The High Cost of Poor Succession Planning

Many large companies fail to pay adequate attention to their top- level leadership pipelines and succession processes, which results in excessive turnover and significant value destruction for companies and investment portfolios.

Analysis suggests that the market value wiped out by badly managed CEO and C-suite transitions in the S&P 1500 alone is close to $1 trillion a year. Better succession planning could, by contrast, help the large-cap U.S. equity market add a full point to the 4% to 5% annual gains Wall Street projects for it.

Companies—and especially, their directors—must plan leadership changes before they’re needed, identify and develop rising stars, give them access to the board, look at both internal and external candidates, and partner cautiously with executive search firms.

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