In previous blogs, I discussed the need to assess the level of need you have for replacing partners that will retire in the near future and how to assess the potential for partner level talent you have on your bench. The next step in this five step process is to get the right people on the bus and develop them into a viable succession team.
Best in class firms as it relates to succession make potential leadership a priority with every new person they recruit. If you don’t feel you have a strong enough succession bench, you may not have the time to address this need by hiring inexperienced staff that has better long potential than you have now. You therefore have two choices: hire near partner talent or find the necessary talent in a merger or acquisition.
The biggest mistake I see firms make that are trying to hire near partner talent is not presenting a compelling and clear picture to candidates of the opportunity. The best talent is not desperate to find a new job. They are probably employed somewhere and are looking for someone to offer them something they don’t see at their current firm. Be prepared to make a strong economic offer and a clear path to partner status. You should be able to discuss what a realistic timeframe will be, what needs to happen before the final decision can be made, and what the upside opportunity will be for them if all goes according to plan. You should have a solid plan for how new partners will be admitted to your firm, the financial commitment required, and what the compensation opportunity will be as a partner.
Most merger and acquisition opportunities you are likely to run into will have the same issue you have, maybe more acute. That is poor prospects for internal succession. If obtaining long-term talent through M & A is your goal look for firms with senior partners that have young talent that appears to have been overlooked, possibly because the firm didn’t have enough time to complete their development. Your other option is to find a firm with all young owners that want to improve their long term prospects by becoming your successor. However, just like when you recruit near partner talent, be prepared to make a compelling offer and a clear plan. You often can’t structure these types of deals like a normal merger deal and make it attractive enough for young partners.
Finally, consider using non-equity partner status as a final proving ground for new partners. This will give you the opportunity to evaluate the candidate in a role almost identical to that of an equity partner just to make sure they can handle it. Plus making the decision to promote to non-equity status is usually easier to do and simpler financially. If your goal is to strengthen your succession bench, though, you should plan to leave a non-equity partner in that status for no more than a few years.
About the Author
Terrence Putney, CPA (email@example.com) is CEO of Transition Advisors, LLC, www.transitionadvisors.com, which exclusively consults on succession and growth strategies for accounting practices nationally and ownership transition. He can be reached at firstname.lastname@example.org or 866-279-8550.