{"id":27868,"date":"2024-08-07T12:02:59","date_gmt":"2024-08-07T16:02:59","guid":{"rendered":"https:\/\/www.dhrglobal.com\/?p=27868"},"modified":"2025-02-13T11:56:29","modified_gmt":"2025-02-13T16:56:29","slug":"safeguard-your-companys-future-create-a-ceo-succession-plan","status":"publish","type":"post","link":"https:\/\/www.dhrglobal.com\/insights\/safeguard-your-companys-future-create-a-ceo-succession-plan\/","title":{"rendered":"Safeguard Your Company\u2019s Future: Create a CEO Succession Plan"},"content":{"rendered":"\n<div class=\"block-hero alignfull  has-breadcrumb\">\n    <div class=\"outerwrap\">\n        <div class=\"wrapper\">\n            <div class=\"copy\">\n\n                                    <ul>\n                        <!-- Breadcrumb NavXT 7.0.2 -->\n<li><a property=\"item\" typeof=\"WebPage\" title=\"Go to Insights.\" href=\"https:\/\/www.dhrglobal.com\/insights\/\" class=\"post post-page\" aria-current=\"page\"><span property=\"name\">Insights<\/span><\/a><meta property=\"position\" content=\"1\"><\/li>                    <\/ul>\n                \n                                    <h1>Safeguard Your Company\u2019s Future: Create a CEO Succession Plan<\/h1>\n                \n            <\/div>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div class=\"block-insights-detail no-intro\">\r\n\t\t<div class=\"meta\">\r\n\t\t<p class=\"date\">August 7, 2024<\/p>\r\n\t\t\t\t<p class=\"author\">Authors:<\/p><ul><li><a href=\"https:\/\/www.dhrglobal.com\/consultant\/justin-menkes\/\">Justin Menkes, Ph.D.<\/a><\/li><\/ul>\t<\/div>\r\n<\/div>\n\n\n<p>In today\u2019s complex business landscape, CEO <a href=\"https:\/\/www.dhrglobal.com\/capability\/leadership-consulting\/organizational-development\/succession-planning\/\">succession planning<\/a> should be top priority for every company. As organizations face extraordinary challenges and opportunities, ensuring smooth leadership transitions is essential for maintaining stability and cultivating growth. Effective succession planning prepares companies for the unexpected and aligns CEO development with long-term strategic goals. In this article, we explore how to approach CEO succession planning, including best practices, and the importance of being proactive in identifying and developing future leaders.<\/p>\n\n\n\n<p>Many CEOs are baby boomers, driving attrition rates higher as they reach retirement age. As of June 2024, 1,101 CEOs have announced their departures this year, the highest year-to-date total on record, according to research from Challenger, Gray &amp; Christmas. That number is up 21% from 907 exits in the same period last year, which was the previous year-to-date record.<\/p>\n\n\n\n<p>This generational shift makes it critical for companies to have solid succession plans to avoid disruptions. Creating a formal plan involves identifying and developing potential leaders within the organization, establishing clear criteria for leadership roles, and ensuring that these future leaders are prepared to step into their new positions seamlessly. A well-structured succession plan safeguards against unexpected vacancies, mitigates risk, and aligns leadership development with the company\u2019s long-term strategic goals.<\/p>\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"is-style-underlined has-green-color has-text-color\"><strong>Proactive Planning Pays<\/strong><\/h2>\n\n\n\n<p>Recent CEO turnover underscores the importance of having a robust succession plan to address leadership gaps and ensure business continuity. Without a documented succession strategy, a company faces potential operational disruptions, financial instability, and challenges in maintaining strategic direction.<\/p>\n\n\n\n<p>\u201cYou could argue that CEO succession is the most important job a board has,\u201d said <a href=\"https:\/\/www.dhrglobal.com\/consultant\/justin-menkes\/\">Justin Menkes<\/a>, Partner in DHR\u2019s Leadership Consulting Practice. \u201cWhen it\u2019s done well, the benefits are significant and enduring. When it\u2019s not done or done poorly, however, the costs are dramatic and obvious.<\/p>\n\n\n\n<p>Without CEO succession planning, companies may face legal battles, financial losses, and a significant impact on their reputation,\u201d Menkes continued. \u201cEstablishing a thorough forward-looking succession plan helps to avoid such turmoil.