Succession Planning Statistics 2024 – Everything You Need to Know

• In fact, one research project investigating the legacies of wealthy families estimated that 60% of all business succession failures are the result of a lack of trust or communication, and 25% are the result of an ill. ^[1]
• In other words, 85% of all business succession failures are related to the inability to resolve family conflicts and train the next generation of leaders. ^[1]
• Put another way, this means that 85% of the common causes of succession failure are very much in. ^[1]

Succession Planning Latest Statistics

• CEOs can account for a 30% variance in their organization’s profitability, and research suggests that top management has an even greater impact on organizational performance than the CEO. ^[4]
• Only 54% percent of public companies are actively developing CEO successors. ^[4]
• 40% of companies report not having a single internal candidate to replace the CEO should he or she exit the position. ^[4]
• 74% of public and 52% of private companies reported that maintaining a robust talent pipeline is the most challenging aspect of CEO succession planning. ^[4]
• And while 86% of leaders believe leadership succession planning is of utmost importance, only 14% think their organization does it well. ^[4]
• Only 35% of organizations have a formalized succession planning process. ^[4]
• At 73% of companies, the most common method for identifying individuals as potential candidates for leadership positions was a single nomination by their direct manager. ^[4]
• 74% of executives were not prepared for the challenges they faced in senior leadership roles. ^[4]
• Only 32% of global leaders felt that their organizations adequately supported new leaders. ^[4]
• Only 27% believe their organizations provide the necessary resources to support their move into a C. ^[4]
• 46% of leaders underperform during their transition to a new role. ^[4]
• 50% of leaders reported that it took them six months to become effective in their new roles. ^[4]
• 20% said it took more than nine months to become effective. ^[4]
• 60% of executives fail within the first 18 months of being promoted or hired. ^[4]
• Direct reports perform 15% worse under a struggling leader and are significantly more likely to become disengaged. ^[4]
• Disengaged employees cost companies 34% of their annual salary in lost productivity each year. ^[4]
• Only 7% of respondents said COVID 19 has not had any impact on their organization’s succession planning. ^[2]
• 70% reported that leadership development programs have been rescheduled or delayed. ^[2]
• 40% of talent reviews that are a part of the organization’s succession planning are now being conducted virtually, and 33% said that they have delayed or rescheduled such meetings. ^[2]
• 46% of board members reported not having an effective plan process for CEO succession Industries which are most in need of planning a succession program are media, leisure products, and metals and mining. ^[2]
• Over half of leaders (51%). ^[2]
• 77% of CEOs did not participate in their company’s performance evaluation of the top executives. ^[2]
• Only 55% of directors claim to know the skills, capabilities, and shortcomings of their senior executives well. ^[2]
• 39% of respondents said they do not have any viable internal candidate for CEO. ^[2]
• Almost all employers (94%). ^[2]
• Over 90% of younger workers report that working at a company with a clear succession plan would improve their levels of engagement. ^[2]
• Companies in top performing quartiles had planned successions 79% of the time, and also 79% hired for CEO positions internally High turnover rate. ^[2]
• 75% of CEOs whose companies’ stock rose during their first year were still in the same job two years later; however, 83% of CEOs whose companies’ stock fell during their first year were not at the same position. ^[2]
• CEO turnover in the world’s 2,500 largest companies is at 17.5%, which means that every year corporations must appoint a new executive. ^[2]
• The rate of forced turnovers is at 20%. ^[2]
• 86% of leaders believe succession planning is an “urgent” and “important” priority, yet only 13% believe they do it well. ^[2]
• 69% of respondents say that a CEO successor should be “ready now” to take over, 54% said they are grooming an executive for the position. ^[2]
• 79% of employers surveyed note that they have succession plans in place for mid level management positions. ^[2]
• Only half of companies (50%). ^[2]
• 40% of new CEOs fail to meet performance expectations in the first 18 months. ^[2]
• Only 7%of respondents said COVID 19 hasnothad any impact on their organization’s succession planning 70%reported that leadership development programs have beenrescheduled or delayed. ^[5]
