Real Succession Planning Includes Planning for a Loss of Skill & Expertise
As will generally be recognised and often read when considering the topic of succession planning, successful succession planning includes a timeframe of at least a couple of years. Having this time enables indepth consideration, review and preparation, all of which is often overlooked where a transition is unexpected or quick.
Therefore, in terms of preparing, it’s more than simply thinking about who is going to acquire the exiting partner’s equity. Hopefully it should also include a review of the skills, expertise and knowledge that requires replacing, because we know that all of us are not the same and each of us make different contributions with firms.
As the old saying goes, ‘most professional firms have the finders, minders and grinders’. Or if you like, ‘the rainmakers, managers and doers’. So, when planning the exit of a key person, it is imperative to have a clear and accurate appreciation of what that individual contributes to the firm. Now, whilst I can imagine some of our readers would be saying “nothing” underneath their breath about their colleague, we have to realise that they must be contributing something to the firm; otherwise they would not be there.
So, the person that is next earmarked for departure; what are their strengths? Are they excellent strategist, do they introduce a significant number of new clients to the firm, do they keep the management of the firm on track, or are they great at smashing out the work? In performing this review, it would be worthwhile asking all partners, including the one departing, what they feel the key skills, attributes, expertise it is that are likely to be lost. Make a list, and then as a group, identify which of these aspects actually require replacing. The key here is to be honest & realistic. Probably most, if not all, require replacing.
The next question is HOW?
Does the firm have internal options that meet these requirements? Will the firm need to source someone externally to the firm? Will those skills best be replaced through a merger to have a broader or larger team on the job? Could the required skills and attributes be contributed by someone other than an equity holder? Could this person be a full or part time senior employee with specialist skills or per a contractor?
These questions are all food for thought. Fundamentally, it’s imperative for the firm to honestly and realistically consider what the potential impact of the firm would be when these skills are not available in the future. A good example is audit services. Another example is someone who is great at introducing new clients; what happens to the future growth of the firm? Or perhaps planning needs to be put in place around the replacement of the “doer” or “grinder”. Keeping in mind, replacing a high level person within the firm who is a greater producer of revenue will probably require more than one person and therefore your firm needs to factor in the additional cost.
Lastly, acknowledgement ideally needs to be given to likely timeframes it will take to find a replacement. Finding succession is difficult at the best of times, however find those with specialist skills can result in an even more lengthy process.