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Harvard Business Review
2 days ago
- Business
- Harvard Business Review
Where Traditional Succession Planning Falls Short
A senior finance executive from a large public company decides to leave on relatively short notice to join another organization. Since this will cause significant disruption to the business, the CEO and remaining executive team quickly look to their leadership pipeline to see who's ready to step into the role. Although a list of successors had previously been created and discussed, no one feels confident that any of these leaders have what it takes to excel in the position. The CEO decides to do an external executive search, for months leaving the role to an interim leader who is doing two jobs at once. Results suffer, the team stagnates, and momentum is lost. A rare occurrence? Hardly. It happens every day. As one board member at a Fortune 10 company told us, 'In my 10 years on the board, the only time we ever talked about CEO succession was when there was an actual CEO transition happening right then. Sure, it's an SEC regulation for public company boards to actively discuss CEO succession, but there are lots of SEC regulations…' Most current succession planning is ineffective, and the business world is fed up with putting substantial effort into a process that has shown such little innovation and ROI. By making just a few key changes to how succession is done, however, organizations can build a leadership pipeline ready to tackle tomorrow's challenges, ensuring business continuity and driving sustained growth in an uncertain world. Where Traditional Succession Planning Falls Short Executive succession planning has been an integral part of talent processes for decades, considered a critical lever for organizational growth and risk mitigation. And yet, what was often considered a complicated and time-consuming process has become downright ineffective in today's environment of unprecedented change and leadership turnover. In 2024, U.S. companies experienced record-breaking executive transitions, particularly at the CEO level. According to Challenger, Gray & Christmas, 2,221 CEOs departed their roles in 2024 —a 16% year-over-year increase and the highest total since tracking began in 2002. In the S&P 500, 44% of new CEOs were external hires, the highest proportion since 2000. Early trends from 2025 suggest this volatility is persisting, with turnover in critical executive roles continuing to rise. This leadership exodus has the potential to leave organizations dangerously exposed and unprepared for the future. We recently completed an internal study at our global consultancy, ProjectNext Leadership, that makes it clear that the corporate sector has raised the white flag on traditional leadership succession planning. Our research was two pronged. First we conducted a comprehensive literature review, analyzing articles and research from top publications and consulting firms over the past decade to take inventory of existing thought leadership on succession planning. Then we interviewed senior leaders at over 35 top companies to get a collective view of how succession planning is and isn't working. These leaders rated the overall effectiveness of their own succession planning process an average of 5.5 out of 10—a failing grade on most scales. When we asked leaders to rate the overall state of corporate succession planning, the process fared even worse, scoring a 4.8 out of 10. Our research echoes other findings that show current succession planning just isn't working. According to DDI's 2025 HR Insights report, based on a survey of 2,185 HR professionals and over 10,000 leaders, 75% of companies prioritize promoting employees to leadership roles from within. However, less than 20% of chief human resource officers say they actually have employees who are ready to fill critical leadership roles. On average, there are only enough internal candidates to fill less than half (49%) of open leadership positions. What's the impact? A team of researchers showed in their 2021 HBR article that the amount of market value wiped out by badly managed CEO and C-suite transitions in the S&P 1500 is close to $1 trillion a year. They estimated that better succession planning could result in 20% to 25% higher company valuations and investor returns. Why do current succession planning processes cause such frustration? Through our interviews, we discovered some 'uncomfortable truths' that highlight the challenges that need to be resolved: All talk, no action. Leaders reported spending extensive time conducting talent reviews and discussing readiness for future roles, but little time on actually developing, preparing, and grooming people for those roles. Many leaders we spoke with complained that year after year, people are perceived as no closer to being ready to advance. Why? Because so little is being done to intentionally and actively grow their capabilities. Seventy-six percent of the leaders we interviewed believe their organizations need to be more intentional around development of successors. As one leader emphatically said, 'It doesn't mean jack s**t if I have a grid full of leaders who are rated. What are we doing about it?' Another explained, 'We did a fancy assessment and then did nothing with it.' Why not? Most leaders we interviewed pointed to a lack of true organizational commitment to succession planning and the resources necessary to enable traction. It's more about politics than potential. We found that self-interest often gets in the way of identifying and preparing the best future leaders possible. Hoarding talent, feeling threatened by potential successors, or seeking a 'mini me' are all frequent traps leaders fall into. As one leader told us, 'I'll be comfortable talking about successors for my role on the day I decide that it's time for me to move on.' Effective succession planning shouldn't be reliant on how comfortable leaders are with talking about it; preparing for future leadership is just too important to suffer at the hands of individual egos. Doing a lot poorly versus doing a little well. Many companies try to create succession plans for hundreds, sometimes even thousands of roles. Because so much work goes into creating a robust succession plan, the companies most effective at creating a supply of future leaders realize that they need to focus their efforts on just the few roles that make the biggest difference. One participant told us: 'We've narrowed down our focus to a small number of critical roles that heavily impact the future of our business. We need to get that right first.' We also found that the technology tools needed to effectively support