\u201d<\/p>\n\n\n\n<p>Inadequate planning also leaves companies vulnerable to uncertainty in emergencies, such as when a CEO suddenly resigns or has unexpected health problems. Boards should create a road map for these situations by identifying interim candidates who can step in immediately and remain until long-term successors are ready to lead their companies.<\/p>\n\n\n\n<p>\u201cIt&#8217;s a relatively simple thing for a board to do, but many companies don\u2019t plan for sudden departures,\u201d said Jonathan Hoyt, Partner in DHR\u2019s Leadership Consulting Practice. \u201cThis oversight is surprising, given the potential consequences of leadership instability.\u201d<\/p>\n\n\n<div class=\"block-billboard alignfull has-dark-blue-background-color alignfull\">\n\t<div class=\"maybe-wrapper\">\n\t\t<div class=\"inner\">\n            \n\n<p>&#8220;You could argue that CEO succession is the most important job a board has. When it\u2019s done well, the benefits are significant and enduring. When it\u2019s not done or done poorly, however, the costs are dramatic and obvious.&#8221;<\/p>\n\n\n\n<p class=\"has-cmedium-font-size\">&#8211; Justin Menkes<\/p>\n\n\n\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<div style=\"height:16px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"is-style-underlined has-green-color has-text-color\"><strong>Build a Road Map for Leadership Success<\/strong><\/h2>\n\n\n\n<p>In contrast, having clear plans helps organizations remain resilient and focused, even during periods of change. When companies are prepared, they can position themselves for sustained success, attracting top talent, potential investors, and partners. Succession plans are an investment in a company\u2019s future. After all, finding the next leader is always in an organization\u2019s best interests.<\/p>\n\n\n\n<p>\u201cA planned approach ensures organizational continuity and mitigates risks associated with leadership changes,\u201d Hoyt said. \u201cPerhaps even more importantly, it improves retention of top employees by offering them clear opportunities for growth and advancement.\u201d<\/p>\n\n\n\n<p>One example of a successful transition is when the late Steve Jobs, Apple\u2019s founder and CEO, left the company to then chief operations officer, Tim Cook. Apple had a strong succession plan that included and prepared Cook as the primary succession candidate. Before Jobs died in 2011, he helped in Cook\u2019s development, including allowing Cook to serve as CEO while Jobs addressed his health issues. When Jobs died, Cook became CEO, helping the company solidify its future as a tech powerhouse.<\/p>\n\n\n\n<p>\u201cA well-executed succession plan is the backbone of a company\u2019s stability and continuity,\u201d Hoyt said. \u201cIt not only safeguards the organization\u2019s future, but also boosts morale and retention by showing a commitment to internal talent development.\u201d<\/p>\n\n\n<div class=\"block-billboard alignfull has-dark-blue-background-color alignfull\">\n\t<div class=\"maybe-wrapper\">\n\t\t<div class=\"inner\">\n            \n\n<p>&#8220;A well-executed succession plan is the backbone of a company\u2019s stability and continuity. It not only safeguards the organization\u2019s future, but also boosts morale and retention by showing a commitment to internal talent development.&#8221;<\/p>\n\n\n\n<p class=\"has-cmedium-font-size\">&#8211; Jonathan Hoyt<\/p>\n\n\n\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"is-style-underlined has-green-color has-text-color\"><strong>Commit to a Dynamic Process<\/strong><\/h2>\n\n\n\n<p>At a minimum, a succession plan should include a comprehensive, data-driven evaluation of potential internal and external candidates, defined criteria for leadership roles, and a structured development program to prepare successors. Moreover, it\u2019s a starting point for action \u2013 not a static document that sits on a shelf. Boards should update their plans to reflect changing business needs and emerging leadership talent.<\/p>\n\n\n\n<p>In short, as company needs and talent evolve, so should a succession plan. Boards should treat succession planning as an ongoing priority, reviewing plans at least annually.<\/p>\n\n\n\n<p>\u201cRegular reviews ensure that succession plans remain relevant, effective, and actionable,\u201d Menkes said. \u201cThis practice helps boards to stay ahead of potential leadership challenges and reinforces their commitment to effective CEO transitions and successful onboarding.