“There are some who start their retirement long before they stop working.” – Robert Half
I had the opportunity this past week to visit with a successful business owner who was dealing with an all too common problem. His partner of 30+ years is approaching The End of his career. He will in the next few years be selling his share of the business to several younger management team members. The partner wants to cut back his schedule so that he’s working fewer hours. None of that is really a problem, but this is – he still wants to get paid like an owner, and he’s already coasting.
Unfortunately, things like this are common when businesses don’t plan carefully enough for the retirement of an owner. Some owners can’t or won’t give up control; others (like this one) want to get paid for not working. Some owners feel like “I earned it” – as though they haven’t been getting a salary all these years. Now they’ve reached The End and they expect a windfall. Regardless of the why, the result is resentment from current owners, cultural breakdowns with the staff (why should I work for my check if that guy doesn’t?), and loss of profitability.
So what to do about this? In this particular case, how do you handle someone who still wants to own part of the business and draw a wage but doesn’t want to do any actual work? For starters, don’t let yourself get into that position in the first place. The best way to handle it would be to say that once you step back from a full-time role, you can no longer be an owner. You have to sell your share immediately. It’s OK if you want to keep working, but it needs to be as an employee. You can work out what that person’s role will be, and then they’ll be expected to do what they agreed to do, subject to the same accountability as the rest of the employees.
Wait a minute, you might say. What if there isn’t anyone ready to buy the business? What if nobody is ready for a management role? What if the $$ isn’t there? Well, then you’re in trouble. And you’re in trouble because you didn’t plan. If you see yourself or one of your partners approaching that point where stepping back becomes a possibility, you better be thinking about who the next generation of leadership is going to be. What are you doing to train them? How are you preparing them to run the business in the future? What are you doing to make sure they have the $$ to make the purchase? You can’t throw things like that together in a few months. You need to be thinking about it at least 5 years out, maybe more.
Lastly, make sure there is no room for misunderstanding with the individual stepping out of ownership. Sit down together and figure out exactly what that person is going to be doing in their new role – and then get it in writing. People like to hold on to “fun” responsibilities – does that work in your business? Are there certain clients/responsibilities/tasks/whatever that a part-time employee just won’t be able to handle? Once you agree on a “job description”, then make sure the pay is fair. Just because that individual made six figures previously doesn’t mean that what they’re doing now has the same value. If the things they’re going to do could be done by someone else, then the former owner shouldn’t get paid more than someone else.
All of this falls under the umbrella of succession planning, but unfortunately the idea of a “problem” partner often isn’t discussed because it makes people uncomfortable. Nobody wants to talk about the possibility that someone they’ve been partners with for decades might start stealing $$ from them. But if you allow them to coast out, that’s exactly what they’ll be doing.
Whether it’s for yourself or another owner, you have to plan and prepare. Are you ready for The End?