Companies that do not plan their CEO successions face greater chances for forced CEO turnovers, which translates into $1.8 billion in lost shareholder value, according to Strategy&.
Recent media headlines are shining a spotlight on what seems to be a growing trend over the past few months—that of top leaders suddenly departing their companies. In some cases, we’ve seen a graceful stepping down; in others, sparks have flown between the board of directors and the CEO. Whether the stated reasoning was declining profits, inability to innovate, lack of product strategy or poorly focused investments, each case has a lesson to teach fellow CEOs and company boards about working together, managing expectations and planning succession.
Family businesses face unique challenges when transitioning from one generation to the next. The struggle to protect family and business interests requires a thoughtful strategy, and succession is even more difficult if there is no clear candidate to lead the business.
As the saying goes, “the best laid plans of mice and men often go awry.” In the case of succession, an unexpected CEO vacancy can throw even a healthy organization into disarray.
People set strategy. Directors and executives who know where the company should be going will be best equipped to get it there.
The first month of the new year saw the highest turnover among chief executive officers since the previous January as 113 CEOs left their posts during the month. The January total is up 9.7 percent over December when 103 CEOs departures were announced, according to the latest report on CEO turnover released from global outplacement firm Challenger, Gray & Christmas.
Appointment of an “interim” CEO usually means an organization’s succession program has failed. In a joint RHR International/Chief Executive magazine study of 236 corporate directors, 95 percent of respondents acknowledged that CEO succession is critical. Yet, more than half (53 percent) rated themselves as “ineffective” in executing their responsibilities in the process. Forty percent of the directors surveyed claimed that they are not prepared for an emergency succession.
A decade ago, the average tenure of a Fortune 500 CEO was 9.5 years. Today? 3.5 years. Looking at recent stumbles at Best Buy, Yahoo, HP and elsewhere a pattern of sorts emerges that may be instructive for leaders looking to beat the odds.
Although CEO succession planning is an integral part to any business plan, companies often fail to plan for it in a real and meaningful way. Doesn’t it seem counterintuitive to focus on leaving a company when you are busy enough with current management challenges? Failing to plan for the future can have negative effects on company reputation, employee morale, momentum and even stock price. Do you have a plan in place?
Recent surveys indicate many companies still don’t have a succession plan in place