Succession Planning: Views From A Luminary

Marc Rosenberg, CPA / Sep 24, 2018

A classic TV commercial showed two businessmen talking over drinks in a noisy, wood-paneled men’s club when one says: “My broker is Smith Barney and he says…”  All of a sudden, everyone in the club leans in to hear. The message:  When a wise person talks, shut up and listen.

Advice from a luminary is highly valued and Carl George is truly a luminary.  He spent 45 years with Clifton Gunderson, 13 years as COO and 16 years as CEO.  During his tenure as CEO, Clifton grew from $50M to $250M.  His last major accomplishment was a sideways merger with fellow Top 20 firm Larson Allen to form CliftonLarsonAllen.  For the past five years, Carl has been consulting to CPA firms on management coaching, mergers, strategic and succession planning, among other areas.

Carl brought the house down when he recently spoke to our Chicago CPA firm roundtable on succession planning. To set the table for his pearls of wisdom, he shared a few stunning facts:

  • There will be a money transfer of $30B from Boomers to the next generation over the next 20 years.
  • Over the next 10 years, more CPA firm partners will retire than in the past three decades combined.
  • 85% of CPA firms have a mandatory retirement policy; half of those make exceptions to this policy.
  • 80% of first generation firms never make it to the second (added by Rosenberg).

Here are Carl’s thoughts on succession planning:

“Retiring partners commonly say ‘the client wants me,’ but this is rarely true.  When they say this, they are putting themselves before the firm. If you’ve got senior partners who won’t let go, you will eventually lose your next generation of leadership.  One way to convince partners that they are not indispensable – mandate that they don’t have a choice but to transition their clients if they want to receive their buyout.”

“One of the keys to successful client transition is for retiring partners to tell their clients:  ‘I’ve agreed to transfer my duties to other firm members.’  Make the change clear but retirees should also assure clients that they won’t be abandoned.”

“New partners should plug in the retiring partners on developments with the clients.  This helps avoid making the retiree feel left out or embarrassed when talking to clients.  This is the ultimate respect.”

“Most partners are not ready for retirement.  All they know is the firm.  Many don’t have any hobbies.  They haven’t developed new types of work to do.  They haven’t talked to their spouses about life after retirement.  All of this can be traumatic.”

CPA Firm Succession Planning: A Perfect Storm is a must-read for firms that want to focus on keeping the firm independent.  Many firms believe that succession planning starts and stops with developing future leaders. Though this is critical, there are many other important parts to a succession plan.   This book addresses ►how to assess your existing staff, ►leadership development, ►MP transition, ►governance structure needed to remain independent, ►client transition, ►partner buyout plan, ►partner buy-in plan

“As a CEO, my overarching drivers were the firm must come first and transfer the firm’s legacy.”

“Senior partners want respect, to be asked for advice (they won’t volunteer) and to work on meaningful assignments.”

“Senior partners’ obligations include providing proper notice (often two years) and transitioning clients in compliance with a written policy.  Enlightened firms link client transition efforts to retiring partner buyouts.  If transition is inadequate, the firm should be able to reduce the buyout.”

“Partners should be allowed to work after retirement only if they provide value to the firm.  The firm needs to create a written game plan, revised annually, for the retirees’ goals and duties.  Retirees’ should no longer be the primary relationship person with their clients.  They should be bridging to the new partner(s).”

“If senior partners properly transition over the notice period, they will run out of work.  They need compensation guarantees.  The firm needs to specify what is required of a senior partner in transition.”

“I don’t like billable hour requirements to be worked into a retirement/transition arrangement.  There shouldn’t be a reward for working more; we want them to work less.  In working out a compensation arrangement for a part-time retired partner, it’s not about breaking even (their billable time covering their comp).  It’s about the partner providing value to the firm.”

“MP succession is a very important process.  The partners need to create a profile of the attributes needed for the next MP because it will be different than the current one.  Things change and the new MP should be on the cutting edge of these changes.”

“I believe that a succession plan needs to be a living document; a written, dynamic document that changes every year.”

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