One thing we know with certainty—every company someday will need a new CEO. Unless a CEO's mandated retirement date is approaching, a board seldom knows when that day will arrive, though for many companies it's sooner than expected. Whether performance doesn't meet expectations, a major crisis requires change at the top, or a chief executive suffers a debilitating health issue or departs voluntarily—seeking greener pastures, pursuing personal interests, or simply retiring—a board may find itself having to identify a new leader for the organization. If fortunate, a board will have the benefit of sufficient time to go through a comprehensive selection process. But it's not uncommon for a CEO's departure to come with stunning suddenness, requiring quick and decisive action.
Despite common knowledge of what's happened at other companies, too many boards simply are not prepared to deal with departure of the company's CEO, especially if it is unexpected. A recent survey shows that while 69 percent of respondents say a CEO successor needs to be ready now, only 54 percent are grooming an executive to take on the role, and 39 percent say they have zero viable internal candidates. Interestingly, the study shows boards spend an average of only two hours a year on CEO succession planning.2
Where does one begin? Certainly a board will want to consider who should jump into the chief executive's seat should a sudden change be needed, as well as defining a selection process ...