Stepping away without stumbling: members share insights and warnings on succession planning.

AuthorSpieker, Sandra L.

For some people, succession planning is like regular checkups with your doctor. It's not fun. It's an uncomfortable way to face the future, and the benefits aren't immediately realized. But, like medical checkups, succession planning is critical to maintaining health and happiness for both you and your organization now and into the future.

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Succession planning, or the lack thereof, has larger ramifications for the profession as a whole. As an increasing number of Baby Boomers in public practice plan their exits, an increasing number of firms will collapse, merge or emerge under new leadership. How will this trend impact the economy and the profession?

Catalyst editorial staff convened a roundtable of members to share their experiences and insights on this and related topics.

Participants:

* Gary Adamson, CPA, managing partner, Brady Ware & Schoenfeld, Inc.

* Mark Bradstreet, CPA, managing partner, Bradstreet & Company

* Charlie Foley, CPA, audit partner, Battelle & Battelle

* Beth Grubb, CPA, tax partner, Battelle & Battelle

* Pete Hackett, CPA, retired shareholder, Clark Schaefer Hackett & Co.

* Jim Haubrock, CPA, shareholder, Clark Schaefer Hackett & Co. and chair of The Ohio Society's Executive Board

* J.R. Hochwalt, CPA, managing partner, Flagel Huber Flagel

Moderator:

Jay Moeller, CPA, partner, Battelle & Battelle and chair-elect of The Ohio Society's Executive Board

Jay: The AICPA predicts that many CPA firms without succession plans will have to sell out to survive--thereby creating a shortage of management staff and a buyer's market. What are your thoughts on that prediction?

Pete: I doubt there are fewer firms today with succession plans than before. This topic comes up about every decade. It would be interesting to look at the actual merger and acquisition activity. There seems to be a lot of mergers today, but this was true in the '60s as well when I first started. A lot of quality firms back then ended up merging because they didn't have solid succession plans in place.

Charlie: The larger firms seem to have succession plans in place and have been planning for the wave of retirees for some time. It's really the smaller firms that are most likely to have problems.

Gary: I agree. A vast majority of partners in CPA firms are in their mid to late 50s, which means they are all coming up on retirement. With some of the smaller firms, the owner will probably be in the saddle when they turn off the lights and shut down the firm. We've talked to a lot of those firms. Getting them to give up their independence, even for the sake of the firm and succession, is a hard thing to do.

Jim: I don't think it's only small firms though. Succession planning is hard for many to deal with.

Mark: Our firm consists of 15 to 16 people and we don't have a succession plan--and we certainly should. It's not part of our model, and that's scary. We're not any closer to having one today than we did 15 years ago.

Jay: What do you think is stopping that? Is there anything in particular, or is it just day-to-day operations?

Mark: It's me, ego, fear, independence--a lot of different reasons. I'm not sure any of those are good reasons though.

Jim: Those of you who have talked to firms about merging--are you having to go find them or are they actually calling you?

Mark: It's both.

Gary: It's amazing to me because my firm has been in a number of discussions where we've outlined all the logical reasons why a merger makes absolute sense, from money to retirement to serving clients. At the end of the day, the answer is still "no." The owner likes what he or she is doing, likes not having a boss and being independent. That mentality kills 90% of the deals.

Pete: I remember Virgil Clark, who founded Clark Schaefer Hackett in 1938. He's the one that finally gave up his ego; we would have always let him be managing partner. I remember the day he called Bill Schafer and me together and said, "It's time to change the way we're managing this firm." It's the person at the top who eventually has to say "we've got to do this--period." There comes a time to develop a plan and give up the ego and insecurities. Otherwise, you won't get your retirement.

Gary: There is also the issue of firm leadership succession. Finding younger people who want to move up into a partnership role and take care of clients is an issue that exists with every firm. In the larger firms we are also looking for the next managing partner, which is a much bigger challenge.

Pete: I agree Gary. Most of us, including me when I ran the firm, would much rather deal with clients than manage the firm. It's very unusual when you find people who really enjoy managing the firm.

Gary: And do a good job.

J.R.: I'm blessed because I came into a firm with very good partner agreements. We've always had a ten-year plan for what is going to happen in the future--who we think is coming in and who we think is going to retire. Our biggest problem is that young people coming out of school have a completely different attitude than what we had 30 years ago.

Gary: I've heard people at other firms say they don't have many people interested in partnership. We've been fortunate because we've really been successful in our recruiting efforts the last several years. We have a lot of good, quality people who are interested in taking it to the next level and becoming partners.

Beth: We have some folks committed to the partnership track. The trick is helping them move from just serving clients to taking on leadership roles. We have to be involved early in their career to help them develop leadership skills. They have to be home grown; It's hard to buy or recruit that later on.

Jay: How do you mentor...

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