The CEO’s Guide to Retirement

Carl De Torres When Lloyd Blankfein was preparing to retire as chairman and CEO of Goldman Sachs on October 1, 2018, he wrote a poignant letter to employees that captured his ambivalence about stepping down. “It’s always been hard for me to imagine leaving,” wrote Blankfein, who had just turned 64. “When times are tougher, you can’t leave. And when times are better, you don’t want to leave. Today, I don’t want to retire from Goldman Sachs, but…it feels like the right time.” Getting this timing right is an essential part of a CEO’s job—and it’s more difficult than it appears. For leaders who have spent decades working to reach the pinnacle of their careers—with all the power, perks, and prestige that come with the role—retiring can be a scary, almost existential prospect. Their self-worth is often connected to their work, and the questions they face go to the heart of their self-image: How can I remain vital and relevant? Will people still respect me without my title? Where should I live now that I’m not tied to headquarters? How will I fill my days? Without an organization to lead, how can I continue to make a difference in the world? While CEOs are working 70-to-80-hour weeks, it is impossible to consider these questions with clarity or to explore what might be possible or fulfilling after they retire. Giving up their jobs feels like stepping off a cliff. Without answers, many CEOs default to remaining too long in the job. Yet by doing so, they may imperil their legacies and their companies. I have spent more than 25 years grappling with these issues—and helping others reflect on them. In 2001, at age 58, I left the CEO job at Medtronic after having served 10 years—a term limit I’d established when I assumed the role. At Harvard Business School, where I teach courses to CEOs, we talk extensively about the arc of a leader’s tenure, finding the right time to exit, and reconstructing one’s professional and personal life after leaving the job. As a board member of numerous organizations, I have been directly involved in counseling CEOs as they devise their exit strategies and postretirement plans. Apart from my board work, I have served as an informal counselor to more than two dozen chief executives who’ve reached out to me when they faced this turning point. In these conversations I encourage CEOs to leave while they are on top, rather than wait too long and risk being forced out by their boards when the business is not doing well. CEOs who refuse to retire make their boards’ job much more difficult. Without a clear timetable, grooming internal successors and following an orderly succession process become challenging. By stepping aside at the appropriate moment, a CEO can create time and space for reflection before making new commitments. With people living into their eighties and nineties, the options are numerous. For a vivid example of the problems caused by a CEO who fails to step down at the right moment, look at General Electric. In 2017, when the GE board forced Jeff Immelt to resign after 16 years, it appointed an internal candidate, John Flannery, as CEO. The timing was terrible: Flannery spent a year trying to clean up the messes he had inherited (which included an ill-advised acquisition and an accounting scandal) before the board lost patience, fired him, and persuaded its newest board member, Larry Culp, to become CEO. Culp now faces a daunting turnaround. During Immelt’s too-long tenure, GE shareholder value declined 73% while that of its peers in the Dow Jones Industrial Average increased 179%. There was a time when business schools studied GE as a model for CEO succession. Now it’s being taught as a case study in how not to handle the process, largely because of Immelt’s failure to properly time his exit. Although CEOs inhabit a rarefied realm, variations on this decision—When should I retire, and what should I do next?—apply to professionals at all levels. This article focuses on the unique circumstances facing CEOs, but parts of the process I suggest are useful to anyone entering the final laps of a career. Get the Timing Right Thinking about when to begin and how to spend a long retirement is a relatively new problem. A generation ago, when most people died in their late sixties or early seventies, the answer was simple: retire and move to Florida for warm weather and daily golf. Today, when many people live well into their eighties and nineties, retirement may last for decades, so deciding what to do is more complex, with a wider range of exciting options available. In his theory of psychosocial development, Erik Erikson described the stage humans reach in late midlife as they approach retirement age and face a choice between generativity and stagnation. Generativity involves spreading your knowledge and wisdom across many people and organizations while actively continuing to learn. In contrast, stagnation occurs when leaders retire altogether and are left with no way to contribute, so they feel disconnected from their communities and society. In my experience, when thinking about the right time for a CEO to retire, tenure in the job is a more important variable than age. It’s rare to find an organization that performs better after a CEO has been in the role more than 10 to 12 years. There are exceptions, of