Stanford's David Larcker, Stephen Miles, and Brian Tayan have written a new article titled "Seven Myths of CEO Succession." They cite some rather startling statistics about succession.
Each year, approximately 10 to 15 percent of companies change CEOs either because of retirement, recruitment to another firm, resignation following poor performance, or for health-related issues. For this reason, shareholders expect that companies have a chosen successor identified at all times to immediately assume the CEO position should the need arise. Unfortunately, research data indicates that this is often not the case. According to a 2010 study by Heidrick & Struggles and the Rock Center for Corporate Governance at Stanford University, only 54 percent of companies state that they are grooming a specific successor to the CEO position, and 39 percent claim to have no viable internal candidates to permanently replace the CEO if required to do so immediately.
Wow... what an indictment of the leaders and the leadership development efforts at many companies! Nearly 4 of 10 firms report "no viable internal candidates." The data raise some troubling questions. Are these firms not investing in leadership development efforts? Or, are they spending unwisely in their efforts to groom future leaders? Perhaps most importantly, are many firms not holding their senior executives, including the CEO, accountable for developing talented people who can assume top positions in the future? CEOs and other top leaders should be held responsible for more than meeting financial and non-financial performance targets. They also need to be held accountable for talent development and succession. That part of their job helps to insure the long term viability and success of the institution.