One of our key leadership team members has secured phantom stock for our upcoming exit, but now they have mentally checked out and are coasting. How do we re-engage or exit them without disrupting the deal?

Question

Tyler Smith · Accepted Answer

When a leader secures long term incentives and then starts coasting, it is an operational emergency. They are treating their future payout as a guarantee rather than a reward for driving performance. This behavior is incredibly toxic because the rest of your leadership team is working hard to build valuation while one peer is dragging down the average.

You must address this immediately. Sit down with this leader and review their current Rocks and scorecard metrics. Do not let their historical loyalty or the impending exit soften your delivery. Show them the data. Point out where their execution has slipped since the incentives were finalized.

Remind them that their phantom stock agreements are contingent on active, high level performance. If they do not GWC™ the seat through the transition, they can and will be replaced. A buyer wants to see a high performing leadership team that runs the company independently, not a group of complacent executives waiting for a payday.

Give them a strict, thirty day window to turn their performance around. If they fail to re-engage, you must exit them. It is far better to explain to a potential buyer that you replaced an underperforming leader with a highly capable successor than to try to hide a coasting executive during the due diligence process.