Succession planning in an ageing population: are you prepared?

The baby boomer generation is heading for the exits and finding replacements at the senior partner level is one of the hardest challenges for accounting firms.

As The Economist pointed out recently, the proportion of people aged over 65 in developed countries will rise from 15 per cent in 2010 to 27 per cent by 2050. Peopled aged over 80 will account for one in ten of the population.

An ageing population is a major threat, but an opportunity. The ‘silver economy’ represents a huge area for growth, worth around $15 trillion by 2020, according to Euromonitor.

But the problem of a retiring workforce and the ensuing skills gap is growing.

A two-year-old report showed fewer than half of multi-partner practices have succession plans ready. While this figure is likely to have risen, the feeling is that a significant number of firms are not yet ready.

The 2012 PCPS Succession Survey from the American Institute of CPAs painted a worrying picture about how ready firms are to adapt.

Over the last 30 years there have been no shortage of opportunities to sell or merge a firm into another. “This situation, however, is not sustainable,” the report said, making succession planning all the more crucial. Four-fifths of the partners surveyed at the time said succession planning would be a major issue, but firms were doing even less than they were in 2008 to tackle the problem.

The report advised firms to start with a three-year plan. “It takes a minimum of three years to implement the type of changes even a small practice might require to ensure the seamless transition of clients and staff,” the authors wrote.

The ageing population is not just an issue for accountancy firms. Businesses of all kinds need to address the problems, which can range from increased pension contributions to skills shortages. Gearing businesses for the opportunities and challenges of the ageing population will be crucial for accounting and consulting firms - but they need to get their own houses in order, too.