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Successful succession: internal ownership transitions and what really matters.

the founding owners of many small to midsize CPA firms often build organizations tailored to their skills. The result of this is that the firm doesn't work without them.

When it comes to succession planning, the issue is less about training future leaders and more about what existing leaders have put in place that will handcuff future leaders.

To find and eliminate those barriers and build a successful succession plan, owners should examine the following modes of operation of a firm: Survival, Safety Net, Success and Continuation.


At this initial stage of entrepreneurship, there is an instinctive drive by the owners to pay for the roof over their heads and put food on the table. Owners are thinking about where the next work will come from and keeping the doors open. Usually owners depend on their own skills and hard work, building limited support infrastructure.

Safety Net

Once the firm has the resources to cover the owner's basic needs, the focus turns to building the business to generate enough cash to pay off business debt and create some financial security for the owners. Still, there is a tendency for owners to lean heavily on their own skills and work, while building an infrastructure that helps them be better at what they do.


Here, owners work on building the firm and its processes around key people in the organization to maximize their talents under the management and control of founding partners. This is as far as many firms go.


This mode requires founding partners to step back into the shadows and allow others to evolve. This stage normally requires an organization to abandon the mode of operation that has been responsible for much of its success and restructure itself.


The firm's success, reputation and strengths still are reflective of the owners. Indeed, the firm's identity is wrapped in the founding owners. The challenge is to create an organization that has its own identity. The owners need to start taking actions that will enable the firm to survive and prosper long after they retire.

What Happens Next?

The founding partners can stay involved after identifying the need to step back, but they will need to take a much less prominent and dominant role in the firm. This means owners need to build processes around organizational roles and responsibilities--not the skills of specific individuals. Why? Because when you take individuals out of these systems, the systems typically fail.

Getting There

The following are some factors owners must address to move from management by a strong owner to a robust system of management and governance based on roles and responsibilities:

* Control of the firm must rest with client service partners who have the entrepreneurial savvy to run a business.

* Identify and clarify the roles and responsibilities of the partner group, acting in effect as the board of directors, of the managing partner reporting to the board, and of the individual partners reporting to the managing partner.

* The partner group acting as the board must agree on and vote on strategy and policy. Partners must learn how to govern--discuss and respectfully debate issues, call for questions, vote and move on.

* The managing partner must be held responsible for the implementation of strategy and policy and has to have the stick and the carrot to hold other partners accountable. Partners are held accountable through a compensation plan that rewards them for doing what is required under the firm's strategy.

* Be willing to fire anyone, including partners, who doesn't do what is required.

* Create a culture of training and development for all of its people--not just partners.

* Get rid of marginal clients.

* Owners and partners must be out in front of clients and build client relationships.

Without the structure for incoming leadership to easily govern, execute and hold everyone--including partners accountable, however, leadership skills and training won't matter.

Check out the CalCPA Education Foundation's free webcast that provides an overview of succession planning:

The Education Foundation and Succession Institute, LLC have also created the CalCPA Education Foundation Practice Management Institute to address your succession planning needs. Learn more at

Dominic Cingoranelli, CPA, CMC is a founder and executive vice president of consulting services for Succession Institute, LLC. You can reach him at
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Title Annotation:PracticeManagement
Author:Cingoranelli, Dominic
Publication:California CPA
Geographic Code:1U9CA
Date:Oct 1, 2010
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