Sunday, January 3, 2010

Consider Phased-Succession Planning

It’s the start of a new year, a new decade and the market is looking a bit bullish again. Some of the baby boomers who were considering retirement prior to the crash of 2008 but felt forced to put those dreams on hold are dreaming again of living a different life. However, most of them still feel the necessity of building back up their nest egg and some question how they will identify themselves in retirement. This push/pull can leave an organization with an uncertain future.

Boards have a responsibility to reduce that uncertainty in order to protect their organization and ensure that its promise to the community is kept. Succession-planning can help, especially if the design of the plan specifically allows for the retiring executives to meet their needs and the organizations to meet theirs.

To satisfy the potentially mutually exclusive needs of both parties, consider implementing what I call “phased-succession planning.” Speak candidly with your executive to determine his/her needs and desires. Then, set up a 2 – 5 year phased plan, where the executive commits in writing to working fewer hours each year for fewer dollars until retirement. For instance, in the first year of a three-year plan the executive might work 90 percent of his/her current contract, for 90 percent of his/her current salary. In the second year, he/she might work 75 percent. And, in the third year, he/she might work 50 percent, with the understanding that at the end of that year he/she will step down totally.

Besides helping the executive ease into retirement, this process serves the organization in several ways. First, we all know that work expands to fill the time available and that studies show that part-time workers contribute more work proportionally than full-time workers. So, chances are, the organization will still get a similar amount of work from its executive, despite the fewer hours. Perhaps more importantly, however, this phased-succession planning allows the organization time to experiment with what jobs it really needs done and who is best suited to do those jobs. The board can look objectively at what the executive has been doing and determine if each of those tasks can or should only be done by the executive. It can ask the executive to try delegating certain tasks to others on staff, to a new employee being groomed for leadership or even to someone outside the organization altogether. Given multiple years for implementation, the organization can play with what works best so that when the executive fully turns over the reins, there is an optimum system in place. And, by employing this gradual transition you increase the chance that the changes, when completed, will be smooth and accepted by all.

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