• And while86%of leaders believe leadership succession planning is of utmost importance,only 14%think their organization does it well. ^[5]
• Only35%of organizations have aformalizedsuccession planning process. ^[5]
• At73%of companies, the most common method for identifying individuals as potential candidates for leadership positions was asingle nominationby their direct manager. ^[5]
• The report found that just 35 percent of organizations have a formalized succession planning process. ^[6]
• According to the report, the top reason for adopting a formal succession planning process, cited by 89 percent of respondents whose organizations use succession planning, is to identify and prepare future leaders. ^[6]
• Other top reasons are creating opportunities for internal advancement and ensuring business continuity (also ). ^[6]
• When ATD last conducted research on this topic in 2010, it found that just 14 percent of respondents thought their organization’s succession planning process was highly effective. ^[6]
• In 2018, Succession Planning reports that 34 percent of respondents said their organization’s succession planning process was effective to a high or very high extent. ^[6]
• Among organizations with no formal succession planning process, nearly half have plans to create one. ^[6]
• Mentoring and coaching is the most popular method organizations use to develop succession candidates—83 percent of organizations use this practice. ^[6]
• Nearly three quarters of organizations use formal learning to develop succession candidates, and nearly as many use stretch assignments, which are assignments beyond the employee’s current skill level. ^[6]
• Another case study, , describes how a company developed a leadership development program to maintain its goal of filling at least 70 percent of its open positions with internal candidates. ^[6]
• Only 35% of organizations have a formalized succession planning process for critical role More than 74% of leaders report they are unprepared and lack the training for the challenges they face in their role. ^[7]
• Sixtypercent of executives fail within the first 18 months of being promoted or hire. ^[7]
• Here are some of their key findings from the report 62% of employees surveyed say they would be ‘significantly more engaged’ at work if their company had a succession plan. ^[3]
• 94% of employers surveyed report that having a succession plan positively impacts their employees’ engagement levels. ^[3]
• Over 90% of younger workers say that working at a company with a clear succession plan would ‘improve’ their level of engagement. ^[3]
• 79% of employers surveyed note they have succession plans in place for mid. ^[3]
• 35% of U.S. Managers Are Engaged in Their Jobs. ^[8]
• Each year about 10% to 15% of corporations must appoint a new CEO, whether because of executives’ retirement, resignation, dismissal, or ill health. ^[9]
• A study by Booz & Company found that, on average, firms with stock returns in the lowest decile underperformed their industry peers by 45 percentage points over a two year period—and yet the probability that their CEOs would be forced out was only 5.7%. ^[9]
• Estimates suggest that up to 40% of new CEOs fail to meet performance expectations in the first 18 months. ^[9]
• Only 55% of directors surveyed in the study claimed to understand the strengths and weaknesses of those executives well or very well. ^[9]
• And only 7% of companies formally assigned a director to mentor senior executives below the CEO. ^[9]
• And finally, put in place an extensive transition process to help with onboarding, which is especially important given that 80% of CEO appointees have never served in a chief executive role before. ^[9]
• In 2013, 20% to 30% of boards chose to replace an outgoing CEO with an external hire. ^[9]
• In contrast, just 8% to 10% of newly appointed CEOs at S&P 500 companies were outsiders during the 1970s and 1980s. ^[9]
• Twenty percent to 30% of boards now replace outgoing CEOs with external hires. ^[9]
• According to the executive compensation research firm Equilar, the median pay of CEOs who are outsiders is $3.2 million more than the median pay of insiders. ^[9]
• And Gregory Nagel of Middle Tennessee State University and James Ang of Florida State University used elaborate multiple regression analyses to show that, on average, going outside the company to fill the top office was justified in just 6% of cases. ^[9]
• When you consider the fact that family businesses make up about 60% of the gross domestic product in the U.S., it’s easy to see that succession planning is a major issue facing business owners across the country. ^[10]
• First off, only about 30% of family businesses even make it to the second generation. ^[10]
• 1015% make it to the third, and 3 5% make it to the fourth. ^[10]
