Succession planning for C-suite and board positions is not just a checkbox on an organizational to-do list; it’s a strategic imperative that can determine a company’s future success or failure. When done correctly, it ensures a smooth transition of leadership, maintains organizational stability, and preserves the company’s culture and strategic direction. When done poorly (or not at all) it becomes a reactive and chaotic exercise resulting in far-reaching consequences for the organization.

A 2023 study reports that only about half (51%) of surveyed board directors said their organization has a written plan for the current CEO’s succession. Failure of succession planning sets the stage for common mistakes leading to disrupted leadership, strategic misalignment, and organizational crises. These missteps not only threaten the immediate stability of the company but can also have long-lasting repercussions, affecting everything from employee morale to market confidence. 

Two of the most common mistakes in CEO succession planning are a lack of a plan and a failure to successfully execute the plan when it becomes necessary. The first was most notably demonstrated by the sudden resignation of Credit Suisse’s Chief Executive Thomas Gottstein. The organization’s lack of a clear succession plan led to a significant loss in shareholder confidence and a 60% drop in stock value over the year. Disney’s “epic succession mess” as coined by CNBC is a clear example of a poorly executed plan, resulting in rising internal tensions and severely struggling stock.

Let’s take a deeper dive into these and other common succession planning mistakes. 

Lack of a Formal Succession Plan

The Mistake:

As was the case with Credit Suisse, many organizations, especially privately held companies operate without a formal, documented succession plan. Decisions about leadership transitions are often made ad hoc, driven by immediate needs rather than long-term strategic vision. 

“Organizations need to put more emphasis on succession readiness, not just identifying potential successors,” says Kathy Bernhard, KFB Leadership Solutions. 

The Debate:

While some argue that flexibility is essential to respond to unpredictable events. A lack of formal succession planning can lead to knee-jerk reactions that may not align with the organization’s goals and values. Pressed for time to find a replacement, the development of a target profile, in addition to the vetting process, may be truncated, causing the board and the selection committee to miss or gloss over red flags or potential issues with culture fit, management style or demonstrated ability to tackle the issues at hand. Having a robust succession plan doesn’t mean eliminating flexibility; it means being prepared for various scenarios such as…(CEO death, fire for cause, etc…)

Best Practice:

Develop a comprehensive succession plan with clear criteria for leadership roles, potential successors, and an actionable transition timeline. Regularly update this plan to reflect the organization’s evolving strategy and market conditions. The board should consistently include an agenda item that will provide an update on the succession planning, in addition to highlighting functions and leaders of particular concern.

Overreliance on External (or Internal) Hires

The Mistake:

Some organizations tend to favor external candidates over internal talent, believing that a fresh perspective is necessary to move the company forward. In some cases, the board directive is focused on growth; in other scenarios, the company may be looking for a turnaround agent. Each situation will affect the target source of new leadership and should be accounted for when crafting the succession plan. An overreliance on external hires, can demoralize existing employees who may have the talent and experience to assume a larger role. Outside talent can often be unfamiliar with the unique culture of the company and contribute to mismatches between new leadership and the company. Moreover, a company that is unrealistically committed to promoting from within, risks inviting “groupthink”, simply recycling traditional ideas and eliminating the opportunity to incorporate truly innovative talent from an external source.

The Debate:

External hires can bring new ideas and energy, as well as help to diversify the thought process, innovation and “out of the box” thinking of the legacy leadership team – especially if the first and second-level leaders are overly homogenous with career incumbents who grew up in the company. However, overlooking internal candidates who might have the ability to bring innovative perspectives can be detrimental. Employees who have grown within the company often have a deeper understanding of its culture, values, and long-term strategy. Furthermore, consistently opting for external hires may signal both internally and externally that there may be underlying issues in talent development.

Best Practice:

Strive for a balanced approach to selecting succession candidates rather than relying too much on internal or external candidates. Invest in leadership development programs that prepare internal talent for future roles, ensuring they are ready when opportunities arise. Additionally, it's wise to simultaneously maintain an ongoing external "leadership bench" of prospective hires should the need arise. This not only boosts morale but also aligns leadership succession with organizational culture.

Jim Schleckser of The CEO Project, shares, “If change is needed, an outsider can be a better choice. If things are going well, an insider is generally the best option. In other words, choose people with direct experience in what makes customers happy, and profits grow.” It is incumbent upon the board to take a more proactive approach to developing the succession plan, before they are forced to do so. A succession framework should be developed for key leadership positions, providing a strategy to fit multiple scenarios (e.g. the ideal COO candidate in the event the company is growing but must find a replacement for the retiring COO, vs. the ideal COO candidate after the company has experienced successive quarters of decreasing margins and increased costs)

Ignoring the Role of Diverse Thinking in Succession Planning

The Mistake:

Succession planning processes that do not prioritize diversity tend to replicate existing leadership demographics, missing out on different and new perspectives that may drive innovation, offer new perspectives on risk, and overall improve decision-making.