course, including the companies whose long-tenured executives appear in HBR’s best-performing CEOs ranking (some of them company founders, whose role in creating the firm and large ownership stake create power and succession dynamics different from those facing most CEOs). In general, nonfounder CEOs should avoid too-lengthy tenures for several reasons. Being CEO is an extremely demanding, travel-intensive job that requires great creativity, energy, tenacity, and resilience, and leaders often have a hard time sustaining those qualities for more than a decade. The strategies the CEO put in place may simply run out of gas, and the company will require new leadership to implement a strategic transformation. Not wanting to post poor bottom-line results, some long-tenured CEOs make decisions aimed at maintaining near-term results; thus they fail to make the bold investments required to drive long-term growth. Other CEOs display the opposite behavior: Late in their tenure they make a large acquisition in an effort to avoid a growth slowdown—but in so doing, they create complexity that the board is reluctant to hand over to an inexperienced successor. As Blankfein pointed out, there is no perfect time for a CEO to leave. To avoid staying too long, CEOs should regularly work through these questions, which are designed to identify when to exit: Take a personal inventory of your life, your career, and your time as CEO. Do you still find fulfillment and joy in the job? Do you feel the passion, energy, and excitement you once did? Are you still learning and feeling challenged? Do you have personal reasons to leave earlier than planned? Is your partner eager to start a new phase of life with you? Do you have family or health issues that may cause you to leave sooner than expected? Are you facing an unexpected career opportunity that won’t come around again? Former Goldman Sachs CEO Hank Paulson wasn’t planning to leave his role but felt compelled to accept President George W. Bush’s appeal to become U.S. treasury secretary. How is succession shaping up? If you have multiple internal candidates, how old are they relative to you? If you stay longer, will your successor still be young enough to have a long run in the job? Alternatively, is your successor prepared to be CEO right now and possibly unwilling to wait around if your timetable is uncertain? That situation confirmed the timing of my exit from Medtronic after 10 years: My successor, Art Collins, was only five and a half years younger than I and was ready to be CEO. If I had chosen to stay longer, he most likely would have taken a CEO position elsewhere. At the other extreme, is your planned successor not ready or running into some difficulties? In that case you may have to extend your tenure so that other candidates can be prepared. Former Merck CEO Roy Vagelos encountered such a situation when his designated successor violated the company’s code of conduct and the board asked Vagelos to stay until it could complete an external search. Are there company-specific milestones you want to achieve before you depart, such as the integration of a major acquisition, the launch of an important new product, or the completion of a long-running project? John Noseworthy remained in his role as Mayo Clinic CEO until the IT team finished implementing a very complex technology infrastructure system. Is your industry changing so dramatically that your company would benefit from a fresh perspective? After eight years as the CEO of Novartis, Joe Jimenez handed over the reins to Vas Narasimhan to lead the pharmaceutical company’s push into emerging gene and cell-based therapies. Does your company have a mandatory retirement age? Not long ago, most companies did (typically 65), but many have dropped it as health and longevity have improved. Today when a board has a high-performing CEO who wants to continue, the directors are often willing to eliminate a mandatory retirement policy. At Ford, where CEOs traditionally retired at 65, the board asked Alan Mulally to stay until just before he turned 69. Merck recently changed its policy to extend Ken Frazier’s tenure as chief executive after he turns 65. Mandatory retirement policies can be useful for forcing out leaders who are reluctant to step aside, but boards should recognize that age 65 is arbitrary and that flexibility may be in the company’s best interest. The relevance of these questions will vary in each CEO’s case, but taken together, they provide an important list of issues that leaders should contemplate in deciding when it’s best to move on. Craft Your Next Act Slowly and Deliberately One reason CEOs hold on too long is that they can’t imagine what comes next. This is shortsighted. Today former CEOs have myriad opportunities to continue to lead and make meaningful contributions. Whether they choose to serve on corporate and nonprofit boards, teach, write books, get involved in nonprofit organizations, join a private equity firm, create a foundation, serve in government, or mentor emerging leaders, many former CEOs find that this period of generativity is very fulfilling. Leaders who construct a satisfying post-CEO life often develop a positive reputation—and, in my experience, seem more content. An example is Steve Reinemund, who served as CEO at PepsiCo from 2001 to 