Issue 26 – Spring 2011

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Leadership Lessons

Ten Steps to Make Succession a Strategic Process

The final test of a leader is that he leaves behind him in other men [and women] the conviction and the will to go on.

~ Walter Lippman

It is no secret that our nation is graying and the need to plan for the succession of the approximately 76 million Baby Boomers cannot be delayed. As we’ve worked with firms across the country, though, we’ve discovered that the issue of succession planning is one that most put off, deny, or ignore.  The reasons for this procrastination are varied, but they tend to fall into four categories:

• Mature partners not wanting to face the aging process or envision possibilities for life without work at the firm.  Leadership then takes their cues from this denial and defers any discussion of succession.
• Mature partners believing that younger partners or up-and-comers are not yet capable of taking over or running the firm.  Because they fear for the firm’s security, these mature partners then hold on to leadership responsibilities and delay the process further.
• Firms not having clear successors for key positions and avoiding the inevitable difficult choices and personal politics that choosing a successor will entail.
• Firms confusing succession planning with the buy/sell process and, not wanting to engage in discussions of valuation or terms, they put off other elements of succession.

But time marches on and succession is, or will be, thrust upon us all.  Not planning, communicating, and preparing will leave your organization vulnerable.  In this article, we will explore how to get past these hurdles and make succession a strategic and ongoing process in your firm.

To propel your leadership team into succession discussions, you must first convince them that succession is not event-based or something easily done in haste.  Instead, it can take years to properly plan for the transition of key people, and the time to start is now.  If you are concerned about sensitivity of certain partners to the subject, hire a facilitator and an attorney to break the ice, perhaps play “bad guy,” and lead your team through your first discussion.

Then, consider taking these important succession process steps:

1. Develop a unifying, engaging vision for your firm’s future that both the mature and up-and-coming leaders can get enrolled in. When you do so, you will develop an agreed upon destination you’re all driving toward, and this lofty ideal – that will surely include the continuation of the practice – will help motivate your succession discussions.  To develop your vision, see our Leadership Lessons article from our December 2010 issue.
   
   
2. Develop your firm’s up-and-coming leaders.  This step is one that must be done every day your firm exists as a core value and cultural commitment.  Invest time, money, and resources to train, mentor, and stretch your team members so that they are encouraged to work a level above where they are in terms of client service, technical capacity, administrative responsibility, and people and business development.  For more information on this imperative activity, see this issue’s Practice Perspectives article.
   
   
3. Understand your firm’s operating agreement.  Make sure you are all aware of the agreement’s requirements around retirement age, retirement benefits, buy/sell, and governance changes that may take place based upon age.  For key positions like your CEO or Managing Partner, understand any age limitations and the process by which successors are chosen and elected.  Also, evaluate the issues of client ownership and be sure that your owner compensation systems don’t promote holding onto client ownership instead of actively transitioning it.  Consider valuation methods that enable retiring owners to “freeze” their buy-out valuation at the point that active transitioning occurs so that they are not incented to hold on to clients or responsibility to maximize their valuation, either.  If your firm does not have these items spelled out in an operating agreement, it is paramount that you iron this out as soon as possible.  We have seen firms in very precarious positions when a sudden transition occurs and an agreement is not in place to guide the firm’s leadership.  Review your buy/sell agreement at least annually and update it regularly as things change in your practice.  You may consider engaging a facilitator and an attorney to help you create or refine your agreement.
   
   
4. Get honest about retirement timing for all firm leaders.  We highly recommend that all partners or shareholders declare their intended retirement date annually and that this information is published to the rest of the group.  Further, we recommend that when a leader is within three years of their declared date, the date is no longer flexible.  For some, this is the hardest discussion, but if you start now and declare annually, people will get used to thinking and communicating in this way and it will become a part of your culture.
   
