Succession Challenges for U.S. CPA Firms to Tackle: Global Accounting Alliance Survey Shows the Need for Practice-Continuation Planning Is Reaching a Critical Point
[ILLUSTRATION OMITTED] About half of all U.S. CPA firms will likely lose at least one partner or principal to retirement in the next five years, the AICPA learned as part of a worldwide survey conducted in May 2014 by the Global Accounting Alliance (GAA), which is made up of 11 of the world's leading accounting institutes. As U.S. firms look to fill the gaps retiring Baby Boomers are leaving, they must tackle five major challenges. The survey identified these challenges: * Looming transition needs. * Roadblocks on the path to leadership. * Challenges for sole practitioners. * Time constraints that impede planning. * Problems with plan implementation. The AICPA, which is a GAA member, participated in the GAA succession planning survey to help identify the readiness of accountants to address succession issues and to determine what services might help them achieve their continuity planning goals. The GAA survey results reiterated results of the succession survey the AICPA Private Companies Practice Section (PCPS) conducted two years ago. Both surveys found that CPAs know succession planning is important, but not enough take steps to institute a formal plan. The need for succession planning is particularly pressing among sole proprietors. "Robust succession strategies are critical to the future success of the accounting profession worldwide," said AICPA President and CEO Barry Melancon, CPA, CGMA. "We have a stewardship responsibility to instill professional pride and knowledge in our future leaders. We also want to provide the information and resources firms need to make productive future transitions. This survey is a valuable tool in determining where we stand in our efforts." FIVE SUCCESSION CHALLENGES 1. Firms Face Imminent Succession Issues Fifty-two percent of firm managers/owners in multipartner firms were aware of partners or principals who were expected to retire within the next five years, making succession planning a pressing issue for the majority of practices. When one partner leaves, it's likely the firm will need new leadership to take on his or her responsibilities. The good news is that 78% of surveyed managers/owners said their firms had identified staff or other suitable people who could be prospective owners. However, only 68% had actually discussed ownership opportunities with one or more staff, and even fewer (53%) offered ownership partner training to one or more staff. (See Exhibit 1 for multipartner firms' top exit strategy considerations.) 2. The Path to Leadership May Not Be Clear The 2011 PCPS Top Talent Study, which measured the aspirations and expectations of firms' most promising staff, showed that career growth opportunities are an important element in attracting and retaining the highest-quality professionals. The GAA survey found that firms may need to do a better job of clarifying future career paths and opportunities. Even though 59% of the CPA firm employees surveyed said their firms have formal processes for admitting new owners, one-quarter didn't know if their firm had a formal process. Among firms that did have a formal process, 78% of employees said their firms generally adhered to it, while the remainder did not know. "The lack of clear career growth opportunities and failure to provide a formal road to leadership could make it more difficult for firms to hire top graduates or to hold on to ambitious professionals," said Mark Koziel, CPA, CGMA, AICPA vice president-Firm Services & Global Alliances. In fact, the GAA survey found that more than half of employees in surveyed firms agreed (strongly or -somewhat) that they would be more likely to stay with their firms if they knew they would be offered ownership in the future (54%). But only 30% of employees said that their firm owners had discussed ownership possibilities with them. …