succession efforts are woefully lacking. In fact, almost every leader we spoke with said they're using archaic tools such as spreadsheets to track progress—and the use of AI-driven solutions is all but nonexistent. It's a process, not a strategy. Our interviews found that there is rarely a clear 'why' for succession planning—i.e., what purpose does it serve for our company, and how does it help us grow? Without articulating which specific business outcomes it's driving and without clear accountability to drive execution, succession planning shows up as a toothless 'check the box' exercise that's more nuisance than lever for growth. As one leader we interviewed said, 'How do we move the succession planning experience beyond a dog and pony show? Sometimes it feels like we're having the same conversation over and over again. We're not clear enough on why we do it, and as a result we lose momentum.' It hasn't kept up with the times. The business world today is fast and ever-changing. Traditional succession planning processes were built for a far more static and steady time. It's typical for leaders to be reviewed just once a year, but nowadays too much change occurs in 12 months to rely on the results of an annual process. As one leader put it, 'If succession plans are not being kept current, there is no point in doing them. Annually doesn't work—things change too fast.' How to Upgrade Your Company's Succession Planning Process Given the bleak picture leading companies paint of today's succession planning programs, it's clear that fresh approaches are needed. The good news? While few companies are getting the value they need from succession planning, there are some shining examples of those doing it well. And with a few key changes, many more companies can leverage this process for growth. We see four pivots as key to an upgrade: 1. From replacement planning to future proofing. Rather than focusing just on which candidates could step into existing roles, the real opportunity for strategic succession planning is to identify the leaders who can take your company into the future. One way leading companies are starting to do this is through 'scenario-driven' succession. One global apparel company used this method for its most recent CEO selection. By considering the most likely strategic scenarios of where the company would place 'big bets' in the next three to five years, the board evaluated which leader would most effectively succeed in each scenario, then made their selection based on their predicted direction. In this way, succession planning can answer the question, 'Who should lead if we take this path?' Scenario-based succession planning can also be used to forecast leadership demand, helping to sharpen predicted workforce needs based on likely futures and driving targeted successor development. 2. From calibration to preparation. For years, many companies have used talent reviews as the primary activity in succession planning. A set of leaders will discuss potential successors for a role, rate them against a nine-box model or something similar, and then call it done. The nature of this approach does nothing to prepare leaders for bigger roles. In our interviews, we found that companies spend the vast majority of their time on 'calibration'—passively taking inventory of where leaders are now—and minimal time on actively preparing them for future roles. By more aggressively developing key leaders with an explicit succession lens, companies can take a big step in strengthening their leadership pipelines. How is this done? One example is a large consumer goods company going through a major transformation effort. They identified a significant capability gap between the company officers and the next level below. After articulating the skills, knowledge, and relationships that future company officers will need to drive growth, they selected potential successors for an intensive development experience, which included assessments to identify individual learning needs and a nine-month cohort experience specifically designed to prepare them for larger roles. Important components included active involvement from their top executives, stretch assignments, and targeted executive coaching for key transitions when promotions occurred. 3. From exercise to execution. Traditional succession planning involves a number of time-consuming activities, including holding talent review meetings, creating talent profiles, and tracking leader information. And yet most company leaders we spoke to couldn't tell us who is accountable for succession planning results. A leader at one company we interviewed who rated their succession practices as highly effective said, 'It's all about execution. Like anything else in business, you need clear accountability, well-defined roles, and succession objectives that everyone knows are the target.' While HR can often play a key role in facilitating the process of succession planning, we found that companies that are successfully growing their leadership bench have executive leadership heavily involved in—and often driving—execution. As another leader told us, 'As soon as you give your HR function sole accountability for succession planning, it's dead in the water.' 4. From leaders as talent assemblers to leadership producers. We already know that the best leaders build teams by recruiting, developing, and retaining strong individuals who collaborate. But in a truly succession-strong organization, leaders are held accountable for developing the next generation of leaders—beyond just their own teams. The most effective organizations ask leaders to take a broad organizational view, recruiting and growing people not only for their own business, but for the long-term leadership pipeline of the whole enterprise. This also requires incentives and expectations to be aligned—leaders who hoard talent shouldn't be considered successful, even if their business unit does well on its own. To be a succession-oriented enterprise leader, one needs to adopt the mindset of an executive recruiter: always thinking about sourcing candidates for both present and future roles for the company as a whole. . . . The potential upsides of effective succession planning are huge, and yet most companies are not realizing these benefits, even though many are spending countless hours on the effort. Although most succession planning processes no longer work for today's business realities, companies can make a few key adjustments to derive far more value from this work. Those leaders who want to set their organizations up to thrive in an increasingly volatile world can't afford not to update outdated succession practices—and they'll reap big benefits by doing so.
