As baby boomers across the country re-evaluate their retirements in the face of dwindling 401(k)s, the organization that represents 40 million of them in Washington, D.C., is planning for its own future as well.

AARP is near the end of an 11-month search to replace Chief Executive Officer Bill Novelli, whose contract expires at the end of 2009.

AARP senior executives declined to specify when the group will make an announcement, but sources close to the process confirm the internal committee overseeing the search has narrowed the field down to the final candidates. Novelli is not contracted to stay through the end of his term, so he could step down as soon as the new chief executive is announced.

“This is a very high-profile search so they have cast a wide net,— said a source familiar with the process. “AARP will want someone with a combination of a significant amount of gravitas, Washington policy experience and management capability.—

The search for a new leader for perhaps the nation’s most powerful and well-funded advocacy organization has implications both inside the Beltway and beyond.

Although technically a nonprofit, AARP is the equivalent of a Fortune 500 company, employing a staff of 2,419 employees, executing $1.16 billion in operating expenses and overseeing annual revenues of more than $1 billion.

Besides its tens of millions of members — with the potential to reach 50 million — the group also has offices in all 50 states, the U.S. Virgin Islands and Puerto Rico, with its headquarters in a 10-story office building in downtown Washington.

The decision last May by AARP’s board of directors to extend Novelli’s contract through 2009 was an acknowledgement of how important the 67-year-old former public relations executive has become in his eight years at the helm, leading the group on a path of growth, increased influence and some controversy.

“When I started at AARP, I wanted to see how we were perceived on Capitol Hill,— Novelli said in an interview last week at his spacious, 10th floor office filled with the photos and awards of a Washington power player.

“The Democrats said we were wishy-washy, and the Republicans said we were Democrats,— Novelli said.

“Today, nobody says we are Democrats and nobody says we are wishy-washy. What we occupy is the pragmatic center,— he said.

During his tenure, membership increased by about 15 percent, while revenues nearly doubled.

“Bill’s steady hand has guided AARP through challenging and exciting times over the years, but the 2009 legislative session could be like nothing we’ve ever seen before,— AARP President Jennie Chin Hansen said in a statement announcing the contract extension.

A Silver Tsunami’

When Novelli was hired by AARP in 2000 as the associate executive director for public affairs, he joined an organization that had just begun to reinvent itself, shortening its title in 1999 from the American Association of Retired Persons and reaching out to the aging baby-boomer population.

He was chosen in June 2001 in a unanimous board vote to replace then-Executive Director Horace B. Deets, a 26-year AARP veteran. He quickly put his own stamp on the position, becoming a high-profile spokesman for the organization and tightening its structure to operate more as a business than an association, according to former employees and board members.

“The transition involved reduction in the power of the board and more concentration at the CEO level,— said a member of the board at that time, who did not want to be named. “His title was changed from executive director to CEO, and he reorganized things to concentrate more power in the main office.—

Novelli used his background in public relations and marketing — he co-founded the PR firm Porter Novelli — to make AARP more relevant to the aging baby-boomer population, doubling the readership of AARP’s bimonthly magazine, launching the country’s largest bilingual publication, establishing an annual member event and introducing new, interactive tools and publications on the AARP Web site.

And he took advantage of his nearly 30 years experience in Washington to make the organization more of a presence on Capitol Hill.

Under Novelli’s leadership, the organization became more institutionalized, from its branding to its profit centers.

AARP-branded offerings grew to include 17 types of insurance, which provide hundreds of millions of dollars annually in royalties used by AARP to support its lobbying campaigns and community-based services for members, such as driving programs and tax assistance for seniors.

Membership rose from around 35 million when Novelli started to surpass the 40 million mark last September, while total revenue rose from $595 million in 2001 to more than $1 billion today.

“Bill brought with him expertise in social marketing, the application of which was a new concept for AARP. It included much more in-depth activities with media, television, newspaper ads,— said Lavada DeSalles, a board member from 2000 to 2006.

In short, Novelli led the organization to focus more on aging as a lifestyle.

