Is succession planning a myth?
The theory of succession planning sounds great, but AccountingWEB's anonymous partner is willing to wager that accountancy has very few examples where it has proved successful.
Throughout my career, I have been aware of the term “succession planning”. However, to date, with only a single, very limited, exception, I cannot ever remember seeing it being implemented in the profession and hardly more frequently amongst clients.
The exception literally runs in the family. While it has not been my good fortune to observe an accountancy practice being handed down from father to son personally, I am aware of such situations, although those examples come from the distant past. One day, I might even see a practice passing from father to daughter or mother to daughter.
In industry, the principle of passing the family company down through the generations still seems to exist, although very sadly most companies of this kind have ended in tales of woe, where the third or fourth generation was very reluctantly forced to close down what had, until the latest family member inherited, been a highly profitable business.
It is a fact of life that a high proportion of accountancy practices seem to be run by partners close to retirement. You must, therefore, imagine that in most cases those ageing partners have regular conversations about how on earth they are going to secure its future (and their pensions) after their departures.
The obvious solution is to pick a likely younger partner or even director/manager and groom them for eventual succession. An even better route might be to hedge bets by bringing on board three or four promising leaders of the future, ideally in the 30 to 45 age bracket. The theory is great but you have to wonder why this never seems to work out in practice.
I know that it may be painful for some readers to discover, but often the main problem is that all of the existing partners refuse to put their trust in those from the next generation. The cynical, and I’m certainly one of those, would also unkindly suggest that there is an element of jealousy involved.
Whatever the underlying reason, and it could be nothing more than overwork or lassitude, which almost always win the day as partners leave things until too late, frequently watching their designated champion sailing off into the sunset, having assumed that he or she had no future working for a firm in which all the younger partners were in their mid-to-late 50s and there was no hint of a plan to hand over power.
An equally knotty problem is the desire of retiring partners to get what they see as their just deserts. Frequently, they expect not only an instant repayment of capital but also a lengthy period of highly paid “consultancy”, perhaps topped off with a sizeable pension, which might even continue beyond their own demise to that of their spouse.
Younger partners aspiring to take a business into the future come from the other end of the spectrum, believing that the oldies have run the business dry and do not deserve another penny beyond the repayment of capital, which ought to be spread over at least 20 years.
Generally, the best way to achieve the goals of existing management is to merge the firm out of existence, effectively selling out to another practice that has the funds to struggle on for a few more years, then suffer the same fate.
Readers may well have their own experience of failed succession planning but I would be willing to wager a significant sum that very few have seen more than a couple of examples where it has actually gone to plan, with the younger generation smoothly stepping into the shoes of their professional forefathers and, having done so, running the practice successfully and paying a nice stipend to those predecessors.