\u201d<\/p>\n\n\n\n<p>Similarly, establishing a culture of succession planning helps ensure continuous leadership readiness and a pipeline of capable leaders. Waiting too long to create a succession plan means an organization may not have sufficient time to develop potential candidates. <\/p>\n\n\n\n<p>\u201cIdentifying and developing potential CEO successors can take two to three years,\u201d Menkes said. \u201cIt\u2019s very likely that they\u2019ll need to grow in some areas to take the role, even if they\u2019re very promising prospects for the job.\u201d<\/p>\n\n\n<div class=\"block-billboard alignfull has-dark-blue-background-color alignfull\">\n\t<div class=\"maybe-wrapper\">\n\t\t<div class=\"inner\">\n            \n\n<p>&#8220;Regular reviews ensure that succession plans remain relevant, effective, and actionable. This practice helps boards to stay ahead of potential leadership challenges and reinforces their commitment to effective CEO transitions and successful onboarding.&#8221;<\/p>\n\n\n\n<p class=\"has-cmedium-font-size\">&#8211; Justin Menkes<\/p>\n\n\n\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"is-style-underlined has-green-color has-text-color\"><strong>Cultivate Future Leaders Early<\/strong><\/h2>\n\n\n\n<p>Many organizations opt for internal candidates when selecting new CEOs. Identifying potential successors early gives current CEOs and boards ample opportunity to interact with them, make sure they have adequate experience, and evaluate their performance. They can assess candidates for succession-readiness, including their strategic thinking, ability to inspire teams, and capacity to embrace organizational change.<\/p>\n\n\n\n<p>\u201cLong-tenured CEOs know who to elevate,\u201d Hoyt said. \u201cThey know how to cultivate capability and performance within their organizations. They can make sure candidates get the proper experience and exposure for the position. There\u2019s nothing like the institutional knowledge that CEOs get over time that\u2019s not easily replaced with an outsider.\u201d<\/p>\n\n\n\n<p>Adds Menkes, \u201cIf it\u2019s clear where the business is going and what demands the next CEO will have, it\u2019s a pretty straightforward exercise to derive the qualities, capabilities, and track record the top successor must have.\u201d<\/p>\n\n\n\n<p>How early is too early for identifying and preparing internal candidates? Some organizations start as soon as their new CEOs are in place. The ideal timeline may depend on the industry and its pace of innovation.<\/p>\n\n\n\n<p>\u201cIt depends on how slow or quickly they evolve,\u201d Hoyt said. \u201cWith a large-cap company that has a portfolio of businesses, it\u2019s unlikely that a particular change in one business is going to change the requirements that the CEO needs,\u201d Hoyt said. \u201cFor a software company, however, the rate of change is much faster.\u201d<\/p>\n\n\n<div class=\"block-billboard alignfull has-dark-blue-background-color alignfull\">\n\t<div class=\"maybe-wrapper\">\n\t\t<div class=\"inner\">\n            \n\n<p>&#8220;Long-tenured CEOs know who to elevate. They know how to cultivate capability and performance within their organizations. They can make sure candidates get the proper experience and exposure for the position.&#8221;<\/p>\n\n\n\n<p class=\"has-cmedium-font-size\">&#8211; Jonathan Hoyt<\/p>\n\n\n\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"is-style-underlined has-green-color has-text-color\"><strong>Make the Right Choice: Internal Versus External<\/strong><\/h2>\n\n\n\n<p>While the guiding rule of thumb is that internal successors are the best choice for CEO succession, it\u2019s not always the most suitable option. Sometimes, an organization\u2019s needs, strategic direction, or specific challenges may necessitate bringing in external talent. External candidates can offer fresh perspectives, diverse experiences, and innovative ideas that align with evolving market demands.<\/p>\n\n\n\n<p>\u201cIf a company is doing well and it\u2019s on a trajectory of positive results, then staying internal is the safest and best way to go statistically,\u201d Hoyt said. \u201cBut if the company is struggling and needs new direction, outsiders tend to outperform insiders.\u201d<\/p>\n\n\n\n<p>Menkes echoed Hoyt\u2019s sentiments.<\/p>\n\n\n\n<p>\u201cInternal talent has the knowledge and the trust. They understand the culture,\u201d he said. \u201cThere isn\u2019t that sort of transition risk associated with bringing in an outsider whose style and culture might not be a fit.\u201d<\/p>\n\n\n\n<p>\u201cFinding and securing a top CEO is a major challenge, under any circumstances,\u201d he added. \u201cGoing from a superstar CEO to another superstar CEO rarely happens.