Does Your Firm Have A Knowledge Retention Strategy?

knowledge retention

Without a knowledge retention strategy in place, your firm is at risk of losing valuable client and business experience and expertise.  In his article in Harvard Business Review, Ron Ashkenas was spot-on when he wrote “Organizations spend a lot of time and resources developing knowledge and capability. While some of it gets translated into procedures and policies, most of it resides in the heads, hands, and hearts of individual managers and functional experts. Over time, much of this institutional knowledge moves away as people take on new jobs, relocate, or retire.“

What Happens When a Partner is Ready to Retire?

We have all witnessed what happens when a highly productive, Partner in a well-established CPA firm announces his intention to retire. The Partners in this firm have been proactive in planning for retirements and feel the transition will be minimally disruptive.

  • The buy / sell is crystal clear on the buyout of retiring owners.
  • The firm has been active in succession planning and has identified their next generation of leaders.
  • The staff is stable and understands the direction of the firm.
  • There is a well-defined plan in place for client transition to another member of the firm.

According to most studies, at any given time, one third of all clients are considering moving their business elsewhere. Clients become particularly vulnerable to leaving when they learn that the individual they trust the most – the one who owns the relationship – is planning to retire.

Therefore, most forward thinking firms address the client flight risk by communicating the pending event early and systematically transitioning the relationship to a new team member. In the case of retirement, the current best practice for a seamless turn over is introducing the change to the client 2 – 3 years before the retirement date. This allows the successor plenty of time to build a relationship with the client and experience two business cycles with the retiring partner still on-board.

The good news is two years is ample time to transition a relationship and ensure the chemistry is right. The bad news is this retirement leaves the firm vulnerable in a way they did not foresee. On the day of the retirement, this firm is losing decades of experience and knowledge that will not be replaced. This Partner is taking a treasure trove of institutional knowledge into retirement with him and there is simply no way the retiring partner can impart the wisdom and experience accumulated over 40 years into two business cycles.

When it comes to the need for a knowledge retention strategy, the retiring partner is the best case scenario. What happens when two firms merge or a re-organization happens? What happens when a key employee leaves for a position at another firm?

Don’t Let Knowledge Walk Out the Door

In order to avoid years of knowledge walking out the door, it’s imperative for  every firm to continually capture the experiential learnings and institutional knowledge of not only the retiring partner but all members in the firm. Here’s how to get started:

  1. Build an explicit strategy for maintaining the relevant knowledge in your firm. Don’t take a one off approach and think about it only when a Partner retires. Knowledge can and should be leveraged across the entire firm.
  2. Assign responsibility to every member of your team to update and add to your knowledge base. Let them know exactly what is expected of them and hold them accountable.
  3. Leverage technology. Technology is critical to capture, curate and distribute the knowledge at the right time in the right context. Much of what we do is process driven – if this, then that – and the right technology ensures the initiative will be successful.

To further discuss how technology play a key role in your knowledge retention strategy, please reach out to our Director of Business Development today.