• Additionally, according the Conway Center for Family Business, 40.3% of family business owners expect to retire at some point. ^[10]
• In fact, other research from the Conway Center for Family Business tells us that 70% of family businesses owners would like to pass their business on to the next generation. ^[10]
• KPMG conducted a global survey of 2,300 directors that showed that only 14% of directors had a detailed board succession plan , with no dramatic differences across the developed countries surveyed. ^[11]
• Only 12% were satisfied with their detailed board succession plan that had been implemented. ^[11]
• Twenty seven percent don’t discuss mandatory retirement or don’t have mandatory retirement ages and among the ones that do, half set the age at 72, but 75 is the new trend. ^[11]
• Two thirds of boards don’t have term limits and the percentage of those with 11+ years is increasing. ^[11]
• When webinar participants were asked why their succession planning efforts were not optimal, 40% said that not enough focus was being placed on planning three to five years out. ^[11]
• Another 30% said it was due to not enough time being allocated on the board agendas. ^[11]
• However 54% said that the issue of underperforming directors never gets addressed, leaving the shareholders not well served. ^[11]
• Almost 40% of webinar participants indicated that they do not have a formal succession plan for their CEO. ^[11]
• Yet, according to the Family Business Institute, the survival rate of a business transition from the 1st generation to the 2nd generation is just 30%. ^[1]
• That number sinks down to 15% from the 2nd generation to the 3rd generation, and under 5% to the 4th generation. ^[1]
• More specifically, they found that the gap between the value of a company with good leadership and that of a company with weaker leadership could be more than 35.5%. ^[1]
• According to the U.S. Small Business Administration, they represent 99.7 percent of U.S. employer firms and 64 percent of new private. ^[12]
• CHROs Struggle to Develop HighQuality Leadership Talent ARLINGTON, Va., January 16, 2020 More than one third of HR leaders report struggling to develop effective senior leaders and 45% struggle to develop effective midlevel leaders, according to Gartner,. ^[13]
• Gartner research reveals that only 50% of approximately 2,800 surveyed leaders report they are well equipped to lead their organization in the future. ^[13]
• Leading organizations recognize that no candidate may be a 100% match; instead, they focus on appointing a best fit leader who demonstrates the fundamental skills required and pairing them with other leaders. ^[13]
• Gartner analysis showed organizations who use complementary leadership realized a 60% increase in team performance and a 40% increase in leaders’ own performance. ^[13]
• Successors are often underdeveloped A recent Gartner survey showed that 81% of HR leaders cite lack of readiness as a top reason that a high potential candidate was unable to fill leadership positions. ^[13]
• Succession planning based on existing roles misses the mark on future business needs The average organization has gone through five enterprise wide changes in the past three years, and 73% of organizations expect more change initiatives ahead. ^[13]
• Planning for future leadership roles has almost double the impact on leadership bench strength as planning for existing leadership roles, however, only 15% of executives rate their HR team as effective in doing so. ^[13]
• Women held only about 27% of senior management roles in S&P 500 companies in 2019. ^[13]
• Racially and ethnically diverse employees account for only 13% of all senior leadership positions. ^[13]
• A recent Gartner survey found that 88% of Diversity & Inclusion leaders identified “Promotions and/or Succession” as one of the talent processes most susceptible to bias. ^[13]
• Failure to provide transparency around succession management disengages employees Gartner research found that 71% of employees think employers should increase transparency. ^[13]
• In addition, a near record 4.3 million U.S. workers quit their jobs in December 2021, according to the U.S. Bureau of Labor Statistics. ^[14]
• From January through November 2021, 1,231 CEOs left their posts, an increase of 1.1 percent over the 1,218 CEOs who did so through the same period in 2020, according to Chicago based outplacement firm Challenger, Gray &. ^[14]
• In an August 2021 survey of 580 members of the Society for Human Resource Management who were actively working as HR professionals, 56 percent said their organization didn’t have a succession plan in place. ^[14]
• Only 21 percent reported having a formal plan, while 24 percent said their organization had an informal plan. ^[14]