   
5. Brainstorm with leaders who are over 55 to define their ideal
   retirement plans.  Discuss their interest in tapering their time commitment and client work and in what timing, whether they want to continue on in some capacity in the firm after retirement, and, if so, what activities they would ideally like to engage in, and when their “completely stop working” date will be.  Again, this should be a fluid discussion over time that is cemented in place within three years of the retirement date.
   
   
6. Define in writing the roles of those who face retirement within three years and begin to prepare the successor for each of their new responsibilities.  Ideally, your firm will have one-size-fits-one role descriptions for each person on your team – not just those retiring.  However, it is critical to have a written role definition of the specific duties and responsibilities of those facing retirement within three years, along with an in-depth listing of their client responsibilities, referral sources, association and networking activities, people management responsibilities, and other internal administrative duties.  This listing is one of the most put-off activities as it often feels too real for the retiree and too presumptuous for those around them.  We recommend that you create a succession team consisting of the retiree, a member of your firm’s leadership team who will act as the “wing person” for the retiree, and an administrative person or young manager.  This succession team will meet in a series of discussions to map out the details of the things the retiree owns and must transition.
   
   
7. Identify the right successors. This activity should be an ongoing process but can also be event-based.  For your ongoing process, your leadership team should meet regularly to identify the list of promising up-and-comers, or rising stars, in the firm.  These rising stars should receive additional focus and resources to develop to their full potential, as discussed in this issue’s Practice Perspectives article.  As a retirement event emerges, the succession team identified above will meet to identify successors for each responsibility on the retiree’s list.  Very often, there are multiple successors to take over portions of the retiree’s responsibilities as it is difficult to find a one-to-one skills correlation for the entire scope of their duties.  In the event of the retirement of a CEO, Managing Partner, or other key practice leader, the choice of a successor may require a more significant assessment process, evaluating potential successors, gathering input from the partner group and staff, and considering the decision as you would a key hire.  The goal of this assessment process would be to find the internal candidate who most closely matches the skills, abilities, and behaviors you need to fill the retiree’s position.  It may be helpful to engage an outside consultant to assist with the selection of your successor, especially in instances where there are differing views on who should emerge as the new leader.  We’ve had the privilege of doing this work for a number of firms, and the presence of an impartial assessor to guide the process can enhance the team’s trust in the outcome.
   
   
8. Plan for the ripple effect.  Most firms forget that the transition of responsibilities from the retiree to a successor almost always causes the successor to transition some of their duties to another person.  This ripple is rarely planned for or managed and the “third successor” is often surprised as work starts flowing their way.  Steps 6, 7, and 9 apply to all levels of transition – from the retiree to the successor, from the successor to their successor, and so on. 
   
   
9. Manage the transition process.  Be sure to manage the transition process as if it were a project plan, with clarity of which items will transition, to whom they will transition, and by-when the transition will occur.  Help the retiree to let go of responsibilities gradually, over time, to minimize overwhelm on behalf of both the retiree and the successor.  The succession team will then hold regular check in meetings to ensure that your plan is on track and consider financial incentives for those responsible for ensuring transition success, especially the retiree.
   
   
10. Honor your retirees and keep them engaged. There are many meaningful roles for your most experienced leaders, including providing training to younger staff, engaging in community activities, developing business for the firm, acting as ambassadors with key clients or referral sources, and coaching emerging leaders.  Be sure to keep your retirees engaged in your firm’s future for as long as is practical and desired by you both.  And, invest in the appropriate “send off” to honor their contributions to the firm and show all others in the firm that people are important at all stages of engagement.

Throughout the process don’t forget the importance of communication.  Include your team by sharing your plans and updating them regularly on the progress you make against it. And, when the time comes, a clear communications strategy and transition plan will need to be in place so each team member understands how any changes will affect them.

Succession planning is critical to your firm’s continued success. Take the time to proactively plan for your future and ensure a win-win for everyone involved!

For more information about creating your firm’s succession plan, contact Jennifer Wilson at jen@convergencecoaching.com or (402) 933-2900.