Poor planning

More than half of companies today cannot immediately name a successor to their CEO should the need arise, according to new research conducted by Heidrick & Struggles and Stanford University’s Rock Center for Corporate Governance.

The survey of more than 140 CEOs and board directors of North American public and private companies reveals critical lapses in CEO succession planning.

“The lack of succession planning at some of the biggest public companies poses a serious threat to corporate health — especially as companies struggle toward a recovery," Stephen A. Miles, vice chairman at leadership advisory firm Heidrick & Struggles, said in a statement. "Not having a truly operational succession plan can have devastating consequences for companies — from tanking stock prices to serious regulatory and reputational impact."

The 2010 Survey on CEO Succession Planning surveyed CEOs and directors at large- and mid-cap public companies in the U.S. and Canada, with 10% of respondents also from large private firms.

SURVEY FINDINGS
• While 69 percent of respondents think that a CEO successor needs to be "ready now" to step into the shoes of the departing CEO, only 54% are grooming an executive for this position.

• A full 39% of respondents cited that they have "zero" viable internal candidates.

• On average, boards spend only 2 hours a year on CEO succession planning, and only 50% have a written document detailing the skills required for the next CEO.

• 71% of internal candidates know they are in the formal talent development pool, but there is regular communication (typically yearly or bi-yearly) for only 50% of these internal candidates.

• The majority of firms (65%) have not asked internal candidates whether they want the CEO job, or, if offered, whether they would accept.

• Once viable internal candidates for the CEO job are identified, 38% of firms think that the external search should continue at the same pace.

• While 48% of respondents think they have an extremely strong or very strong understanding of the capabilities of internal candidates, only 19% have extremely or very well established external benchmarks to measure their skills against.

• Only 50% of companies provide on-board or transition support for new CEOs.