2006. During that time he set the standard for values-centered leadership, grew revenue and market capitalization, and diversified PepsiCo’s management. At age 58 Reinemund stepped down to focus on his family’s needs, making way for Indra Nooyi to succeed him. After retiring he spent six years as the dean of Wake Forest’s business school, giving it a focus on values and ethics. In addition, he has served on the boards of Johnson & Johnson, American Express, ExxonMobil, Walmart, and Marriott, where he has been a strong advocate for values, ethics, and diversity. When I discuss retirement with CEOs, I suggest this step-by-step approach: 1. Finish strong and go out on top. Many CEOs worry that they will become lame ducks as soon as their succession timetable is clear. I disagree. You are in charge until the last day, and you should finish your tenure on a high note. As Ecolab CEO Doug Baker puts it, “Run through the finish line.” By staying fully engaged, outgoing CEOs give their successors time to plan their own agendas without the pressures of daily business. That is precisely what John Noseworthy did as Mayo Clinic’s CEO: He gave the board nine months’ notice to select and prepare a successor while continuing to build Mayo’s medical business and leaving the financials in great shape when he retired, on December 31, 2018. During that time his successor, Gianrico Farrugia, was developing an agenda and organizing his top team. 2. Meet with a career coach or a therapist a year in advance. When leaving Medtronic, I had fears about losing relevance, not having a platform, or lacking meaning in my life. So I went back to a therapist I had seen years before and talked those issues through. In addition to exploring my fears, the discussions enabled me to envision what my new life might look like and what my options might be. Recognizing that I didn’t want to take on another full-time role gave me the freedom to explore many other things that life has to offer. I still had no idea how I would feel or what I might do when I left, but I was better prepared to cope with the unknown. After I left the job, I spent two years figuring out my next steps while teaching for 18 months as a visiting professor at two Swiss universities. By staying fully engaged, outgoing CEOs give their successors time to plan ahead. 3. If you’re married, talk through the transition with your spouse. Ask questions such as What would give us the greatest satisfaction? Where will we find fulfillment? Where would we like to live and spend time? What hobbies haven’t we had time to explore? Is there a bucket list of activities—such as living in another country—that my being CEO has prevented us from pursuing? My wife, Penny, and I met with a counselor six months before I left Medtronic to discuss those issues, and we were able to address the different stages we were at in our careers. 4. Say your goodbyes and make a clean break. In the months before you leave, make in-person visits to secure your relationships with key people, your employees, and customers. When your time is up, don’t hang around the C-suite. Move your office to a new location—preferably away from headquarters, but definitely far from the executive wing. I suggest that former CEOs go back to the company only when specifically invited by the new CEO. 5. Take six to 12 months to explore your options before making any firm commitments. Extended time away gives leaders a tabula rasa so that they can think clearly about what comes next. After I left Medtronic, Penny and I rented a villa in Provence and had visits from family and friends—something I had wanted to do previously, but then I couldn’t afford the time away from the company. During this exploration phase, don’t make any firm commitments. The first opportunities that come along may not be the best options, but some leaders accept them out of fear that they won’t be able to fill their time. They may want to retain a title and a business card and to let colleagues know they are still active. Be careful with smaller commitments, too; they can fragment your schedule and prevent you from taking extended vacations or being available for other, higher priorities. This new stage of exploration and saying “not yet” to emerging opportunities may be uncomfortable, but living with the discomfort will help you choose your next step wisely. 6. Make your decisions and move ahead. When you’re ready to take on new roles and activities, be flexible about your time obligations, knowing that these commitments are not forever. Then dive in 100% to learn everything you can and contribute as if you will be there the rest of your life. Weighing All the Options Beyond needing a process for weighing options, many retiring CEOs want to talk specifically about the pros and cons of the options they have. Here are the most common ones: Serve on corporate boards. These days most active CEOs are restricted by their own boards to serving on a single outside board; but once they step aside, they can make vital contributions to multiple organizations. For this reason, recently retired CEOs are very much in demand as directors. Former DuPont CEO Ellen Kullman is an example: She sits on the boards of Amgen, Carbon, United Technologies, and Goldman Sachs (as a colleague of mine), where she shows a knack for digging deep into