Central to any functional succession plan is a focus on the clients, and seamlessly transitioning those relationships from one partner to the next.

But while considering that client perspective, partners will benefit from asking themselves one question: How would they advise these very clients to plan for their own company's succession?

Perhaps placing the looming, profession-wide problem of succession planning under that lens would increase the urgency for firms, especially those that have yet to outline a plan at all.

The first of the Baby Boomer generation (born between 1946 and 1964) reached the retirement age of 65 last year. They number 77 million and make up 37 percent of the population aged 16 or older. According to a 2010 WealthStar Alliance survey of accounting firm partners, 94 percent of respondents said that succession planning was important or very important, but only 31 percent reported having a plan in place.

A succession plan is the "first thing firms would recommend to a client, like a real estate client" explained Manny Kaplan, managing partner of Los Angeles-based Top 100 Firm Miller Kaplan Arase. "A lot of the profession works very hard for their clients. I was a managing partner for a law firm for three weeks. A friend had a law firm with 60 lawyers and no one wanted to be a managing partner; they all wanted to take care of their clients. Eight months later, they went out of business, formed four different firms and had a $6 million debt. Most of the [accounting] profession doesn't take care of business, but takes care of clients - you've got to do both."

 

BUILDING A HISTORY

Of course, the two are intertwined. Many successful succession plans involve cultivating strong client relationships early, and among more than one partner.

Miller Kaplan, founded in 1941, has had a succession plan in place for the past 30 years, based on a long-established partnership agreement. The firm currently has 22 active partners and has retired a total of 13 since inception.

"Our firm adopted a 'we' policy as opposed to an 'I' policy," Kaplan explained. "A lot of firms have partnerships with five to six guys and each handles their own accounts. They might share staff, but hardly ever share clients, and each person has a book of business. Our firm has a different approach. We share clients and oversee each other - there are two partners on every job. That's the way we've always done things, so when we transfer a client to another partner it becomes a natural thing."

New York-based Top 100 Firm Berdon also benefits from firm history. According to co-managing partner Mark Bosswick, 25 of the current 38 partners have only ever held a job with the firm, while the remaining partners have been with Berdon for at least 10 years.

On Jan. 1, 2012, Bosswick and Stuart Kotler transitioned into the roles of co-managing partners, taking over for Stanley Freundlich, now MP emeritus. The shift had been in motion for the 15-plus years that the three men had served on the Executive Committee together, and was regularly discussed at weekly Thursday morning meetings.

Constant communication is also integral to the succession plan at Miller Kaplan, in the form of monthly partner meetings. "It's an open meeting, and there's not a partner with more points than any other," Kaplan explained. "They can vote whatever they want. There's a lot of expression and ideas and we learn a lot. We take into account a lot of good decisions."

Gary Shamis, managing partner of T100 firm SS&G Inc. and partner of the consulting coalition think tank The Advisory Board, agreed with the importance of an open dialogue. "Once in a while, I'm on a consulting project where no one is on same page - the young people want to take over and want a contemporary firm," he said. "It's not a good scenario. You want to get everyone to speak their mind so you can understand and flesh that out. For the firms that are not incredibly open and transparent, there's a degree of unhappiness and dissension."

While firms should give everyone - especially those of the younger generation - a voice to ensure some harmony, the most important one still comes from the top. "If the guy that runs the thing, you don't believe his enthusiam, he needs to get out of the way," Shamis continued. The succession plan "needs to be a natural evolution, where you let it take place from the top down. From the bottom up is more of a revolution."

 

GETTING ON THE SAME PAGE(S)

At the top, time must be allotted for drafting the necessary plan documents. Bosswick, Kotler and Freundlich spent six months "collaboratively and non-confrontationally" drawing up the legal documents for Berdon's succession plan, making for a "very healthy and seamless transition."

Individual priorities should be verbally hashed out long before dotted lines are signed, however. "Everybody needs to be open and honest about what their expectations are, what they want and/or need out of this business relationship," said Bosswick. "How long they want to work for, how hard they want to work, and how much money do they feel they need?"

This upfront approach helped Miller Kaplan rule out a potential outside partner who didn't fit the values of the firm. "A man brought us one sixth of a firm; his firm didn't have a succession plan," Kaplan recalled. "He discussed it with us, and he wasn't looking for a succession plan. He wanted to stay eight to nine years at the same pay and not give up control of his clients. We passed and he did, too."

While multiple partners should foster relationships with each client to guarantee post-transition retention, these matches should also be chosen carefully. "Our firm works on one word: selection," said Kaplan. "We select the right clients, personnel, associates, the right leaders and formats, so they are all going to work. When we start to vary from the selection process, we're talking all kinds of problems."

This emphasis on selection extends to the firm's services, which are specialized to fit the needs of Miller Kaplan's more than 6,000 clients. "We don't put square pegs in the round holes; people do taxes or audits and don't change into other things," Kaplan said. "One person could do it all at most firms, but we all work together to give clients a better opportunity. I was a tax partner and couldn't keep up with all the audit statements, and vice versa. Working together, we're a good team on behalf of the client."

Bosswick agreed. "The most important thing, which is counterintuitive to professional firms, is to have as many people in your organization that can have a close relationship with the clients' organizations. It's incredibly beneficial."

 

THE DAY AND AGE

A good partner-client relationship is also predicated on personalities meshing, which can also mean teaming up based on age.

"Stu [Kotler] is friendly with the largest clients, the generation that's 70 now, and I'm friendly with the generation that's 50 now," Bosswick explained. "When we transitioned, it was necessary they'd stay and we had formed a pretty good alliance. Those 50-year-old clients, they're my friends also - it's more than a client-service relationship, but a close bond."

While not officially designating junior and senior partners, Miller Kaplan pairs younger and older partners with clients. "Partner Doug [Waite] has training sessions," Kaplan explained. "Doug takes younger partners to meetings to deliver reports to clients. Succession starts when you become partner and there is training on taking over responsibility. Then clients don't feel that you dumped them on someone else."

Preparing these multiple transitions is becoming more vital for firms that don't want to succumb to the M&A trend.

"It's not always about succeeding the managing partner; in some cases, firms are succeeding all aspects of it - financial, audit, tax, the heads of those," said SS&G's Shamis. "It may not be the perfect scenario to succeed everyone, because you need the right array of people to pull it off in the right way. You have a lot to lose. You don't want to set yourself back so that you have to get rid of the firm because you didn't do it in adequate time."

Too often, the issue of succession planning is addressed too late, when all options can narrow into selling off the firm, Shamis added. "If you do want to keep the firm, and the legacy, that's great," he said. "Give yourself five years, and assemble talent if you don't have it and give yourself a year [for that]. The biggest issue - the awareness of the situation - is available to you. That is the biggest thing."

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