Older CEOs plan to work past age 65. They may find that harder than they expect.
At age 64, Bob Drucker's living the dream. He and his wife live in a tidy five-bedroom house on Long Island with a backyard the size of a football field. He kicks back by floating in his pool and spoiling his granddaughters with trips to Disneyland. He would, in fact, be the poster child for retirement, except that the concept makes him recoil. "The only way you can get me out of here is to carry me out," says Drucker, referring to RxUSA, an online pharmacy he founded and runs in Port Washington, N.Y. "I love work, and I cannot imagine sitting home, virtually doing nothing."
Drucker is not alone. As a record number of Americans approach what is the traditional retirement age-- including 77 million baby boomers, the oldest of whom are now 59--many are not slowing down. AARP reports that 80% of the boomers plan to work past 65, and Merrill Lynch says 13% plan to start a business in their golden years.
That baby boomers in particular would rewrite the rules of retirement is hardly surprising. By force of numbers, they have had an unparalleled influence on American culture, changing the rules of sex, marriage, parenthood, and divorce.
Theirs was also the first generation to clash against the rigid structure of the corporation. Boomers like Bill Gates and Steve Jobs were the heroes of the revolution; they inspired thousands of peers to start companies that have created wealth, independence, and personal fulfillment. Today satisfaction with work--combined with a fear of boredom and concerns about what will happen to their firms--makes it hard for them to let go.
But deciding not to retire is complicated in its own way. "When you're a baby boomer and a CEO, there comes a point where you go into this purgatory," says Jack Stack, the 56-year-old founder of SRC Holdings in Springfield, Mo., "between really wanting to stay and knowing that you should be preparing to leave."
The Rise and Fall of the Gold Watch
Retirement itself is a young concept, formalized during the Great Depression to open up jobs for younger workers. Over time corporations realized the idea had planning benefits: Executives groomed replacements. Rising stars stayed with organizations because they knew, with some certainty, when their time would come. This, in turn, reassured outsiders (and insiders) that the company would continue to run smoothly even after its leader stepped down. The breakdown of corporate America, however, ended orderly pensioned retirement, as did demographics. When Social Security was created in 1935, 65-year-old retirees lived, on average, another 13 years. Today it's 20 years. That's a lot of time to fill, even for the most ardent golfer.
Mike Shultz found that out the hard way. When he sold his engineering services company six years ago, he took a look at his age (54) and his net worth (solid) and decided it was time to relax. He lasted all of four days. Faced with empty morning spooling onto empty afternoon, Shultz frantically looked for a job running a small company. Today he's the CEO of Infoglide Software in Austin. "The answer for me was not play golf," he says. "The answer for me was to get back involved in a business."
The current labor crunch enables entrepreneurs like Shultz to stay on. There simply aren't enough young people to fill the positions that older workers are vacating. There are even fewer with the right skills. Thanks to Great Society spending, boomers are better educated than any other generation to date, particularly in math and science. In contrast, more recent American students have been lagging behind those from other countries.
It's not just the schools that have created a skills gap. A generation ago, elaborate corporate training programs groomed many boomers, who later left to become entrepreneurs. These initiatives were gutted in the 1980s and '90s, says Harvard Business School professor Rakesh Khurana, who has studied how companies develop leaders. What's more, "significant downsizing contributed to thinning out the ranks of middle management, the group that we would now be turning to" to run companies, he says.
Shultz sees that trend in his industry. "Historically we've always had a training ground, a No. 2 and 3, and division heads," he says. "We're all running so damn lean now that we're not doing that."
"Sitting on This Time Bomb"
If entrepreneurs intend to work much later in life, that will inevitably change their relationships with workers, directors, and investors--not to mention heirs apparent. The key to managing these critical groups is good succession planning, but entrepreneurs often struggle with this. "You're rolling it around in your head: What you should do, how you should leave the place, if you leave the place will it function as well as when you led," says Stack. You also worry that "you could end up choking the company. You read these things about how, in your fifties, you stop taking risks."
With more CEOs avoiding retirement, succession-planning issues are poised to boil over at many companies. When a founder steps down, "there's a huge added deleterious effect to a transition," says Stanislav Dobrev, a professor at the University of Chicago's business school. Turnover spikes. And the longer that contenders have been vying for that top job, the more factions have likely developed within the company and the greater the disappointment among runners up.
How can CEOs address this? Stack meets with his board annually to discuss succession plans. Massood Zarrabian, 56, the CEO of OutStart, a Boston software company, keeps a written record of major decisions he makes, his reasoning, and what the financial results are, so he can pass that down. Troy Cooper, 58, came up with an even more creative plan: He split his Dallas-based Palm Beach Tan into three separate entities and hired a CEO to run the group while he presides over one of the subsidiaries.
But these entrepreneurs are the exceptions. Shultz has no plan in place at Infoglide. Drucker says his younger partner would take over RxUSA in an emergency, but they have no set strategy. In avoiding the management issues posed by their own mortality, older entrepreneurs may discover that managing into their sixties and seventies is a bigger challenge than they expected. "Almost any company with leadership in their fifties is sitting on this time bomb," says Zarrabian. "A lot of experience, a lot of expertise, a lot of things in place are going to go away."