Terry Cavanaugh gave himself a 10-year tenure when he became CEO of Erie Indemnity Company in 2008, following a 33-year career with Chubb Group of Insurance Companies. Cavanaugh was 55 years old at the time and planned to work until he was 65. His projection was off by one year—he retired a few months shy of his 64th birthday. Close enough. “In my mind, there’s a half-life to being in any job, and as you go up the food chain to become the CEO, it becomes more acute,” he said.
In making the decision to retire, Cavanaugh felt good about his tenure. Under his leadership, Erie Insurance had increased its property/casualty direct written premiums by more than 45 percent and grew policyholder surplus by 60 percent. He was the first senior executive to be hired from outside the company. “The board was frustrated by not having a solid internal candidate to assume the post,” he explained.
Not surprisingly, his initial challenge was to build the organization’s operational and financial skillsets. “Human capital drives success,” he said. “I was acutely aware of the need to recruit and develop talent. Most importantly, I wanted to have a good successor in place when it was time for me to go.”
“I feel the longer the CEO stays on, even if they’re successful and energetic, it adversely affects the succession management plan. It doesn’t send a good message to the executive team and can create organizational apathy.”
Terry Cavanaugh, former CEO, Erie Indemnity Company
As he got closer in age to 65, the year he had established for his retirement, Cavanaugh reflected on whether or not his timing was right. “Some CEOs don’t have good self-awareness; others get to the point where the job becomes so much a part of their identity they can’t walk away comfortably,” he said. “I took inventory of how I felt intellectually, emotionally and physically about the company’s state and my own future.”
Eight and a half years had passed since he became CEO, and he realized another year and a half wouldn’t make much of a difference to the company and his legacy. “But it might extend the length of my lifespan not having to deal with all the stress and eat restaurant food on the fly anymore,” he added.
In his talks with former CEOs who had confronted the prospect of retirement, they often mentioned the pressure they felt from board directors requesting they stay on longer. “I feel the longer the CEO stays on, even if they’re successful and energetic, it adversely affects the succession management plan,” he said. “It doesn’t send a good message to the executive team and can create organizational apathy.”
A more personal reason to move on with life is the realities of aging. “When you hit 64 and look in the mirror, you realize it’s harder to be courageous—to take innovative risks,” he confided. “Fortunately, I had groomed people to take over. It was their time now.”
Cavanaugh lives half the year today in Naples, Fla., where he often runs across other former CEOs. “I met this one fellow who said, ‘Terry, you and I are PIPs. I asked what he meant and he replied—’Previously Important People.’ Made me laugh.”
Nowadays, he puts his considerable business acumen to work as a member of two boards and is an executive coach to C-suite leaders. “My advice to them is to retire while they’re still champions,” he said.
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