Heidi Bolger

Making the Right Successor Choice

As your client’s CPA and trusted adviser, you are in a good position to bring some objectivity in designing this process to achieve the best outcome.

February 6, 2012
by Heidi Bolger, CPA, ABV

To many CPA advisers, succession planning conjures up a vision of a heavy duty tax strategy coupled with plenty of financial modeling. As good stewards of our clients’ finances, we naturally focus on how to shift equity ownership in the most tax-efficient way, thereby maximizing after-tax cash flow to the exiting owner. Beyond all the financial wizardry that’s essential to effective succession of ownership, succession of leadership in a client’s business is even more important to business transition. Without well-chosen and well-prepared leaders, the business won’t thrive and the buy-out payments to our clients may never materialize.

Who Should Choose the Successor Leader?

If your client’s business(es) is closely held with a next generation family member or two aspiring to assume the lead roles, this may seem like a no brainer. There may also be a longer-term employee or two that seem to be the right fit. Your entrepreneurial client may be comfortable in making this choice on his or her own. With smaller, less complex enterprises, a selection process can also be designed to draw on the insight of a circle of trusted advisers and/or the client’s board of directors. As the client’s CPA and trusted adviser, you are in a good position to bring some objectivity in designing this process to achieve the best outcome.

For larger, more complex clients, I advocate the formation and use of a “Talent Management Committee” in some form. This executive-level team is responsible for mapping the strategy for attraction, development and retention of talent in your client’s business. A key aspect of successor-talent development is determining the critical leadership competencies required for success in your client’s specific business. It is only with a clear understanding of these competencies that you and your client can accurately assess whether internal candidates possess or are capable of developing these competencies. Having a handle on who is part of the “high potential” leadership talent pool, combined with individual training programs to further develop key competencies, are central to creating the leadership bench strength needed to provide a next CEO, COO, etc. This process model will also reveal to the Talent Management Committee whether an external candidate search can be necessary.

What Should Your Client Look for in a Successor?
Although there’s certainly not a one-size-fits-all list of leader characteristics, some important aspects for consideration are included in the diagram below:

Depending on the business, the degree to which each of these characteristics is essential will differ, but if any of the above is lacking, a development process should be devised to shore up the gaps.

What Kind of a ‘Training Process’ Prepares a Successor Leader?

Every prospective leader candidate comes with unique experiences and background with varying degrees of relevance to the critical competencies required to successfully lead your client’s business. If your client has used the aforementioned “Talent Management Committee” to outline essential competencies, a good starting point is to design a training process that assesses each high potential candidate against this set of competencies (there are software applications that facilitate this process). The assessment output will provide important insight into the strengths of each candidate and identify areas in which competencies need to be further developed.

Using the outcomes of the assessment process, a tailored individual development plan (IDP) can be designed to expose leadership candidates to a mix of formal, informal and experiential learning and development modes. A well-defined development process will provide leadership candidates with:

  • Access to learning tools and experiences;
  • Feedback element to gauge their progress;
  • Open dialogue to modify the IDP as appropriate; and
  • Clarity around expectations and career direction.

The length of this process can vary widely, depending on the extent of development required along with the time frame your client may have in mind for transitioning the leadership role in the business. It sometimes happens that your clients may want to relinquish their leadership role before the next generation of family members is ready to assume senior leadership positions. In this case the development process may include non-family key employees who will work to develop the next generation of family leadership in the desired time frame. All of these variations make leadership transition an extremely interesting and important part of business succession in which CPA advisers can play a critical role. With a soundly developed financial strategy for business succession and well-conceived plan for developing leadership talent, the odds of your clients transitioning their business successfully increase dramatically.


Providing your client with an objective framework for accessing, developing and ultimately selecting the best successor(s) will help to remove some of the inevitable emotion from the decision making process and will more likely result in long-term satisfaction for all parties, and sustainable value creation for the business.

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Heidi Bolger, CPA, ABV, CFFA, CMAP, is a founding principal of Rehmann Consulting and advises clients in the areas of succession planning and business sales.