\u201d<\/p>\n\n\n\n<p>In the best situations, potential successors have basic leadership skills gaps they can easily overcome. A formal internal candidate development program can provide targeted training, mentorship, and hands-on experience to address any weaknesses. By investing in the continuous development of internal talent, organizations can build a robust roster of capable leaders who are ready to step in when needed.<\/p>\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"is-style-underlined has-green-color has-text-color\"><strong>Strategic Succession for Stability<\/strong><\/h2>\n\n\n\n<p>Effective succession planning is crucial for handling planned and unexpected leadership changes, supporting long-term growth and stability. By having robust plans in place, companies can minimize risks associated with leadership transitions and maintain their strategic focus. Continuous evaluation and refinement of these plans is essential to keep pace with changing business landscapes. Prioritizing succession planning demonstrates a commitment to organizational resilience, ensuring a steady path toward future achievements.<\/p>\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n    <div class=\"block-consultants-featured \">\n        <div class=\"maybe-wrapper\">\n\n                            <h2 class=\"is-style-underlined\">Meet the Experts<\/h2>\n            \n            <div class=\"consultant-grid\">\n\n                <article id=\"post-16791\" class=\"post-16791 consultant type-consultant status-publish has-post-thumbnail hentry consultant_title-partner\" >\n    <a class=\"inner\" href=\"https:\/\/www.dhrglobal.com\/consultant\/justin-menkes\/\">\n        <div class=\"img\" style=\"background-image:url(https:\/\/www.dhrglobal.com\/wp-content\/uploads\/2023\/03\/Menkes_Justin_Web-370x370.jpg);\"><\/div>\n        <div class=\"info\">\n            <h3>Justin Menkes, Ph.D.<\/h3>\n                            <p>Partner, Leadership Consulting<\/p>\n            \n                    <\/div>\n    <\/a>\n<\/article>            <\/div>\n        <\/div>\n    <\/div>\n    \n\n<div class=\"block-cta has-dark-blue-background-color alignfull\">\n\t<div class=\"maybe-wrapper\">\n        \t\t<div class=\"left\">\n\t\t\t<h2>Fostering Growth &#038; Mitigating Risk<\/h2>\t\t\t\t\t<\/div>\n\t\t<div class=\"right\">\n            \n\n<p>By leveraging our expertise in executive assessment, leadership development, and executive search, we ensure the right leaders are ready when needed. Our succession planning process includes understanding your strategy and culture, crafting an ideal candidate profile, assessing internal and external candidates, and facilitating board discussions to align on a succession roadmap. We minimize transition risks, build a leadership pipeline, and provide tailored support to fit your needs.<\/p>\n\n\n\n<div class=\"wp-block-button alignleft\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.dhrglobal.com\/capability\/leadership-consulting\/organizational-development\/succession-planning\/\">Learn More<\/a><\/div>\n\n\n        <\/div>\n\t<\/div>\n<\/div>\n\n\n\n","protected":false},"excerpt":{"rendered":"<p>In today\u2019s complex business landscape, CEO succession planning should be top priority for every company. As organizations face extraordinary challenges and opportunities, ensuring smooth leadership transitions is essential for maintaining stability and cultivating growth. Effective succession planning prepares companies for&hellip;<\/p>\n","protected":false},"author":20,"featured_media":27879,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"insights_type":[49],"acf":[],"_links":{"self":[{"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/posts\/27868"}],"collection":[{"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/comments?post=27868"}],"version-history":[{"count":19,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/posts\/27868\/revisions"}],"predecessor-version":[{"id":31155,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/posts\/27868\/revisions\/31155"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/media\/27879"}],"wp:attachment":[{"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/media?parent=27868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/categories?post=27868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/tags?post=27868"},{"taxonomy":"insights_type","embeddable":true,"href":"https:\/\/www.dhrglobal.com\/wp-json\/wp\/v2\/insights_type?post=27868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}