IPA Data Dive: Succession Shortcoming?

IPA Data Dive: Succession Shortcoming?

One of the most effective ways to maintain control of a firm’s future is to have a clear succession plan in place for key leadership roles. Even as they rationally understand this, however, many firms are still not putting this key business tool in place.

Data from IPA’s 2020 Firm Administration survey shows that just over half of all non-Big 4 firms (54%) have a succession plan in place for the MP/CEO, and only 44% have a plan for all equity partners. While larger firms ($75+ million) tend to be in far better shape (at 89% for MP/CEO), the numbers drop off significantly as one moves down the revenue scale. For example, only 47% of respondents in the $10-$15 million range have a succession plan in place for their MP/CEO, leaving more than half of firms of this size vulnerable should their leader suddenly depart.

The succession situation at most firms gets worse for partners outside of the top spot. Here again, the bigger firms are in better shape (72% of firms over $75 million have a plan in place for all equity partners) but beyond that top echelon things get pretty dicey, with fewer than one-third of firms just below in the $50-$75 million range ready for what comes next with respect to their partners.

A lack of succession planning could result in a more uncertain future for the firm. With no clear plan in place, after all, a sudden vacancy at the top or a case of several key partners leaving at once could mean few options other than a merger or sale to ensure survival – a situation that few firms want to approach from a position of desperation.

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