Succession Planning

Know when and how to say goodbye

in reCent years, the landscape has changed in several significant ways that impact succession processes for professional firms.

Many senior professionals feel so pro-
ductive and energetic that they’re increas-
ingly reluctant to withdraw from the prac-
tice. As a result the succession process is
often deferred, sometimes in a very fuzzy
manner, as in “not now,” “when I feel
ready,” “I’m not sure.”
Many professionals who are approach-
ing the traditional (or previously agreed
upon) retirement stage have determined
that, because of today’s economic envi-
ronment, they’re not comfortable, or may
be economically unable, to walk away from
their regular income flow.

However, against this landscape, many longstanding aspects of the succession process continue to be relevant. Younger successors feel the need to have decision-making authority and control passed to them in a timely and effective manner. Those who are leaving tend to be important reservoirs of knowledge and wisdom about the practice, its clients, its history and various business networks. In order to ‘work’ (however defined), a succession process needs to be linked to a successful transition process.

Each firm needs to define what it would consider to be a successful or failed succession experience. Failure isn’t necessarily marked by a cataclysmic event. It may simply be that the experience could have been more rewarding, less stressful and more seamless than it was.

Consider these common pitfalls.

lettinG Go While not lettinG Go 2

stay is often experienced by successors as blocking their advancement. The extended timeframe can discourage successors to the point where they may leave the firm in order to pursue their careers in an alternative environment that doesn’t present such a blockage. Sometimes, the delay can result in successors deciding that, although they may be content to stay with the firm, they’re no longer interested in being a successor principal. It’s possible that their attention has begun to focus on their own personal strategy for how they’re going to eventually exit the firm.

levels: There’s no effective transition of clients; successors have in fact not assumed the in-charge role; and the retiring partner is impeding the firm’s evolution.

brain drain 3

reluCtanCe to Withdra W 1

Although the knowledge, connections, skills and wisdom possessed by senior practitioners are difficult to measure, it’s usually of considerable potential value to their successors. Succession arrangements that don’t provide for a formal, structured transfer of this intellectual property inevitably will fall short of the potential value that could have been derived from such a legacy.

The bottom line is that such pitfalls can result in inefficiency, suboptimal productivity and a failure to maximize profit potential as a result of a succession event. And from an interpersonal, quality-of-life viewpoint, relationships between successors and retirees (actual and intended) will be strained. END

Where a planned retirement has been
delayed (whether for psychological, finan-
cial or emotional reasons), the extended
A common pitfall is that retiring partners
don’t actually pass authority and control over
to their successors. They only go through the
motions. They may continue to have client
contact and be accessible by their clients
even though a successor has assumed re-
sponsibility for servicing of the client. This
creates a fiction that can confuse the client
(“who is really in charge?”) and can discour-
age a successor (“she continues to control
the client — there really hasn’t been a transi-
tion of the relationship”). Such half-hearted
transitions are counterproductive at many