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Reference

1. deloitte – https://www2.deloitte.com/us/en/insights/topics/leadership/effective-leadership-succession-planning.html.
2. thesuccessionsolution – https://thesuccessionsolution.com/why-succession-planning.
3. myshortlister – https://www.myshortlister.com/insights/succession-planning-statistics.
4. hireology – https://hireology.com/blog/5-stats-on-talent-management-and-succession-planning/.
5. aiirconsulting – https://aiirconsulting.com/21-shocking-statistics-on-the-state-of-succession-planning/.
6. accendotechnologies – https://accendotechnologies.com/blog/succession-planning-statistics.
7. td – https://www.td.org/insights/succession-planning-is-your-organization-prepared.
8. meridithelliottpowell – https://meridithelliottpowell.com/5-shocking-succession-planning-statistics/.
9. gallup – https://www.gallup.com/topic/succession_planning.aspx.
10. hbr – https://hbr.org/2016/12/succession-planning-what-the-research-says.
11. abovethecanopy – https://www.abovethecanopy.us/family-business-succession-planning/.
12. forbes – https://www.forbes.com/sites/forbesinsights/2017/05/24/succession-planning-needs-to-be-your-number-1-priority/.
13. pnc – https://www.pnc.com/insights/small-business/business-planning/all-you-need-to-know-about-small-business-succession-planning.html.
14. gartner – https://www.gartner.com/en/newsroom/press-releases/2020-01-16-gartner-identifies-the-top-five-succession-risks-that.
15. shrm – https://www.shrm.org/hr-today/news/hr-magazine/spring2024/pages/succession%20planning%20is%20critical%20in%20uncertain%20times.aspx.

How Useful is Succession Planning

One of the key benefits of succession planning is that it helps to mitigate risks associated with abrupt departures of key personnel. In today’s fast-paced and competitive business environment, unexpected departures of key leaders can have significant negative impacts on the organization. Succession planning ensures that there are qualified individuals who are ready to step into key roles when the need arises, thereby minimizing disruptions to the business and maintaining continuity in operations.

Succession planning also plays a crucial role in talent development and retention. By identifying high-potential employees and providing them with opportunities for growth and development, organizations can improve employee engagement and morale. When employees see a clear path for advancement within the organization, they are more likely to be motivated and committed to their work.

Moreover, succession planning helps in the preservation of institutional knowledge and organizational culture. As experienced employees retire or move on, they take with them valuable knowledge and insights that are essential for the organization’s success. By grooming successors who can step into their roles, organizations can ensure that this knowledge is passed down and retained within the organization. Additionally, succession planning enables organizations to maintain their unique culture and values by selecting leaders who are aligned with the organization’s mission and vision.

Furthermore, succession planning can also enhance the organization’s competitive advantage. By developing a pipeline of future leaders who possess the necessary skills and competencies, companies can adapt to changing market trends and stay ahead of the competition. Succession planning allows organizations to build a strong leadership bench strength, which is essential for long-term sustainability and growth.

In conclusion, succession planning is a critical strategic investment that can yield significant returns for organizations in the long run. By identifying and developing future leaders, mitigating risks, retaining top talent, preserving institutional knowledge, maintaining organizational culture, and enhancing competitive advantage, succession planning is an indispensable tool for ensuring the long-term success and viability of any organization. As the business landscape continues to evolve, it is more important than ever for organizations to prioritize succession planning as a key component of their overall strategic planning process.

In Conclusion

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