As the current workforce is rapidly aging, companies have to rethink and reevaluate their succession strategies. The cost of a bad hire at any level of the company is an issue. A bad hire for a CEO or other leadership position can have a major detrimental impact on a company.
How COVID-19 has
changed succession strategies
- Only 7% of respondents said COVID-19 has not had any impact on their organization’s succession planning (I4CP, 2020)
- 70% reported that leadership development programs have been rescheduled or delayed (I4CP, 2020)
- 40% of talent reviews that are a part of the organization’s succession planning are now being conducted virtually, and 33% said that they have delayed or rescheduled such meetings (I4CP, 2020)
- 46% of board members reported not having an effective plan process for CEO succession (HBR, 2020)
- Industries which are most in need of planning a succession program are media, leisure products, and metals and mining (HBR, 2020)
Reasons for
failed succession
- On average, boards spend only two hours on CEO succession planning (Stanford, 2014)
- Only half of companies provide support or on-board training to newly appointed CEOs (Stanford, 2010)
- Over half of leaders (51%) have weak confidence in maintaining clear and consistent succession programs (Deloitte, 2014)
- The majority of firms have not asked potential internal candidates if offered a CEO position whether or not they would accept it (Stanford, 2010)
- 77% of CEOs did not participate in their company’s performance evaluation of the top executives (Stanford, 2014)
- Only 55% of directors claim to know the skills, capabilities, and shortcomings of their senior executives well (Stanford, 2014)
- 39% of respondents said they do not have any viable internal candidate for CEO (Stanford, 2010)
Succession planning has positive effects
- Almost all employers (94%) said that having a succession plan positively impacts their employees’ engagement levels (Talexes, 2017)
- More than half of employees claim they would be “significantly more engaged” at work if their company has a succession plan (Hireology, 2015)
- Over 90% of younger workers (aged 18-to-34) report that working at a company with a clear succession plan would improve their levels of engagement (Talexes, 2017)
- Companies in top-performing quartiles had planned successions 79% of the time, and also 79% hired for CEO positions internally (Strategy-business, 2015)
Succession Planning
Tools Vendors
High turnover rate
- 75% of CEOs whose companies’ stock rose during their first year were still in the same job two years later; however, 83% of CEOs whose companies’ stock fell during their first year were not at the same position (HBR, 2007)
- CEO turnover in the world’s 2,500 largest companies is at 17.5%, which means that every year corporations must appoint a new executive (Strategy & PwC, 2018)
- The rate of forced turnovers is at 20% (Strategy & PwC, 2018)
- Annual turnover among senior managers rises dramatically when a new CEO is appointed, especially if it is an outside hire (HBR, 2016)
Succession strategies
- 86% of leaders believe succession planning is an “urgent” and “important” priority, yet only 13% believe they do it well (Deloitte, 2014)
- 69% of respondents say that a CEO successor should be “ready now” to take over, 54% said they are grooming an executive for the position (Stanford, 2014)
- 79% of employers surveyed note that they have succession plans in place for mid-level management positions (Talexes, 2017)
- 81% of employers reported using some form of software for their succession planning process (Hireology, 2015)
- Only half of companies (50%) have written down the skills required for the next CEO (Stanford, 2010)
Cost of a bad Company Leadership hire
- 40% of new CEOs fail to meet performance expectations in the first 18 months (HBR, 2016)
- Large companies that underwent forced succession would have generated $112 billion more in market value had they planned the succession better (Strategy-business, 2015)
- Companies that have to fire their CEO lose an average of $1.4 billion in shareholder value, compared with companies with a succession plan (Strategy-business, 2015)
- Companies in the lowest performance quartile have poor succession practices, and force out CEOs twice as much as companies in higher quartiles (Strategy-business, 2015)
- Second-generation leaders of family-owned businesses have a 60% failure rate, and the succession from second-to-third generation has a 90% failure rate (EDSI Solutions, 2020
Different software and services can help companies with their succession planning needs. Companies can see the top Succession Planning Solutions on the Shortlister platform.
