Planning for the future leadership of a company is among a board’s most important tasks, and Spencer Stuart’s latest pulse survey of 625 directors on U.S. public and private company boards found a wide range of responses about how they are approaching CEO succession.
Boards are putting in the time
The majority of directors (65%) believe that their board spends the right amount of time and attention on CEO succession planning, though virtually all of the remainder (34%) think that their board does not. There’s also a sizable gap between public and private companies: 45% of private company directors think succession planning deserves more time on the agenda, compared to only 28% of public company directors.
Among the subset of respondents who say they do not give enough time and attention to succession planning, the most common reason (46%) is that other board matters are deemed higher priority. The second most common reason (26%) is that it is too far off to address now, followed by succession being a sensitive topic for the current CEO (22%).
What is your assessment of the amount of time and attention your board gives to CEO succession planning?
|
% Public Co. |
% Private Co. |
% Combined(Pub+Pvt) |
| We give an appropriate amount of time and attention to CEO succession planning |
72% |
53% |
65% |
| We do not give enough time and attention to CEO succession planning |
28% |
45% |
35% |
| We spend too much time and attention on CEO succession planning |
0% |
2% |
<1% |
Looking beyond the most-likely successors
When asked what steps they’ve taken in succession planning, most directors (65%) have discussed potential successors and their development plans, and just over half have discussed the profile and criteria for the next CEO. Boards should regularly revisit this exercise as the organization’s context and priorities evolve, even when a transition is far off. But only 33% of directors have discussed alternatives for accelerating the development of possible internal successors, and a mere 23% have reviewed information about possible external talent options. Taken together, these data points may indicate boards need to identify and develop more individuals as potential successors — this includes gaining visibility into high-potentials who could be stronger than the most-likely successors and regularly scanning external talent. Increasing optionality is the best way to be prepared for a range of future succession scenarios.
Needed: An emergency succession plan
Just 45% of all directors say that they have an emergency succession plan in place (58% of public companies and 25% of private). Given the “certain volatility” of the past few years, it’s fair to say that this number can and should be higher. Unlike a full CEO succession plan, emergency succession planning is relatively straightforward — a hypothetical conversation about worst-case scenarios and how key roles will be filled.
In the last 12 months, what has your board and/or the relevant board committee done to address CEO succession planning?*
|
% Public Co. |
% Private Co. |
% Combined(Pub+Pvt) |
| Discussed the development plans and potential of possible internal successors |
74% |
49% |
65% |
| Aligned on an emergency CEO succession plan |
58% |
25% |
45% |
| Discussed the profile and criteria for the next CEO |
53% |
51% |
52% |
| Discussed alternatives for accelerating the development of possible internal successors |
38% |
24% |
33% |
| Reviewed insights from formal analysis or assessments of possible internal successors |
33% |
20% |
28% |
| Established a formal succession plan with possible options across various timelines |
30% |
19% |
26% |
| Reviewed information about possible external talent options |
22% |
25% |
23% |
| Delayed or extended the timeline for a CEO transition due to a challenging business context |
13% |
25% |
18% |
* Respondents could select all that apply.
Allocating responsibility
38% of directors reported the full board was responsible for driving the succession planning process in the medium and long-term, followed closely by a board committee (25%), most commonly the nominating and governance committee. Designating succession planning to a committee that can handle the bulk of the work and report to the full board annually not only assigns clear responsibility for the process, it’s also a way for boards to ensure adequate time is spent on it without disrupting other board business.
For succession planning in the medium (1.5–3 years) and long-term (3+ years), who from your organization is driving the process?
|
% Public Co. |
% Private Co. |
% Combined(Pub+Pvt) |
| The full board |
38% |
39% |
38% |
| Board committee |
24% |
27% |
25% |
| A combination of stakeholders, e.g. board and CEO |
14% |
15% |
15% |
| The CEO |
7% |
14% |
9% |
| The CHRO |
2% |
5% |
3% |
| Other |
18% |
9% |
15% |
Directors are well-versed in succession
66% of respondents have been part of two or more succession processes. This level of experience can be both a benefit and a blind spot: Every succession has its own complexities, and experience with one (or a few) doesn’t always predict how the next one will unfold. The views of longer-tenured directors may also color development of the criteria and profile for the next CEO. As one director shared, when asked about their biggest concern related to succession planning, “We need to find the right CEO for the future of company — not the company as it exists today.”
How many CEO succession processes have you been part of during your career as a director?
|
% Public Co. |
% Private Co. |
% Combined(Pub+Pvt) |
| 0 |
11% |
13% |
12% |
| 1 |
18% |
22% |
20% |
| 2+ |
68% |
62% |
66% |
| Other |
2% |
3% |
3% |
Percentages may not total 100% due to rounding.