Harvard Discusses the Importance of Succession Planning

Posted on June 7, 2008
Filed Under Succession Planning |

This is a great article on the Harvard Business Publishing site discussing the importance of business continuity and succession planning in high profile companies. The article entitled “Why Aren’t Poor Performing CEOs Fired Sooner?” cites:

“The latest installment of Booz & Company’s annual study of CEO succession finds that chief executives generally have six years to design and implement their strategies — shattering the popular assumption that CEOs have just two years to get things right or get out.

But there’s a downside to that discovery: over the 10 years of our data on CEO turnover (1998 through 2007), on average only 2.1% of chief executives were dismissed for poor performance. Given that over this same period the average rate of turnover (which includes retirement, multiple types of dismissals, and M&A-related turnover) was 12%, a 2.1% rate of dismissals due to poor performance is quite low.

Is short-termism dead? We think not. Stakeholders still place tremendous pressure on the top team to perform. However, even in the face of very poor performance for two years in a row, boards are slow to react, in part, we believe, because they have a dearth of in-house candidates ready to take the reins.”

Click here for practical steps each business should take in establishing their succession planning strategy.

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