Let’s start with a simple question: Does it matter who an organisation’s CEO is?

Some sociologists say, “no”. They argue that large organisations are shaped by structural forces, market dynamics and institutional pressures that no single individual can control. The person at the top is largely interchangeable. 

In my new book, “21 Questions About CEO Succession”, I start from the opposite premise. In my 25 years advising boards, owners and chief executives, as well as delivering the “CEO Succession” seminar at INSEAD’s International Directors Programme to more than 5,000 participants, I’ve found that the choice of the chief executive is one of the most consequential decisions any organisation ever makes. 

At the start of each session, I ask participants to formulate a question on CEO succession. The 21 questions in this book are those that were repeatedly brought up. Some expose the gap between how boards think they manage succession and how they actually do it. Get it right, and the company is poised for sustained, purposeful growth; get it wrong, and the consequences unfold gradually, then suddenly (to quote Ernest Hemingway). The cost of poor CEO transitions in the S&P 1500 alone has been estimated at nearly US$1 trillion annually. 

I wrote this book to help firms get it right by asking the right questions. My aim is to help readers understand the challenges inherent in CEO succession and the methods available to address them effectively. They will learn how to anticipate and avoid recurrent pitfalls, design and institutionalise a rigorous succession-planning process, and align leadership decisions with organisational strategy and culture. This article is a teaser of what’s in store for readers.

Why intelligent people keep getting this wrong

The core argument of the book can be stated plainly. CEO succession is not an event. It’s a process, and it must be a continuous, proactive and strategic one. If a board treats succession as an emergency to be managed rather than a discipline to be practiced, it’s unlikely to achieve a good outcome.

Why do so many organisations fail at this? Evidence suggests that 30% to 50% of CEO transitions are badly managed. Some researchers put that figure as high as 70%. A Stanford and Yale study – colourfully titled “CEO Succession Roulette” – of publicly traded United States firms found that boards have had a poor record of hiring, evaluating and firing CEOs. Their analysis of 3,000 listed American companies over five years put the proportion of involuntary CEO departures at 29%. Only 23% of the exits were truly voluntary – the remaining 48% fell somewhere in between. In other words, 50% may be a conservative estimate of the proportion of successions that are effectively unplanned.

The problem is psychological and systemic in equal measure. The incumbent CEO, however self-aware, is rarely immune to the prospect of losing identity, power and relevance, or what is termed “King Lear syndrome”. This often manifests as denial (that the time is approaching), procrastination and self-validation (“How could any candidate be good enough?”). Understanding these responses is a prerequisite for managing them.

Boards are not immune. Directors who should be pressing the emotive issue instead join the incumbent in avoidance. Others retreat into withdrawal, deferring to headhunters and consultants and endorsing whatever decision emerges. But the fact remains that good boards should own CEO successions. 

The wrong question about the right candidate

The question of whom to choose is, naturally, where most of the attention goes. It’s also where most of the confusion concentrates. Boards tend to look for a universal set of leadership qualities: curiosity, courage, ambition, resilience. All worthy attributes, no doubt, but insufficient on their own. 

Leadership is contextual, as CEOs from Steve Jobs to Carlos Tavares (formerly of automaker Stellantis) show. The latter’s skills at rescuing failing automotive brands like Peugeot and Opel did not transfer to running the vast Stellantis. Jobs, as the world knows, was a startup genius, an okay CEO, then a failure before becoming a superstar.

The relevant question is less "What makes a great CEO?" than "What makes a great CEO for this organisation, in this environment, over the next five years?" This distinction has practical implications for how boards build a CEO profile, how they evaluate candidates and how they decide between insiders and outsiders. 

Well-prepared internal candidates consistently deliver better results: they stay longer, perform better and ensure smoother subsequent transitions. Yet, boards suffer from a natural bias towards outsiders whose shortcomings they know nothing about. Between 20% and 30% of new CEOs in both mature and emerging economies in recent years have been outsiders, and the data shows that their integration all too often proves an insurmountable challenge. 

When external candidates are recruited to save sinking ships – as they so often are – research does support their appointment, specifically outsiders with finance, accounting or operations backgrounds from a different industry. But in stable contexts, the appointment of an external star frequently ends up in disappointment – just ask HP (Carly Fiorina) and JCPenney (Ron Johnson).

The appointment isn’t the finish line

The final appointment isn’t the end of succession but the beginning of the transition. How the handover is structured, how the outgoing CEO departs, how the governance framework is reset for the new leader's context, how the runners-up are retained – these questions all matter, yet receive far less attention than the selection decision itself.

How do we know when a CEO succession has worked? Conventional metrics such as tenure length and the organisation’s financial performance tell us very little. The true measure, in my opinion, rests on four pillars: delivering consistent results, laying a foundation for sustainable post-tenure growth, crafting a positive legacy, and making a timely and strategic exit. By these measures, Unilever’s Paul Polman, Haier’s Zhang Ruimin and Tata Consultancy Services' Natarajan Chandrasekaran are successes.

Succession is hard not because the questions are especially difficult. It’s hard because it is a human process. Getting it right requires patience, honesty and courage from everyone involved. I hope my book can make the hard conversations easier to start and the difficult decisions harder to avoid.