By Thomas Giella and Mary K. Totten
Succession planning is a high-stakes governance responsibility. The significant costs of protracted CEO searches and failed replacements are well-documented. Yet, data from the for-profit and nonprofit sectors continue to show that many boards aren’t focusing enough attention on succession planning or on getting it right.
A 2014 study of U.S. public and private companies conducted by the National Association of Corporate Directors found two-thirds of respondents had no formal CEO succession plan in place. Findings reported in February from a global study of succession management conducted by Korn Ferry showed that only one-third of those surveyed said they were satisfied with the results of their succession programs.
A report of the American College of Healthcare Executive’s 2014 Hospital CEO Survey on Succession Planning noted that 52 percent of respondents conducted CEO succession planning. While that percentage more than doubled over the past decade, results still indicate that almost half of hospitals don’t conduct succession planning in a time when industry transformation demands strong leaders specifically suited to an organization’s strategic vision and priorities.
A variety of reasons are likely at play for lack of solid board oversight for CEO succession planning. They include the perception that it is a delicate topic not easily broached with incumbents who may feel the board is really saying, “It’s time to move on.” Other reasons include the belief that board members lack the skill and experience to appropriately vet candidates (Harvard Business Review, May 15, 2015). Still others cite the overly full agendas facing many boards trying to guide their organizations through transformational change.