With that shift came an increased focus on Washington and a move from addressing a smaller slate of issues to playing offense on the major stories affecting its membership, from Social Security to Medicare and financial security.

With an e-mail advocacy list of close to 6 million and data showing that more than 40 percent of the nation’s voters are 50 years or older, AARP has the electoral heft to capture the attention of lawmakers of both parties.

“They represent the silver tsunami,’— one majority Senate aide said. “They seem to know what their members want and who can take action on those issues.—

A Big-Picture Player’

Under Novelli, AARP has expanded its state offices and grass-roots operations; increased its annual lobbying expenditures by more than $20 million, to almost $28 million in 2008; and increased its in-house lobbying staff from 30 in 2000 to 50.

The group has also not been hesitant to form partnerships with what Novelli has called “strange bedfellows— to achieve its goals, joining with the Business Roundtable, Service Employees International Union and the National Federation of Independent Businesses on the multimillion-dollar “Divided We Fail— campaign to highlight health care and financial security.

In 2003, Novelli orchestrated the organization’s most aggressive, and controversial, lobbying effort to date in support of the Medicare bill that was eventually signed into law by President George W. Bush.

People on both sides of the aisle said AARP’s support ensured the bill’s passage, but its inclusion of a prescription drug plan and expanded role for private insurers angered the organization’s Democratic allies and alienated its traditional, elderly constituent base, leading thousands of members to quit in protest.

“It’s a challenge when you have so many millions of members to keep them pleased,— said Ralph Neas, chief executive officer of the National Coalition on Health Care. “Bill is especially attuned to what members are thinking and adept at protecting the constituency of the AARP.—

In 2005, AARP returned to the scene again, this time with a $30 million campaign that succeeded in forcing Bush to shelve his plan to privatize Social Security.

Novelli participated in last month’s financial summit and last week’s health care meeting. In February, the group launched its Government Watch Web site to keep its membership engaged on legislative issues.

“Social Security and Medicare are the issues of the day that will be critical to the future of America,— he said. “We have to be big picture players and we have to involve the public, both of which AARP can do.—

A House GOP health care staffer said Congress “realizes any Medicare legislation they propose that doesn’t have AARP support will be difficult to pass.—

A Secret Sauce’

The firm leading the search for Novelli’s replacement, Chicago-based Heidrick & Struggles International Inc., reportedly screened more than 100 candidates before presenting 20 possibilities to the internal search committee.

The search committee has introduced the four finalists to the entire board, according to current board members who asked not to be named.

Five of AARP’s past six staff executives have risen from internal positions to the top slot, and sources close to the organization say Chief Operating Officer Tom Nelson and Executive Vice President of Social Impact Nancy LeaMond are potential candidates to replace Novelli.

Nelson is seen as the insider’s insider who has been with the organization for 29 years and played a key role in building the state offices and consumer, community service and educational programs.

LeaMond came to AARP in 2001 after stints on Capitol Hill and at the Office of the U.S. Trade Representative and the Department of Commerce during the Clinton administration.

She directs the Divided We Fail campaign for the organization and has worked to build AARP’s global reach, a stated priority of Novelli’s when he became CEO.

The AARP Global Network, a partnership with like-minded member associations in five countries around the world, was launched in 2006 in an effort to take its member services and benefits global, and the organization has expanded both its partnership with the United Nations and outreach to other countries.

The economic crisis and an ambitious legislative agenda, however, may spur the board to reach beyond the organization for a new leader, perhaps again in the realm of Novelli who came to AARP after establishing himself in the private and public sectors.

“In looking for a new CEO, we’re looking for someone who will look at the best things we’re doing and bring new ideas,— said Leobardo Estrada, a board member who is not on the internal search panel. “The AARP is willing to be adventuresome, and in a new CEO, we’re looking for someone who will open new adventures for us as well.—

Novelli says one of the great challenges for his successor will be reaching the next wave of 50-somethings to ensure AARP stays relevant and continues to grow, but he is confident the tools are in place.

“The secret sauce for the AARP is that we have a great mission, we have the resources to pursue that mission and we have really talented people,— he said.