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WESTERN CPE BLOG

Providing the latest tax news, information, and updates for tax and finance professionals

The Tax Professional’s 5-Step Guide to Succession Planning

Beginning Client succession planning

Succession planning for your client is more complicated than simply choosing a successor. Institutional knowledge, client relationships, and technical expertise are all important characteristics of their unique business expertise — expertise that needs to be passed down and implemented for a smooth transition at any organizational level. Whether you’re planning your own transition or advising clients, understanding the full scope of succession planning is critical for maintaining a business’s success and ensuring that the business’s legacy endures. Here are 5 steps to follow when creating a successful succession plan.

Step 1: Build a Solid Foundation with Assessment

Everyone likes a good SWOT analysis. That’s why the cornerstone of effective succession planning begins with a thorough evaluation of the state of the business and an eye towards a future of foreseeable challenges. Rushing this first step could result in core business needs being neglected or overlooked during a transition. Identifying positions that impact client services and revenue generation is key to maintaining a business’s future success. Assisting your client in defining which roles maintain fundamental relationships and specialized technical knowledge establishes the scope of essentials unique to the business. Map a client’s business fundamentals. What sets their company apart in the market? Define the hallmarks of their services focusing on specialized expertise, industry knowledge, and unique problem-solving approaches. These legacy qualities are necessary for considering successor technical excellence and leadership potential. Candidates should be adaptable, emotionally intelligent, and have a commitment to professional growth. Be sure to assess the client’s internal and external relationship networks. Document mission critical relationships, regulatory contacts, and professional partnerships being maintained through any transition. Risk management and compliance frameworks are paramount for a successful, seamless transition.

Step 2: Develop Your Talent

With a solid foundation, clients can develop their respective talent pool. The right people should be set up for success. Technical expertise may form the foundation of a client talent pool, but developing well-rounded professionals requires a broader approach. Designing structured development paths for future leadership with opportunities for hands-on learning will facilitate operational knowledge. Look to what it takes to maintain internal and external client relationships, team leadership, and strategic planning when developing future leadership. The creation of internal documents for training programs with a focus on practical application is an excellent start. Use case studies, establish mentoring relationships, and graduate responsibility in client engagements. Make these resources available to multiple candidates. Having multiple prospects creates backup capacity for critical roles and develops an operational support network for future leaders. Establishing clear performance metrics and milestone reviews for these candidates will allow for regular feedback opportunities. Provide client candidates with opportunities for lateral moves that broaden experience and perspective. Cross-training in different specialties or departments creates a cohesive understanding of a business’s operations.

Step 3: Passing Down Knowledge

Company departures often come with brain draining effects, and no business can thrive with that kind of headache. Save your client the headache by taking steps to preserve company knowledge, so that critical information doesn’t leave when they or a mission critical employee departs. Pairing current position holders and potential successors will facilitate the transference of company knowledge. You can further this by assigning clear objectives to these mentorships, holding regular meetings, and defining what knowledge is to be passed down. Successors should work alongside current role holders. Experienced professionals have a wealth transferable insight for younger team members. Hands-on learning encourages smooth internal and external client relationship transitions with face-to-face introductions and rapport building overtime. Process documentation can be an important asset. Think about technical approaches, client preferences, and relationship histories. When an employee departs, those aspects of a person’s work go with them. Documentation resolves this issue easily. Encourage the creation of case studies from complex situations your client has faced to be used as a problem-solving template. History repeats itself, and having a library of solutions provides successors with a vault of knowledge to pull from.

Step 4: Implementation

Planning is nothing without a sense of what your clients will require for implementation. Taking the theory of business succession planning and turning it into action requires careful execution and commitment from all levels of the organization. Company succession planning should be both structured enough to stand during a transition and flexible enough to adapt to surprises. Creating a timeline for successor progress with specific dates for key transitions, training completion, and relationship handoffs will provide clients with a tangible progression tracker. Communicating the succession plan clearly to all stakeholders, including staff, and key business partners is essential. Transparency is trust. Regular reviews by client leadership can play a big role in ensuring the plan is on track. But beware, succession planning in business comes with challenges. Encourage flexibility in your clients and impart that unexpected challenges are opportunities in disguise. Develop contingency plans for key position holders and critical client relationships should challenges arise. Ensure client satisfaction throughout the succession planning process. Be sure to address any concerns promptly to maintain a strong relationship. Remember, transparency is trust.

Step 5: Oversee and adjust

Succession planning is a living process that requires a watchful eye and a mind to adjust parameters when necessary. Regular evaluation and adjustment are excellent tactics for keeping client succession planning functional and form fitting to current and future needs. Successful plans should include consistent progress monitoring and a willingness to adapt. Be vigilant and prepare for change with quarterly progress reviews, assessing both individual development and overall plan effectiveness. Adjust based on performance and changing client needs. Collect feedback from all participants, including mentors and successors. Use this information to refine the client’s approach to tackling new challenges. Assessments are an excellent tool for evaluating a successors’ learning, ensuring those candidates can cope with complex situations independently. Make room for evaluating company performance during any transitions. This provides crucial feedback about the effectiveness of the succession plan’s progress. Lastly, encourage updates to the succession plan annually to reflect changes in client strategy and market conditions. Keep the plan aligned with their evolving needs.

A Living Process

The living process of succession planning focuses on the strengths of a client’s business while preparing them for future challenges. Clients should start early, stay committed, and remain flexible. Their skills and knowledge are the foundations for leading into the future by enshrining their expertise into the next generation of leadership. Investment in succession planning today builds the foundation for a business’s continued success tomorrow.