Firms reassess leadership changes to thwart competition

by Stuart Kahan

Seattle-based Moss Adams, the 10th largest accounting firm in the United States, named Rick Anderson to succeed Robert Bunting as chief executive in June — the firm’s first new CEO in 23 years. Anderson joined Moss Adams in 1973 and rose through the ranks to become the firm’s president and chief operating officer, and now its chief executive — a prime example of succession planning.

To say that accounting firms today must develop an effective management succession strategy would be an understatement. With increased competition among CPA firms, there is a need to reassess existing leadership structures. Whether it is a sole practitioner or a 200-person organization, the question of management succession is clearly the firm’s most important strategic matter.

According to Anderson, Moss Adams was always focused on succession planning as an important service to its clients, but it also believed that it had equal applicability to the firm itself. “We place great importance on the issue at multiple levels, including succession planning for each and every partner, resulting from both normal retirement and unexpected incapacity; each office and industry group leader; and for all key firm-wide roles, such as CEO and COO.”

Anderson explained that Moss Adams has a number of internal processes that it follows on a regular basis, and the selection of a new leader was the result of a plan that it executed over a number of years.

“While nobody had pre-determined beliefs even one year ago about who would assume certain roles, there was widespread confidence within our firm that we had multiple ‘good choices,’ and the primary reason for that was we have focused on the concept of succession planning for many years,” he said. “We are over 90 years old as a firm, as are many of our business clients, and we are intent on being a quality, independent firm for another 90, just as many of our clients are. So we work with them on this topic, and we practice it internally.”

Preparing for transition
Management selection of successors is linked to ownership. The majority of the firms today do not look to bring someone in from the outside. In the smaller firms, the sole proprietor, or perhaps the firm founder, would usually be the partner-in-charge and make most of the decisions. At the larger firms, the leader is primarily selected from within the partnership ranks.

Preparing for this transition of management personnel requires a considerable investment of time. And, depending on the number of management levels involved, the new firm head will usually come from those ranks.

Regardless of the firm’s size, the primary goal is continuation of the practice following the end of the current management. This means that, starting with the first day, any new management must take immediate charge. Even though an individual practitioner does not have partners to lean on with respect to succession, that person must have a clear vision of where the practice is heading and a plan for getting there that should include the development of a key employee who could possibly be a future partner.

Ivan Brown and Leonard Smith are co-founders of New Jersey-based WithumSmith+ Brown. “We practice what we preach,” said Brown. “Thirty years ago, Len and I came together and founded what is now this firm. Each year we have had greater revenue than the year before, and that is because we have specific, written plans for growth.”

One of those plans, noted Smith, is for succession.

“Thinking toward the future means succession. We have had a long-range forecast model that goes out for some 20 years. We know we have our shareholders and retirement benefits, but we want to make sure it is not a burden on our successors,” he said.

He emphasized that such a plan must be reasonable and provide for continuation. “We go to our people and we incorporate all of their ideas in our plan. We know when certain people, including ourselves, want to retire, and what they want to do.”

Brown concurred, adding, “We are generous with our younger people and we recognize the importance of having them come up through the ranks. We have a generous approach that is not only centered around money.”

This has translated well with the firm because it has an extraordinary low turnover. In fact, the average time of a shareholder there is 21 years. “We share everything with our people,” said Brown, “and we want them to be a part of management. We have monthly partner meetings that have been going on for the past 25 years. Even with a healthy dose of dissent at times, we all eventually reach an agreement on what we want to do. The firm would not miss a beat if any shareholder left for any reason, even if it was the managing partner.”

WithumSmith+Brown has 18 shareholders serving as directors and 15 income or equity shareholders. Shareholders attend a retreat three times a year. “We do have term limits on serving on our management growth committee, which is for two, three-year terms and then one must sit out for an additional year,” said Smith. “The term limit provides the election of younger shareholders to the committee, which functions in an advisory capacity.”

Implementing action
Tom Beaver was one of the founders of Reinsel & Co., based in Wyomissing, Pa. In 1994, at the age of 41, Beaver replaced founder David Reinsel as managing partner.

