Succession plans should be more than schedules for transferring ownership— they should be integral to a firm’s strategic plan to recruit and develop talented staff
The process of succession planning
For a group of principals that’s just starting, the main task is to become fully informed in general about all elements of succession planning and how they specifically apply to their firm. The best way to do this is by talking to colleagues who have done it, and reading about the process for professional service firms. It will probably be necessary to hire a consultant. The most prudent use of the consultant’s time is the front-end strategizing—setting forth goals, requirements, making a timeline, and specifying tasks—and moving forward. A consultant can prevent mistakes, such as inadvertently chasing away viable successors by overpricing the firm, or advise principals against selling out but failing to retire.
Peter Piven, FAIA, the Philadelphia-based principal consultant of The Coxe Group, and author (with William Mandel) of Architect’s Essentials of Ownership Transition (John Wiley and Sons, 2002), lists seven steps that are crucial to making a succession process successful: start early, recruit constantly, share information, assign and delegate judiciously, provide feedback and establish accountability, communicate interests and intentions on a regular basis, and mentor continually. These steps, discussed below, should serve as a good starting point.
Start early: Firm principals should put an ownership transition in motion at least 10 years before they plan to retire.
The conventional wisdom is that it takes about that much time to implement a reasonable transfer, although there might be some exceptional cases where it could be accomplished sooner. It is more than a financial transaction. It is a transfer of the responsibility, contacts in the marketplace, and so on—the whole firm culture. Client relationships will also benefit from early planning, with likely successors working with their counterparts on the client’s side of the table. It takes time to develop close working relationships.
Recruit constantly: This will illuminate differences in the talent pool and help to clarify to management which skills and personal characteristics may be desirable in the future. It is prudent to use job searches to identify interested potential successors rather than simply addressing the firm’s immediate need for a new employee.
Share information: Effective communication will foster staff education about all aspects of the firm—particularly its culture. Allowing candidates to examine financial reports such as income statements and balance sheets will yield an understanding of the firm’s operations, which is significant for future partners.
Assign and delegate judiciously: What work is assigned, to whom, and when are important decisions. Principals must get into the habit of delegating components of a leadership position to facilitate the transition and provide exposure. If there is some overlap, for example, a principal can observe and evaluate performance. It is easier to pinpoint any weaknesses or deficiencies in this context, which can then be addressed. If principals fail to provide opportunities for successors to engage in meaningful client relations and practice management tasks, they risk losing successors, who might even take clients with them. These exercises may also expose staff who are not good candidates for the succession process.
Provide feedback and establish accountability: Debrief early and often to discuss how you—or another principal if you are not in a position to be a direct role model—would have handled a given situation. Annual performance evaluations are a good mechanism to provide feedback related to any anticipated partner-level accomplishments.
Communicate intentions on a regular basis: Ann Chaintreuil asserts that expectations for future partners must be explicit. In her firm’s case, generating new work and assuming a leadership role were important and consistent with the stated desire for the firm to continue to grow.
Mentor continually: Provide frequent mentoring beyond job-related issues to include all aspects of professional growth. This might even involve a team of principal mentors in a firm—matching strengths of a mentor to needs of a candidate at the most appropriate time within his or her development.