Most people look forward to retirement. They can't wait to play more golf with their pals, travel, hang out with the grandchildren, perhaps spend more time on non-profits, and generally pursue a more relaxed lifestyle. But some of us don't really want to retire. Like my partner, with whom I co-founded our finance services company.
David is in a very slow process of retiring. It was inevitable that he would leave the company before me: He is 20 years older. This age difference is among the reasons that our pairing has been so successful; we have drawn clients from different generations, and David's age enhances his aura of statesmanlike wisdom.
Slow retirements of senior executives present some of the same challenges to organizations as typical departures, and certain unique ones. For example, years in advance of his leaving, we addressed the critical, often financially painful, and sometimes insurmountable matter of redeeming our partner's ownership stake. However, as difficult as the financial buy-out element is, the more complex problems relate to how to fill the slowly expanding void created by a gradual departure.
The slow retirement poses risks and challenges if handled poorly, but can be a rewarding experience for the executive involved and his colleagues if managed carefully. Here are the principles we've been using to guide us; they may also be applicable at your firm:
Work out the financial ramifications quickly. In a financial firm like ours, holding growth aside, the pressure comes from two sources: the purchase of the partner's shares by existing or new partners, and compensation needed to bring in new talent. In any firm, unless the departing executive makes concessions, the company will have to balance the outgoing executive's existing salary (and any retirement package) with the cost of bringing in a replacement. When David passed his CEO title over to me, becoming Chairman, we explained his ongoing specific job functions to everyone and the fact that his compensation would reflect those changes. This removed ambiguity and the likelihood of misconception about opportunities for others within the firm.
Think through the cultural ramifications. According to research by Langowitz and Allen, the success of new ventures is inextricably connected with the style and leadership of their founders, so companies need to be careful about maintaining cultural integrity when one of those founders leaves. Having a co-founder leave slowly will have a more muted effect than a sudden exit, but the benefit can disintegrate if he is there, but not engaged in what suits his interests and the enterprise needs. In our case, this culture includes our relationships with clients. Clients adore David and he loves working with them, so these relationships will be the last element of his job to transition. We have informed all clients of the process and always have two partners assigned to each account. However, we need to both include a third member to each client team and establish the chronology for handover. I know this will be the toughest aspect to his retirement and I am not anxious for its arrival.
Design a hover-limited environment. No one will want to step up to a position if the gradually retiring executive will be either hovering or reassuming that assignment. If you won't own the job, why take it? Think of Warren Buffet or Bill Gross of Pimco, both of whom have hired and then lost their apparent successors, who either grew impatient waiting or annoyed with the meddling. Reassure your veteran colleague that he or she is helpful and respected but be honest about responsibilities and limits. The lifeblood of any investment company is making investment decisions and David has made many since we started our firm nine years ago. Over time, we have successfully added personnel to our investment professional ranks. While David is still passionate about helping craft our strategy and implementing these moves, this is the area where we can least afford limited capacity. Like a fishing boat cruising through a barren stretch of sea, we can't be fooled by a lull in activity, but need staffing to discover, analyze and invest in opportunities that might suddenly emerge from price changes.
For example, each quarter David has traditionally written a topical investment piece, which we send to all clients. We have encouraged other team members to broach themes about which, after colorful group discussions, they write themselves and we send to all our constituents. This introduces other colleagues to our clients on a new dimension, increases their confidence in promoting ideas, and raises their profile internally.
Know your own strengths and weaknesses. Finally, if you are the CEO, but have had the benefit of a close partner with whom you shared responsibilities for building and overseeing a company, be grateful for that relationship, determine what you do well, what your partner did better, and envision the firm's future with that in mind. We've considered the different operating lines of our company, with an eye toward transferring or reimagining responsibilities in an orderly progression as David pulls back from his involvement. Marketing and client development transitioned naturally from David to me and other partners because he had done so much in the early years of our enterprise that there were very few untapped contacts years later. To maintain our momentum and supplement our steady growth, we added an experienced executive who could direct both marketing and compliance, which has become an increasingly complex responsibility that I could no longer assume.
The trickiest aspect of the slow transition is, by definition, the lack of speed, which suggests that managing timelines and expectations are a key to success. We value David's knowledge and input, but the next phase of our business growth involves younger people charged with independent decision making on which they will be judged. By the time I retire (maybe, but no promises), 20 years from now, when we are a much larger but still comfortably sized company, we will be experts at building experience and competence in a whole new generation of co-workers.
A version of this post originally appeared in Harvard Business Review's blog.