the details and asking important questions. Serving on boards enables you to stay engaged in the important issues companies are confronting and to develop new professional colleagues. But be aware of the time investment boards can require, especially during crises, because that may constrain your other activities. Teach. As I have learned, teaching MBA candidates and executives can be both rewarding and intellectually challenging, forcing you to remain sharp enough to keep up with your students and to understand the motivations and philosophies of a younger generation. You gain entry to the very different world of academia, with all its intellectual stimulation but also its bureaucratic frustrations. Teaching should not be entered into lightly, because doing it well takes an enormous amount of time. Many retired CEOs find it worth the investment. It has enabled me to fulfill a passion to help authentic leaders develop their capabilities. Coaching the next generation of leaders can be a satisfying way of giving back. Write books. Many retired CEOs write books. Several of these, such as those from Aetna’s Ron Williams ( Learning to Lead ), Campbell Soup’s Doug Conant ( Touchpoints, with Mette Norgaard), Bridgewater’s Ray Dalio ( Principles ), and Baxter’s Harry Kraemer ( Becoming the Best and From Values to Action ), have been especially helpful to emerging leaders. Although writing can be very satisfying, it’s important to wait at least a year after retirement so that you can gain perspective and write about more than your experience at a single company. Lead nonprofit organizations. Serving on the boards of nonprofits can be especially gratifying. Some executives even take full-time leadership roles there. For instance, following a successful career as the CEO of U.S. Bancorp, Richard Davis became the chief executive of Make-A-Wish Foundation, in Phoenix, while also serving on the boards of Mayo Clinic and Twin Cities YMCA. But be warned: Although nonprofit leadership is personally rewarding, it can be just as demanding as being the CEO of a for-profit company. Join a private equity firm. The rapid growth of the private equity sector has created a real need for executives with strong operating experience who can bring fresh eyes to the often-troubled companies in PE portfolios. A good example is Harry Kraemer, an executive partner with Madison Dearborn. Kraemer is positive about his experiences; however, several former CEOs have confided to me their disappointment in private equity. They feel that they were promised more responsibility than was delivered and that the firms were simply using their names for prestige. Create a foundation. Many CEOs who accumulate significant wealth over the course of their careers decide to establish a foundation to achieve wider influence on important issues. That’s what former IBM CEO Sam Palmisano did when he established the Center for Global Enterprise (CGE) at Rockefeller University in New York. At IBM, Palmisano developed his theories regarding globally integrated organizations. In creating CGE, he was able to engage with scholars to deepen those ideas and put them into practice. Penny and I used Medtronic stock to create the George Family Foundation, which she chairs, focused on integrated health and healing and authentic leadership. We have found it enormously rewarding to support nonprofit organizations doing important work, but it can be challenging to realize the outcomes you desire. Serve in government. Many former CEOs have moved into government service, whether by appointment or by seeking elective office. My Harvard Business School classmate Michael Bloomberg is a superb example: He served three terms as mayor of New York City and remains an important voice on a range of social and political issues. In the right circumstances, serving in government can be fulfilling, create meaning, and burnish one’s legacy. In the wrong ones it can be deeply frustrating, as former ExxonMobil CEO Rex Tillerson learned during his 14 months as U.S. secretary of state—when he often found himself at odds with President Trump. Mentor leaders. In the past decade rising executives have sought out coaching and mentoring opportunities, and many people recognize that former CEOs make very thoughtful coaches. Coaching the next generation of leaders can be a satisfying way of giving back. Former Novartis CEO Dan Vasella travels the world coaching CEOs and running mentoring programs for leaders. Morgan Stanley’s John Mack finds great joy in coaching young entrepreneurs. The rewards of mentoring far exceed the investment of time required. CONCLUSION At a moment when authentic leaders are needed throughout society, it’s an enormous loss if former CEOs simply retire to warmer regions and make no attempt to help solve the world’s myriad problems. The possibilities listed above enable such experienced leaders to make very important contributions to society while still having time for family and friends, hobbies, and travel. Among the many former CEOs I know, the ones who are thriving have found ways to create or nurture things that will outlast them. Their generative approach to their later years brings them a sense of well-being—and helps improve the world.

The CEO’s Guide to Retirement

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