Geek Wire
2 days ago
- Business
- Geek Wire
Avalara files for IPO as tax software giant aims to go public again
(GeekWire File Photo) Avalara is going public — again. The tax software giant confidentially filed for an IPO on Monday, signaling plans to become public company. It's part of a small-but-growing wave of companies starting to hit the public market as the IPO window reopens. Avalara, which helps online retailers and others adhere to complex tax regulations, previously went public in 2018 and was acquired in a $8.4 billion deal with Vista Equity Partners in 2022. The company's market capitalization was above $16 billion during the pandemic and its quarterly revenue topped $200 million before the Vista deal. Avalara CEO Scott McFarlane co-founded Avalara 14 years ago with Rory Rawlings and Jared Vogt on Bainbridge Island, Wash. Rawlings left in 2015 and Vogt left in 2012. Avalara relocated its headquarters to North Carolina after the Vista acquisition and downsized its Seattle office. The company still maintains a 'significant presence' in the Seattle region, according to a spokesperson. The company has 5,300 employees worldwide. It recently hired Seattle-based marketing vet Adrianna Burrows as executive vice president and chief marketing officer.
Bloomberg
7 days ago
- Business
- Bloomberg
Everyone Wants a Bitcoin Treasury
The basic idea is that the US stock market will pay $2 for $1 worth of crypto. If you have a pot of crypto, you should merge it with a small US public company, because then your pot of crypto will be worth twice as much. This creates weird dynamics. I mean, it is a weird dynamic, but it creates further weird dynamics. Two are: On the first point, we talk a lot around here about small public companies that get gobbled up by crypto entrepreneurs so they can pivot to being crypto treasury companies. But this is inefficient and haphazard: If you want to take a pot of crypto public on the stock exchange, why should you have to find some defunct public biotech company, negotiate with its executives, strike a deal, lay off the biotech researchers, etc.? Why shouldn't an investment bank just be in the business of supplying pristine public listings, so instead of pivoting some biotech/toy/liquor/whatever company to crypto, you can just start with a blank slate?
Bloomberg
16-07-2025
- Business
- Bloomberg
Zeno's Takeover
The naive way to buy a public company is: You log into your Robinhood account, you type in the company's ticker, and you click 'buy' repeatedly until you own 51% of the company's stock. Then you call up the company's board of directors and say 'hi, I am the new owner, I have a new business plan that I think you'll really like, let me tell you about it.' The board looks at the stock registry and says 'hmm, checks out, okay, tell us what you'd like us to do.' This is not the normal way to buy companies. It comes up from time to time. It's how Warren Buffett came to run Berkshire Hathaway Inc., for instance. And we talked last year about a Saudi Arabian family office that managed to buy The Children's Place this way, in the open market. I found it weird. It's not always easy to acquire a controlling stake in the open market, and you'll probably pay up for it, and don't you want to at least talk to the CEO first?
ABC News
09-07-2025
- Business
- ABC News
Markets live updates: Nvidia climbs past $US4 trillion and ASX to follow Wall Street higher
Wall Street has climbed and chipmaker Nvidia has hit a milestone as the first public company to reach a $US4 trillion (more than $6 trillion) valuation. The local share market is eyeing gains at the open, while the Australian dollar is buying about 65.3 US cents. Follow the day's financial news and insights from our specialist business reporters on our live blog. Disclaimer: this blog is not intended as investment advice.
