At the height of the COVID-19 pandemic, businesses were so busy putting out fires that their executive succession plans were set aside. Ongoing lockdowns kept most employees working from home, and disruptions to supply chains left many executives with difficult decisions, like replacing long-standing vendors with more dependable ones.
The COVID-19 pandemic and supply chain issues weren’t the only problems to navigate, though. Ongoing social unrest prompted many organizations to reconsider their approach to diversity and equity in the workplace, concerns about the Russia-Ukraine War escalated, and a shaky economy saw business expenses skyrocket due to ongoing inflation.
As a result of these issues, many companies chose to hold onto their current CEOs for dear life, scared to make any significant shifts that could impact organizational direction. While we may not be entirely out of the woods yet, one sign of clearing skies is an increase in CEO turnover.
According to an analysis by the Conference Board, CEO turnover dipped to just 9.6% in 2021, a decrease of two percentage points from 2020. The reason was likely organizations’ desire to hold onto CEOs while they navigated uncertain and serious issues unseen since World War II.
Letting go of a CEO during times of unrest is a little like relieving a captain in the middle of a battle with a warring ship. The captain knows their crew. They’ve had time to assess the enemy’s weaknesses, and they have a plan for achieving their objectives. Bringing on a new captain means a complete revamp of their battle strategy.
However, in 2022, things seemed a little cheerier. As a result, CEO turnover increased significantly — by as much as 30% in the first few quarters of 2022 alone. Harvard Business Review predicted CEO turnover to align with 2019, during which 11.6% of CEOs turned over the reins to new leadership.
The trend for CEO turnover will continue in 2023. During the first few months of the year, CEO retirements were up nearly 7% from 2022.
Like other workers, CEOs weren’t immune to the burnout and stress brought on by the pandemic and subsequent major events. They may have been even more susceptible to the impact.
That is because CEOs are tasked with managing every aspect of their organization’s business operational response. Failure would likely mean being the source of finger-pointing and blame. As a result, the only thing to do was push forward.
Most CEOs throughout the tumultuous years of 2020 and 2021 didn’t have the luxury of self-care and time off for rejuvenation. They needed to respond immediately and with precision. Mistakes could cost them customers and lead to other problems, like losing key employees or even failing to sustain business operations.
Now that things are picking up, CEOs have seized the opportunity to pass the baton to a successor. After all, they’ve led their teams through the worst; it’s time for someone else to step in.
Even if boards don’t believe their CEO will step down soon, it’s wise to start succession plans early. A succession plan ensures you have someone to immediately assume the executive role when your CEO decides to leave. You won’t need to search for the right person; you’ll already have them available.
It can take boards months or even years to find the right person for the CEO role, particularly in large organizations or those that operate in complex environments. The trick is to start early so the current CEO has time to introduce their intended predecessor to the company’s challenges and intricacies.
A future CEO usually knows they’re being primed for an executive leadership role. They’ll typically hold a place of importance in the organization, such as the COO or CFO positions. In some cases, they’re vice presidents or senior directors.
The more time a current CEO has to manage the transition, the better. A longer transition time allows future executives to see the company at different points of the business cycle and witness the decisions made to support it.
Over time, the leaving CEO should grant their successor more ownership over business areas integral to the organization’s success. Doing so allows the incoming CEO to strengthen relationships among crucial team members and get more face time with staff.
If your CEO doesn’t plan on leaving for a while, take the time to choose a successor with an eye toward DE&I. While most organizations have integrated new DE&I initiatives in recent years, we haven’t seen the same trends extending to executive leadership. Establishing a new succession plan gives you time to source the best person for the job, regardless of their background.
Choosing a successor who doesn’t fit the background of a traditional CEO can give your organization an advantage over your competitors, potentially increasing profits and leading to a more innovative workforce. A company led by executives from diverse backgrounds may attract top-tier employees who want to work for forward-thinking organizations.
Of course, if the best person to lead your organization fits the traditional executive mold, there’s no reason to bypass them in the name of diversity. Instead, find other ways to incorporate diversity into your different leadership roles.
As the pandemic wanes and companies recover from the catastrophic events of 2020 and 2021, CEOs who put their retirement plans on hold to help their companies survive will start to leave at increasing rates.
While the average age of current CEOs hovers around 58, some are in their 60s, 70s, and even 80s. This means that their time to retire will come soon.
Planning for CEO succession is critical for minimizing interruptions to business operations.
If you’re a CEO who intends to step down soon or a board member who wants to ensure a seamless transition to the next leader, it’s crucial to begin the process now. That way, you’ll have time to find a suitable candidate to lead the company.
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