How should a CEO plan their own succession?

That’s normal. It’s also fixable, and most of the fixing sits with you.

What is CEO succession planning?

CEO succession planning is the work of making sure someone credible can lead the company after you, whether you leave on your own timetable or suddenly. It covers who could follow you, how they’re being prepared, what the board thinks the next CEO needs, and how ready you are to go.

The formal decision belongs to the board. But the plan only works if the CEO does the everyday part: handing over real decisions, putting candidates in front of the board and being honest about timing. A board can choose a successor. It can’t grow one.

It helps to think of it as two plans, not one. The emergency plan answers “who runs things tomorrow if I can’t?” The long-term plan answers “who should run things in three to five years, and what will they need to have done by then?” Many companies have a version of the first and almost nothing of the second.

When should a CEO start succession planning?

Earlier than feels necessary, ideally in your first year in the role. An internal successor needs years of experience at your level, and that experience only exists if you start handing it over long before you plan to leave.

The trouble with starting late is arithmetic. If your strongest internal candidate has never run a P&L, never presented to investors and never made an unpopular call, two years is tight. Twelve months is a coin toss. The board will reasonably start looking outside, and your internal people will notice.

There’s also a quieter reason to start early. Succession talk is easier when nobody is leaving. In year one it’s good governance. In year eight it sounds like an announcement, and everyone in the room starts reading the subtext.

Why do so many companies have no successor ready?

Mostly because boards and CEOs give it very little time. Research led by Stanford’s David Larcker found that boards spend about two hours a year on CEO succession, and that many companies couldn’t name a successor if they needed one.

The 2010 survey by Stanford and Heidrick & Struggles asked more than 140 CEOs and directors, mostly at North American public companies, about their plans. The figures are now dated and come from larger listed firms, so treat them as a picture of a pattern rather than a measure of your company. But the pattern is worth knowing:

• 69% thought a successor needed to be “ready now”, but only 54% were grooming an executive for the role.
• 39% said they had “zero” viable internal candidates.
• On average, boards spent only 2 hours a year on CEO succession planning.
• Only half had a written document setting out the skills the next CEO would need.
• 65% hadn’t asked internal candidates whether they actually wanted the job.

Larcker’s diagnosis was that the lapse stems “primarily from a lack of focus”. His co-author Stephen Miles, of Heidrick & Struggles, was blunter about the gap between wanting a ready successor and actually grooming one, calling it “a total disconnect”.

That last point is the one for you. The board may own the plan, but you own the grooming. If nobody in your team is ready, the most likely reason is that the work which would make them ready is still on your desk.

What does a good CEO succession plan cover?

Four things: named successors, their development, the board’s view and your own readiness to let go. Most plans are strong on the first and thin on the rest, which is why a list of names so often fails when it’s needed.

Named successors. Two or three people who could credibly follow you within a few years, and one who could hold the role for six months in an emergency. Names you have actually thought about, not the most senior people by default. And people you’ve asked: the Stanford finding that most companies never check whether candidates want the job is an easy one to fix.

Their development. For each name, the two or three experiences they’re missing and a dated plan to give them. Running a business unit end to end. Leading a hard negotiation. Standing in front of the board without you in the room. Making a call you would have made differently and living with it. If you lead managers further down, the same logic applies one level below; our post on how to build bench strength in your team covers that in detail.

The board’s view. A shared, written picture of what the next CEO needs to be able to do. Not a list of your strengths. The company in five years may need a different leader from the one it needed when you arrived, and the plan should say so. The board should also know the candidates as people, not as names on a slide.

Your readiness to let go. Whether you have thought honestly about when you’ll go, what you’ll do next and whether you’re genuinely willing to hand over the parts of the job you enjoy. This is the part most plans leave out, and it’s often the one that decides how the hand-over goes.

What does this look like in a real company?

Here’s a hypothetical example. A CEO has led a mid-sized services business for six years. She expects to step back in about four. When the chair asks about succession, she names her chief operating officer.

Then she works through the four parts properly.

