Architects & Engineers Articles -
Ensure the Future of Your Firm with a Succession Plan

Succession planning should be a part of every architect and engineering (A/E) firm’s practice continuation strategy. The reasons are fairly obvious. Without a succession plan, your firm cannot guarantee it will have qualified professionals to move up and take over when the current generation of directors retires or otherwise becomes unable to perform its jobs.

Not having a succession plan can also affect your relationship with clients. To effectively shift clients from one generation to the next, you need to plan years in advance to avoid interruptions in service and other costly mistakes that may send clients packing.

Finally, without a succession plan, your firm will have trouble implementing long-term goals and strategic plans. Unless you can say with confidence that there will be competent leaders to carry them out, strategic plans can get sidelined.

Replacing the irreplaceable

When most architects and engineers consider succession plans, they think of their firm’s major players —the managing directors who make most of the important decisions.

While replacing founding and managing principals is an important consideration in the firm’s long-term survival, you should also plan for the retirement of other directors and non-directors in the firm. Think, for example, of the impact on the firm if your A/E administrator or CFO left or retired tomorrow.

Losing major rainmakers, in particular, can greatly affect your firm’s profitability and success. The departure of even a few large clients could have a severe impact on the firm’s bottom line, not to mention its morale.

To protect your firm from the loss of these key players, it’s important to start early — at least several years before they reach retirement age. Asking senior directors about their retirement plans is a good idea. It will prevent the firm from being caught off-guard and will help you establish a timeline and action plan.

Many directorship agreements include retirement-related stipulations. For example, an agreement might request that the retiring director notify management three years prior to his or her expected retirement date. At that time, the retiring principal could suggest successors capable of serving particular clients.

Grooming the next generation

Picking successors, however, shouldn’t be left entirely to the discretion of retiring professionals. Perhaps one of the most important roles of a succession plan is to identify and develop the skills and talents of younger architects and engineers.

To develop these skills, firms need to understand what each director or other key member of the organization does. For example, what personal characteristics and legal, management, and practice development skills does that person bring to the firm? Are retiring principals valuable because they are client magnets or because they possess a complex understanding of the firm’s technology needs?

Knowing the answers to these questions will help you groom more junior directors and even professionals to eventually step into retiring partners’ roles.

To prepare them for the responsibility, younger architects and engineers should be assigned to committees and task forces and offered management opportunities. Senior directors should also include these future leaders in client meetings so that they can learn about the client development and marketing aspects of the firm.

Transitions can be troublesome

Even if you begin your succession plan early and are fortunate enough to have many willing and able successors to your retiring directors, you may encounter a few obstacles as the transition gets under way.

Principals used to authority — particularly founding principals — may have a difficult time surrendering it when retirement time arrives. This is especially true in the case of principals who give up their official title but remain with the firm in an “of counsel” role. These individuals often have the urge to second guess new leaders.

While you want to ensure former leaders are available as sounding boards or sources of advice, it is, at the same time, important to prevent them from interfering in the work of the firm’s new leaders. To avoid alienating retired directors, you may want to engage them in areas that can benefit from their experience, such as recruiting or mentoring new professionals.

Determining financial compensation for retiring principals can also potentially produce conflict. One way to avoid surprises is to set up a several-year plan that ties the director’s draw to a corresponding reduction in production. Retirement payout should be linked to the firm’s retention of business formerly managed by the retiring principal.

Plans benefit everyone

Because there is never one succession plan that fits all firms, plans should be flexible and tailored to the needs of your firm, its size, and the skills of its people.

Whatever plan you choose, it should ensure that future leaders will be well trained and capable of taking the helm. Finally, and perhaps most important of all, a well thought out and executed succession plan should lead to a smooth transition that does not disrupt the firm or lead to hard feelings among retiring or remaining directors.

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