exception to the above may be when the current MP is less assertive or serves more as an admin partner than a CEO. In these cases, a more democratic process could work. However, it’s always a good idea for the firm to appoint a group of partners, which could be the executive committee, to deliberate on the candidates and make a recommendation to the full partner group before a vote is taken.

The best training ground

Many firms with five or more partners (usually seven or more) have executive committees. Ideally, the EC will comprise at least one “younger” partner who has the leadership skills to eventually become the MP. Serving on the EC for a number of years is the best training ground for the new MP. If the EC is largely comprised of partners, none with the right stuff to be MP, then the firm has not selected the right group in the first place.

Polling the partners

Some firms, particularly ones with an MP who has served as MP for ten years or more, may wish to poll the partner group on:

1. What should the criteria be for MP? What qualifications and skills are necessary?
2. What should the MP’s main focus be? What should be expected of them?
3. What are the firm’s three biggest issues or problems that the MP must address?

The findings of the poll can be used by whatever group is charged with recommending the successor, but they should not be obligated to follow the results.

Our book, The Role of the Managing Partner: The Definitive Guide to CPA Firm Leadership, covers these topics and more: Winning strategies employed by MPs to drive their firm’s success • Techniques to manage the other partners and foster partner accountability • Management vs. leadership • 25 best practices • Proven practices for managing staff, revenue growth, and assembling an exceptional management team • Partner compensation-a potent weapon in the MP’s arsenal • Essential organizational skills for MPs • Observations of how the very best MPs operate • Why and how MPs fail • Quotes from esteemed leaders

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Should MP candidates “campaign” for the job?

In my experience, it’s pretty clear who the best choice is for the next MP. But I have seen a few isolated cases where a firm had two candidates being considered. Under these circumstances, there is logic in having the candidates make a presentation to the partner group and/or the executive committee on how they see the job, how they satisfy the criteria for being MP (see the beginning of this blog), where they see the firm going and what their focus will be.

Having an election where candidates “campaign” for the job is often not productive and harmful because (a) people’s feelings may get hurt, and (b) there is a risk that selecting the MP will turn into a popularity contest.

How soon should the MP-elect assume the position?

A best practice is to designate the new MP roughly two years before assuming office. This allows plenty of time for the new MP to:

1. Transition a meaningful number of clients to other firm members, thus freeing up enough time to devote to managing the firm. It’s a huge mistake for any MP of a decent-sized firm, new or existing, to manage the firm while continuing to manage a full client base.
2. Work with the current MP to transition duties. The MP position is a big job and shouldn’t simply be turned over to the successor in a few weeks or months. It takes time to learn how to do the job.

What if there is no obvious successor?

It’s a tough predicament, made difficult because there is no easy solution. Here are some alternatives to consider.

1. The partners or EC persevere until they find the right successor. This person may not initially want the job. The partner may not check all the boxes for qualifications for an ideal MP, but they do get the job. This may not be the best solution, but it’s a common one.

Years ago, in my girls’ softball coaching career, the head coach of our traveling team was fired by the association for egregious behavior. The association asked the three assistant coaches to pick a successor. We met at a local establishment for libations and cheeseburgers. We started the conversation by asking if anyone wanted the position. We were all capable, experienced coaches. We all said no because we were all busy professionals and didn’t have the time. Then we looked each other in the eyeball and asked, “What next?” Then, after more than a few sips of suds and dead silence, one of our coaches said, “Okay, I’ll do it. But I will need a lot of help from all of you.” Deal done. Vicki ended up being a head coach for many years and was very successful.

A similar scenario undoubtedly plays out at many firms, usually smaller ones. After the initial impasse, someone steps up and volunteers.

2. Hire an outside, experienced CEO. But it’s uncommon – not because it’s a bad idea; it’s simply too groundbreaking. The candidate need not be a CPA but has experience at the highest level running an organization, perhaps as a president. A few firms that I worked with had such a person, and it worked out very well. Why has the profession resisted such a leadership solution? CPA firm partners may feel in their gut that someone without experience as a practicing CPA “doesn’t know our business.” But it’s common for many other industries to hire a president or other high-level executive from a totally different industry… and it works. There is no valid reason to require experience as a practitioner and/or a CPA. Solid leadership experience at a high level should be the main criterion.
3. Hire a high-level leader from another business as the COO. Being a CPA should not be required, though it would be nice. This person runs the firm on a day-to-day basis. Perhaps one of the partners assumes the MP title, but is involved only on an oversight basis. This is supplemented by an active executive committee. One approach I have seen a number of times is one in which the firm has a very talented client service manager with leadership skills and this person is made the COO.
4. Merge into a larger firm. This option is often viewed as undesirable, but I have seen it work well a number of times, including firms that were sizeable and quite successful.
5. Never, ever choose to manage by committee. That’s not leadership but management by abdication.

What MP succession challenges are you facing?