Now, in 2004, he has stepped away, yielding to Andrew Weidman.

Beaver said that, following a lengthy illness, his wife encouraged him to have a five-year plan so that he could step away at a reasonable time. He told the other members of the firm that he would prepare a vision plan for them and he surveyed the firm’s members as to who they saw as the next managing partner. It took almost three years to set up the succession plan. The transition was handled smoothly and it was well known by other members of the firm for two years before it took effect.

The firm has executive committee and partner meetings every month. By the time Weidman came in as managing partner this past May, everybody was on the same page. For the past two years, Beaver has met with Weidman, chief operating officer Charles Fabian, and firm administrator Yvonne Rosenbaum to prepare for the transition. According to Beaver, he stepped down at this time, even at the young age of 51, because he had made a commitment to his family to spend more time with them.

As a result, Beaver has spent the last several years engaged in providing leadership consulting to clients. “I have a long to-do list of projects on which I look forward to rolling up my sleeves and advising.”

According to Weidman, the succession planning started in 1999, at a retreat. The group identified candidates who were interested in the managing partner position, and who would be comfortable to the staff. There are 18 partners in the firm and they looked at candidates relating to positions of leadership both inside and outside the firm. Weidman said that he touches base with all the partners on a constant basis to keep everybody up-to-date.

It’s an MP thing
Todd Mitchell, chairman of Elliott Davis in Greenville, S.C., pointed out that he gathered a team together of the top next- generation leaders well before the previous chairman was due to retire. “Who was the most qualified and had the best talents to take over, we asked ourselves? This was all in light of where we wanted to go ... our strategy. We wanted both groups to be together and to have a frank discussion. Once the decision was made, I began immersing myself in the firm and getting up to speed on day-to-day activities. I was on the executive team for three years and knew where we wanted to be. I wrote many memos on what’s involved in day-to-day activities and how important it was. I was elected for three-year terms that are unlimited. Strategy and day-to-day go hand in hand.”

According to Mitchell, the problem resided in knowing how to implement the managing partner position. “Succession issues revolve around knowledge of the operating agreements, such as authority and voting procedures.” Another important aspect, he said, was to meet and become a “known commodity” to the firm’s bankers, attorneys and professional liability insurance brokers, as well as other professional advisors.

Raymond Buehler, president of Schneider Downs & Co. in Pittsburgh, said that the actions and considerations that his firm has taken to address the issue of succession are:


  • The reorganization of the firm structure, for future growth and expansion, and to allow new opportunities for leadership;
  • A manager development leadership program, covering the introduction of a firm-wide program that focuses on technical, administrative, sales and marketing training programs to prepare future leaders;
  • The specific identification of leaders in shareholder and management groups for additional training and mentoring;
  • A program that recognizes and encourages community involvement;
  • The development of the next evolution of a three-to-five-year strategic plan;
  • Regional analysis to identify opportunities for expansion through acquisitions, mergers or new offices; and,
  • Branding a project that clearly identifies the firm’s current position in marketplace and future opportunities in that marketplace, and preparing a message that is future-focused.

“The vision is something that we can easily do,” stressed Buehler. “You can become too complacent. We don’t want to sit and look back. Leadership development is the essence. It ensures the long-term success of the firm and that success means effective management. We need to select highly qualified shareholders and put people in position to learn.”Looking to the future
This year, Dan Simms of Habif, Arogeti & Wynne, in Atlanta, succeeded Jonathan Miller as managing partner. The firm has actually put together a Power Point presentation on succession planning for CPA firm owners.

In changing leadership models, the firm determined that leaders must have honesty; a strong commitment to ethics; the trust of partners, staff, and clients; a commitment to the firm; decisiveness (and the courage to make a decision and stick to it); and the ability to network well — as well as being self-starters with high levels of energy. The committee felt that a leader must build consensus, motivate staff and focus on firm needs. And leaders must embrace change.

“In developing a succession plan,” noted Simms, “the firm must realistically assess the current state of the firm and its staff, establish goals, identify obstacles, and choose a facilitator. The elements of such a plan embrace firm structure, the new management team, timing, communication (both internal and external), and establishing the role of outgoing management.

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