Why Your CEO's Head Is the Riskiest Place for Your Succession Plan

The Current State of Succession Planning

The data paints a concerning picture. According to Heidrick & Struggles’ Route to the Top 2025 research, only 26% of CEOs and board members report that CEO succession is among their top priorities and treated as such. Meanwhile, the same research reveals that 57% of CEOs and board members have relatively little confidence that their CEO succession planning process is positioning their organization well for the future.

The leadership churn is accelerating. The Conference Board reports that succession rates for CEOs aged 64 and older dropped by 8% in 2024, pointing to what experts call a “retirement cliff” on the horizon. At the same time, 64% of C-suite leaders say they are likely to make a move beyond their current employer—a 14-percentage point increase that underscores the volatility in today’s leadership landscape.

The financial implications are equally striking. Research from SIGMA Assessment Systems demonstrates that a succession plan can deliver a 510% return on investment (ROI) vs. filling a key role via an executive search firm, and up to 660% vs. filling a vacancy through a traditional hiring process, resulting in savings between $40,000 to $70,000 to fill an average leadership vacancy. Organizations that invest in their people see the returns: almost all employers (94%) said that having a succession plan positively impacts their employees’ engagement levels.

Step 1: Identify Critical Positions

As your first action item, identify which positions are the most critical to the success of your organization. Current trends from The Conference Board show that 77% of new CEOs in the S&P 500 in 2024 were internal hires, with the share of incoming “insider” CEOs with 20+ years of tenure-in-company at 27%, up from 18% in 2022. This data emphasizes the importance of developing internal talent. The average tenure of incoming internal CEOs is 17 years in the S&P 500, highlighting the long-term investment required in leadership development. 

 If necessary, take time to talk one-on-one with your leadership-level employees about their positions, e.g. job duties, skills and responsibilities. Position criticality is rated on a scale of 1-5 and includes factors such as degree of decision making authority and management of other critical positions. This assessment helps you understand where your organization is most vulnerable and where succession planning efforts will have the greatest impact. 

Step 3: Develop Success Profiles

Developing success profiles is another vital step in the process. Success profiles are position-specific and involve four main elements that foster success on the job, including: behaviors, knowledge, experience and skills. First, identify the success factors necessary for each critical position, then analyze which factors each potential successor has, and the ones they need to further develop. This information will help you determine whether or not each potential successor has the knowledge, experience, personal attributes and competencies required of a particular position. As The Conference Board research reveals, institutional knowledge is critical—the average tenure of incoming internal CEOs is 17 years, demonstrating the value of long-term organizational experience.

Step 5: Conduct Knowledge Loss Risk Interviews

This would also be the perfect time to complete a knowledge loss risk interview with employees in critical positions who are at risk or leaving your organization. This interview helps to identify which broad areas of knowledge an employee possesses, some of which become the topic of subsequent interviews to gather more detailed information.

Modern approaches to knowledge transfer recommend using mentorship programs, shadowing, and team-building activities to facilitate cultural integration alongside formal documentation. Organizations should also schedule regular check-ins between outgoing and incoming leaders to ensure the knowledge transfer process stays on track.

Effective Knowledge Transfer Methods

According to recent research, organizations should employ multiple knowledge transfer strategies:

• Digital Documentation: Create comprehensive manuals, video tutorials, and searchable knowledge bases using modern collaboration platforms like Microsoft Teams or Slack

• Mentorship Programs: Pair potential successors with current role holders for hands-on learning and relationship building

• Job Shadowing: Allow successors to observe and participate in daily operations before formal transition

• Regular Feedback Sessions: Establish structured check-ins to address knowledge gaps and ensure understanding

• Communities of Practice: Create cross-functional groups where expertise can be shared across departments

Research shows that inadequate documentation is a primary barrier to knowledge transfer, and poor documentation can result in project bottlenecks, inefficiencies, and slower onboarding processes for new employees. Don’t let your organization fall into this trap. 

Your Action Plan

Now, armed with this information on succession planning, you’re ready to take the first steps toward building a more solid and secure workforce and positioning your company for ultimate success. Remember:

1. Start Now: Don’t wait for a crisis. Begin identifying critical positions and potential successors today

2. Document Everything: Create comprehensive knowledge transfer processes that capture both explicit and tacit knowledge

3. Develop Consistently: Invest in ongoing leadership development programs for high-potential employees

4. Communicate Openly: Share succession plans appropriately with stakeholders to build confidence and engagement

5. Review Regularly: Update your succession plan at least annually or whenever significant organizational changes occur

6. Measure Success: Track key metrics like internal promotion rates, time-to-fill positions, and employee engagement scores