It’s no secret that CEO turnover has increased greatly in recent years. Mainstream media outlets and research firms have reported that dozens of CEOs left their posts in 2023 and 2024.
Driving this concerning trend is the fact that the job can be quite stressful, especially given the increasing complexity of the business landscape.
Top executives must oversee and provide strategic direction for everything from digital transformations and geopolitical fractures to increasing regulations and stakeholder expectations around sustainability. All of this can easily become overwhelming to balance.
Why High Turnover Is a Problem & How to Develop a Solution
Unfortunately, high CEO turnover is a problem for organizations. It can disrupt strategic vision and direction, causing instability throughout the organization. It can also negatively impact investor confidence, which can lead to a loss of capital to grow the organization.
A robust framework for succession planning is key to maintaining continuity in uncertain times.
However, just 51% of board directors indicate that they have any type of succession plan in place for their CEO. The numbers are better for CFO positions, but around a quarter of corporations lack succession plans for that role as well.
Still, just having a succession plan isn’t enough. The plan has to be a good one. Succession planning committees must be able to identify leaders who can withstand adversity and stay committed to taking the company to the next level.
Clearly, this is a challenge for boards, but corporations can’t afford to lack solutions. One way to help them solve this problem is to ensure that only experienced leaders fill succession planning roles.
Another is to understand the importance of building experienced and capable leaders through a robust talent strategy. Learning how these two processes go hand in hand is the key to building leaders who can drive future growth and success.
The Importance of Having Experienced Leaders in Succession Planning Roles
Not all of the board’s succession planning process is about the “what.” While the steps you take to select a new leader matter, it’s also crucial to examine who is on the selection committee making decisions about the people who will lead the organization into the future.
First, having experienced leaders and consultants on the succession planning committee builds trust with all stakeholders. Having this trust is essential for getting buy-in for the decision and building support among internal staff and investors.
Also, experienced leaders have a deep understanding of the organization that allows them to pinpoint other leaders who will likely be successful in the role.
The board needs to ensure that only experienced leaders are part of the succession planning process, and that goes for both internal committee members and external consultants.
When it comes to external consultants, an experienced firm will get to know the organization and the core competencies needed.
It will also have a proven process for matching candidates’ skills, experience level, and personality to the role. It will collaborate with the internal team to ensure that the succession plan aligns with the company’s overall strategic vision.
Finally, having experienced leaders on the internal selection team can help ensure a smooth transition process once a candidate is selected. These leaders likely have developed deep knowledge about corporate success that can be transferred to the new leader. Experienced leaders can provide mentorship and coaching to ensure that the candidate selected to take on the role gets up and running and finds success quickly.
Experienced Leaders Must Be Developed Through Effective Talent Strategies
Board members need to know where to find candidates who are qualified to take the helm of the company or one of its major business functions. Your organization can either find these candidates externally or select from among your existing team.
However, you can’t just pluck any key leader from their role, place them in a critical role like CEO or CFO, and expect them to do well. That’s clearly a recipe for disaster. Instead, capable leaders must be built and developed.
This is much easier to accomplish when the board has already set the strategic direction for talent development within the organization. Board members must identify the key traits and experiences needed for crucial leadership roles. Once these traits have been identified, the board should assess the current talent pipeline with a keen eye toward two things.
First, the board should identify potential immediate successors who may be able to take top positions should a key executive step down in the near term.
These succession candidates will already possess a great deal of the experience and personal traits they’ll need for success in leadership. What they’ll need is high-level mentorship and a tailored professional development plan that will adequately prepare them to steer the business in the right direction.
The second thing the board should assess is whether the current talent pipeline development strategy is aligned with the company’s strategic vision for the future. Boards should know what skills will be most important in the future and ensure talent leaders are upskilling and reskilling the current workforce to that end.
Managers and leaders should also recognize employees who display exceptional leadership talent, offer development plans and opportunities, and ensure they are nurtured into the leaders the company will need tomorrow.
Talent Strategy Is a Foundational Part of Successful Succession Planning
As executive turnover continues to rise, succession planning has become a necessary discussion for corporate boards. It’s important that those involved in finding the right person for the role be experienced leaders who deeply understand the organization’s needs and can identify and mentor leaders who fit those criteria.
The board should examine the company’s talent pipeline, both to identify current leaders who may be ready to take on a next-level role and to ensure the management team is continually developing the leaders of the future.
With a strategic approach to talent development and the right people in place to steward the succession planning process, your organization will be better positioned for long-term success.
