Today's rapidly changing conditions have led many CPA firm leaders to acknowledge that the range of problems with which they must cope-new staffing demands, regulatory fallout and opportunity, and ventures and alliances-are all intertwined with their succession plans.

Who will run your firm in the long-term? A little time and effort over the next few months will give you a succession plan that fits your firm's changing initiatives, produces solid growth, and guarantees that the firm will flourish for many years to come.

While the height of busy season will leave you little opportunity to address this task, many relevant issues may surface during the rush. Making note of individuals who deal well with a crisis, general structural issues related to a new service that clients mention, or other ideas that occur to you will help as you come to grips with the succession question later in the year or during your firm's retreat.

If your succession plan is more than five years old, you will need to rethink it completely. Even fairly new plans need regular updates because of all the market changes, as well as CPA firms' new mandate to be more flexible and responsive to changing demands.

Moreover, the lineup of successors may change because of the increased mobility of staff and the changes wrought by mergers and acquisitions, accor-ding to Audrey Smith, senior vice president of executive solutions at the consulting firm Development Dimensions International (DDI; Bridgeville, Pa.).

Confused about how to proceed? You may be relieved to know you're not alone: Few organizations, including other CPA firms and your clients, have viable succession plans in place. In Leadership Forecast: A Benchmarking Study, a report released by DDI last November, only slightly more than half the surveyed organizations reported having a systematic process for identifying and developing future leadership candidates. And those that do have some work to do: The average rating of succession management effectiveness is only 4.8 out of 10 (a score of 10 equals "extremely effective"), according to DDI.

The benefits of an effective succession plan. Perhaps top among them is an improvement in financial performance. A new study, How Companies Grow Great Leaders: Top Companies for Leaders, by Hewitt Associates (Lincolnshire, Ill.) found a strong correlation between good overall succession management practices and a higher average return on sales. The study also found that organizations that define leadership competencies, track the turnover of top talent, and assess leadership behaviors and competencies also tend to have a higher return on sales than organizations that don't.

If that doesn't convince you, Hewitt's research also indicates that succession management helps organizations retain top performers and lack of it does the opposite: "If you can't convey to your best talent what their development plan is...and if you don't have a process for moving people around the organization and considering their strengths and weaknesses...you lose the ability to keep your top performers engaged," said Hewitt's Marc Effron, global practice leader, leadership consulting.

Maturing CPA firms are especially in need of succession planning. A talent management strategy that you develop now-with flexibility to allow for change-is the best approach, according to William Rothwell, professor in charge of workforce education and development at Pennsylvania State University and author of Effective Succession Planning and Strategic Development of Talent.

The most workable succession management strategy is based on leadership competencies, said Rothwell. It should include:

• Competency models for each key job category. "We do this so we know what we are preparing people for." These models describe what competencies ideal performers should possess. They are also used to evaluate performance and they can help identify developmental needs.
• Competency inventories. Old-style skills inventories focus on academic degrees, but competency inventories look at what individuals know and do and what special skills they have to help your firm achieve its goals. Staff found to be deficient in a competency can be referred to developmental resources such as training courses.
• Integration of performance management. By including performance management in your succession strategy, you make performance in the current job a key consideration of succession management.
• Future-oriented competency models. Once you've reviewed the present competency models for all job categories, you can better see what else is needed for the firm's future. "Today's competencies may not be sufficient to meet future needs," Rothwell noted.
• Individual development plans (IDPs). These are learning contracts by which individuals can narrow any gaps between the competencies for their current position and their assessed performance. IDPs also outline how individuals can build competencies for advancement.
• A method for evaluating the total succession program.

Keys to a successful program. Most important is to list a few crucial competencies, explains Hewitt's Effron. In fact, in creating your succession plan, you'll want to concentrate on your own firm's needs, not worry about other CPA firms' competencies.

And rather than building your approach to succession slowly, over a set period of time, Effron advocates a "real time" succession plan with an ongoing, in-depth understanding of key and potential leaders, including:

• Strengths and weaknesses.
• Skills and behaviors.
• Developmental needs.

Best practices for succession planning. In the Top Companies for Leaders study, Hewitt compared the top 20 companies for leaders as identified by Chief Executive Magazine to 300 other companies and identified several practices that set the best companies apart from the others. Effron noted that these practices are applicable to organizations of any size. In fact, succession planning can be easier at smaller firms because there is less need for layers of bureaucracy and coordination when there are fewer staff and positions to track.

Personal involvement of the CEO and board of directors in building leaders was a key differentiator in this comparison. In a CPA firm, this would translate to managing partner and executive committee involvement.

Holding leaders accountable for developing other leaders is another best practice among top organizations, Effron said. "I'd rather have good leadership support and the worst program than the best program and the worst support."

Other best practices include:

• Keep a "maniacal focus" on high-potential staff by, for instance, meeting with them at least once per month.
  
• Fitting the leadership development/succession program to the firm's particular business strategy.
  
• Measuring the effectiveness of the program for developing leaders. The study found that 79% of the top 20 companies for leaders measure the effectiveness of their programs, while only 29% of other companies do.

For more information. See the sidebar, "Succession Resources."

Succession Resources

Effective Succession Planning, 2nd edition, by William Rothwell (Amacom, 2000)

The Strategic Development of Talent, by William Rothwell (Human Resource Development Press, 2003)

"Taking Your Succession Management Plan Into the 21st Century: Six Mistakes That Can Cripple Your Ef-forts to Build Leadership Bench Strength," by William Byham, Development Dimensions International (www. ddiworld.com)

"Finding Future Perfect Senior Leaders: Spotting Execu-tive Potential," by Robert Rogers and Audrey Smith, DDI (www.ddiworld.com)

"What Drives Worker Engagement? Leadership Shown to Be Key to Employee Commitment," (Workforce Strategies, BNA, Vol. 21, No. 5; www.bna.com)

"In Search of Leaders," by Leah Nathan Spiro, Chief Ex-ecutive Magazine (Oct. 2003, Vol. 192; www. chiefexecutive.net/)

How Companies Grow Great Leaders: Top Companies for Leaders and Building High Potential Leaders (Hewitt Associates;http://was4.hewitt.com/hewitt/)