Turnover among the nation’s chief executive officers is becoming commonplace in business these days. In January CEO departures surged to a 24-month high of 131 departures, according to Challenger, Gray & Christmas, Inc.
Some companies do require a change of leadership and others may be pulling the trigger too quickly, but no matter the reason, every company needs to have a CEO succession plan in place.
You may be asking yourself “why” right now. Why do we need to have a plan? Let me give you a few reasons as to why having a strategic CEO succession plan in place can be vital to the financial and long term success of your company.
Reason #1: Shareholder value. Large companies who fail to have a plan in place lose, on average, $1.8 billion in shareholder value. Yes, that’s billion with a ‘b’.
Reason #2: Companies that do have a succession plan in place, on average, generate $112 billion in additional market value during the transition.
Basically, money and revenue is the reason why your company should spend more time developing a plan if you do eventually have to replace your CEO, which inevitably occurs for most companies.
Despite the financial impact of replacing a CEO, more than half of companies today cannot immediately name a successor to their CEO should the incumbent suddenly depart.
Now this “plan” isn’t something you can just simply spend a couple of hours thinking about and assume you’re prepared. It requires time and strategic planning, but with the financial statistics provided for you, doesn’t it seem worth it? If you’re feel a bit nervous since your company doesn’t have a plan in place, don’t worry, most companies don’t. Now may be the time to start thinking about getting one.
DHR International created this infographic to further elaborate on why it pays to have a CEO succession plan in place. The graphic’s goal is to demonstrate the value a succession plan will provide your company.