Carol J. Geffner, president of CB Vision, coach and consultant, and author of Building a New Leadership Ladder reminds leaders that, “Organizations need to develop succession plans that reflect their short- and long-term DEI goals. There is a compelling reason to do so: Diverse organizations aren’t just more inclusive but also more profitable.” Once again, prior to deploying a succession plan, the Board and Executive Leadership Team (ELT) must determine the appropriate tone and commitment to creating a broadly diverse leadership team (e.g. diverse education, gender, age, ethnicity, industry, etc.)

The Debate:

While some may argue that the best candidate should always be chosen regardless of diversity considerations, it’s essential to recognize that leadership teams that embrace diversity of thought, incorporating various ages, genders, ethnicities, industry knowledge and educational backgrounds, are proven to perform better. While diversity simply for diversity sake should not be used as the sole criteria to select a new leader, just as hard skills must be considered when making a hiring decision, diversity – as we’ve defined it - should also be a part of the decision. The most effective boards typically look to build a coalition of ideas, perspectives, backgrounds, industry experience, gender, ethnicity and education. A lack of diversity across a leadership team can hinder creativity and limit the organization’s ability to navigate a complex, globalized market.

Best Practice:

Incorporate thought diversity as a key criterion in succession planning. Ensure that the pool of potential successors is diverse in gender, race, ethnicity, experience, age, education, and thought. This promotes selecting the right person to assume the leadership role and enhances the organization’s adaptability and resilience.

Failing to Prepare Successors for Their New Roles

The Mistake:

Identifying and adequately preparing for a successor’s  transition is a common oversight. This can lead to performance issues, strategic missteps, a rise in internal tensions, and a loss of confidence among stakeholders.

“When the two people at the top of a company have a dysfunctional relationship, there’s no way that the rest of the company beneath them can be functional,” Iger wrote in his autobiography, “The Ride of a Lifetime.” “It’s like having two parents who fight all the time.”

The Debate:

Some believe the right candidate should be able to “hit the ground running.” This is especially true in hyper-growth, disruptive companies that are accustomed to moving at the speed of sound. Leadership teams and boards quickly grow accustomed to the pace of their organization, failing to allow new hires to take the necessary time to understand how decisions get made, what style of communication is most effective and what the business priorities need to be. Even the most capable leaders need time and support to adjust to new responsibilities, especially in the complex environment of the C-suite or board.

Best Practice:

Implement a structured development program for identified successors, including mentorship, role shadowing, and targeted training. Board members should schedule regular 1-on-1 meetings with the new leader during the first 90-180 days, to ensure a smooth onboarding and to calibrate on top priorities. The Board and full ELT must provide ongoing support even after the transition to ensure the new leader is fully integrated and effective in their role. When promoting from within, spend time with the new leader to address potential stumbling blocks. The new CEO will now be overseeing staff that previously operated as peers and may confront animosity created by others who were not selected for the promotion. Once again, the Board – along with the ELT - has a responsibility to communicate with senior leaders that may have been passed up in the final CEO selection, to avoid these leaders losing focus, or worse yet, feeling as though they are no longer valued.

Lack of Transparency and Communication

The Mistake:

Organizations often keep succession plans under wraps, leading to uncertainty, rumors, and potential power struggles. This lack of transparency can erode trust and morale among employees.

Tom Morrison, principal with Deloitte Consulting LLP’s Human Capital practice, tells The Wall Street Journal that “Transparency into succession planning activities helps to build employees’ trust in the process.“ Everyone needs to understand why certain people are on the leadership development path and others are not. When you tell long-term practitioners that you’ve decided someone else is going to be the next CIO, you should have supportable reasons to share with them,” he adds.

The Debate:

While some confidentiality is necessary, especially regarding sensitive decisions, keeping succession plans too secretive can backfire. Post selection, key employees may feel entitled to an elevated position and after being passed over, may feel disengaged or undervalued if they are not informed about the organization’s future direction and their potential role in it. In order to minimize negative repercussions, prior to an executive vacancy, the Board and ELT should spend time identifying key employees (“high potentials”) to engage on a confidential basis about their selection to a “High Potential Program”, or to simple initiate a confidential conversation about their career trajectory within the company.

Best Practice:

With regard to CEO and Board level succession planning, it’s imperative that the full board (not just the Board selection committee) consistently articulates the succession planning process openly, sharing potential leaders’ criteria and development paths. Additionally, when it comes to succession planning outside the CEO’s office and board room, the ELT must take responsibility for initiating ongoing dialogue with key leaders that are instrumental in the success of the organization. This fosters a culture of proactivity, trust and engagement, encouraging key leaders to aspire to leadership roles, knowing a clear and fair process is in place.

By avoiding common pitfalls and embracing best practices, companies can ensure that their leadership transitions are smooth, strategic, and successful. Let’s continue to engage in meaningful conversations about succession planning, learn from real-world experiences, and drive our organizations toward a brighter future.

ABOUT THE AUTHOR

 KEN SCHMITT

Ken Schmitt is an industry veteran with nearly three decades of expertise in executive recruiting and human capital management. His extensive background includes roles at a large regional agency, the globally renowned Heidrick & Struggles, and as the founder of TurningPoint Executive Search—a boutique firm known for its high-touch client partnerships. Ken and his team at TurningPoint specialize in placing top-tier leadership talent, crucial for succession planning, preparing for growth, and building scalable teams.