• Named successors. The COO is the only name. When she thinks harder, the head of the largest division is a credible second, and the CFO could hold the role in an emergency. She has never asked any of them whether they want it.
• Development. The COO runs operations superbly but has never owned revenue, never dealt with investors and never presented to the board alone. The division head has owned revenue for years but has never run anything outside his own unit. Neither has made a big call she disagreed with.
• The board’s view. The board has met the COO a handful of times, always with the CEO presenting. There’s no written view of what the next CEO needs. When she drafts one, it’s clear the company’s next phase leans on growth through partnerships, which is the division head’s strength, not the COO’s.
• Her readiness. She still chairs every investor meeting, still signs off every pricing decision and still leads the annual strategy offsite herself. She has no plan for what comes after. If she’s honest, she likes all of it.

Her moves are specific. The COO takes on a revenue target for one region next year. The division head leads a cross-company project with operations and finance. Both present to the board, alone, twice a year. She asks each of them, privately, whether the top job is something they want. She drafts the “what the next CEO needs” document and takes it to the chair as a starting point, not a decision. And she hands one investor relationship to the CFO, which is the first real thing she has given up.

None of this names a successor. It turns a single name and a hope into a plan with dates on it.

How do you bring the board into succession planning?

Early, often and before you have an announcement to make. Talk to your chair about succession as a standing topic, share your honest view of the candidates and your own timing, and give directors regular time with the people who might follow you.

Research by Rebecca Slan Jerusalim and Navio Kwok of Russell Reynolds Associates, based on extended interviews with 30 departing CEOs, found that 83% of successions were initiated by the CEO. Yet boards were often caught out. The authors note that even when the relationship was strong, “boards were still surprised at the decision.” They also report that when CEOs said they wanted to step down, half of the boards were unreceptive, from the CEOs’ point of view.

The fix they describe is a close CEO-board relationship “where open candid dialogue is welcomed.” In practice that means a few habits:

• Put succession on the agenda twice a year, not only when someone asks. A short private session with the chair is enough to start.
• Say your timing out loud, even if it’s a range. “Somewhere between three and five years” gives the board something to plan around.
• Let directors see candidates without you. A candidate who has only ever been seen beside you is hard for anyone to judge.
• Agree the emergency plan separately. Who would step in tomorrow, and for how long, is a different conversation and should be settled first.

The same research found that outgoing CEOs’ involvement mattered. When CEOs were heavily involved, the authors write, “they were more confident in their successor’s ability to lead the organization.” The board should own the decision. It shouldn’t make it without you.

Why is letting go the hardest part?

Because for many CEOs the role has become part of who they are, and planning your own exit means planning to lose it. That makes it easy to keep succession abstract, a board topic for later, rather than something you do this quarter.

The Russell Reynolds interviews found a near even split: 43% of the CEOs saw the role as their job, and 47% saw it as their identity, with the rest feeling it was both. Those who saw it as their identity tended to have stronger board relationships, but felt more negative emotions in the transition. The study also found that 53% of CEOs didn’t plan ahead for what they would do next, and those who didn’t had a harder time.

You don’t need a retirement plan to start succession planning. But you do need to notice where your own reluctance is shaping the plan. The usual signs are small: you keep the meetings you enjoy, you redo work before it reaches the board, you describe your candidates as “nearly there” for years. If you want a practical test of how much of the company runs through you, our post on how to make your business run without you is a good place to start, and Two Weeks Away shows what would stall if you were gone for a fortnight.

How ready is your succession today?

Usually less ready than you’d say at dinner. The quickest way to find out is to score the four parts separately, because a strong list of names can hide a weak development plan or a board that has never heard your timing.

Succession Ready is a free self-test for CEOs and senior executives. It takes about 5 minutes, needs no sign-up, and your answers stay in your browser. You answer 14 questions and get a succession readiness score out of 100, split across the four areas in this post: named successors, their development, the board’s view and your own readiness to let go. It picks out your two weakest areas and gives you one move for each.

The score is your own view of your plan, not a verdict on you or on anyone you might name. It’s only as useful as the honesty you bring, and it should move as soon as you start making changes.

If the gaps are further down the organisation, Bench Strength maps who could step into your role, person by person, with one move for each. For the wider set of tests and posts for people at the top, see the CXOs hub. And for a broader read on your habits, including whether you tend to stretch people or shield them, try The 42 Test.

A succession plan isn’t really about the day you leave. It’s about what you hand over in the years before it, and whether the person who follows you has already done the job, in pieces, by the time it’s theirs.