If CEO succession is so well researched, why do so many boards still get it wrong?

OVER the past few years, I have served on several boards and participated in numerous nomination and remuneration committee (NRC) discussions, including chairing one for a listed company.

If there is one topic that consistently commands the board’s attention, it is the succession of the CEO.

On paper, this should be one of the most structured decisions a board makes. There is no shortage of research, governance guidance and published best practices. Most directors understand the theory.

Yet, succession rarely unfolds as neatly as the frameworks suggest.

When the discussion shifts from a hypothetical successor to a real individual, it becomes more complex and uncertain.

Strategy evolves. Business conditions change. Boards may not always agree on what the company needs next.

Above all, a weight lies in making one of the board’s most consequential decisions, alongside the fear of getting it wrong.

Global consulting company Korn Ferry’s research on CEO turnover found that 11 per cent of newly appointed CEOs part ways within the first year. The number rises to 34 per cent by the end of the third year.

A recent conversation with Professor Stanislav Shekshnia at Insead on his latest book, 21 Questions About CEO Succession, reinforced another sobering statistic: Between 30 and 50 per cent of CEO transitions are poorly managed.

Given that CEO succession is arguably a board’s single most important responsibility, these figures should make every board pause.

So, why do so many boards still struggle to get it right?

The issue is rarely the framework

One lesson I have taken away from my experience is that boards sometimes jump too quickly to answers.

We discuss names, benchmark candidates and even engage search companies before agreeing on the more fundamental questions.

Everyone agrees succession is critical, and yet, the conversation is often postponed because it feels uncomfortable.

Succession is expected to be objective, and yet, the final decision often depends on judgement, trust, relationships and emotions.

Those paradoxes are a reminder that CEO succession is not simply a governance exercise. It is a process in which strategy, leadership, psychology and stewardship intersect.

Good succession starts with strategy

Before evaluating candidates, boards should first ask more fundamental questions: What will the company need from its CEO over the next three to five years?

Is the organisation entering a period of transformation? Is artificial intelligence reshaping the business? Is growth the priority, or operational excellence? Different futures require different leadership capabilities.

Only after agreeing on the future strategy, can the board meaningfully assess whether the current CEO remains fit for the future and define the profile of the next leader.

A CEO profile should distinguish between capabilities that are essential and those that are desirable, anchored firmly in the direction the company is heading. As strategy evolves, the profile should evolve too.

Timing matters

Once strategy is clear, the next question is timing.

Most boards agree on the triggers for CEO succession: sustained underperformance, a major strategic shift, a crisis, a change in ownership or shareholder expectations. The harder challenge is agreeing on when those triggers have actually been reached.

Take performance. A CEO may believe he or she has delivered good results, given the business environment, while the board may be asking a different question: Is this still the right leader for the company’s next strategic cycle?

Succession is rarely about today’s performance. It is about tomorrow’s needs. Boards rarely disagree that succession matters. They disagree on when the future has arrived.

The role of the incumbent

If the timing is difficult, the human dimension is harder.

This is the aspect in which the process of succession becomes most challenging.

Developing internal successors depends heavily on the incumbent CEO, and yet, succession inevitably touches on identity, power, ego and legacy. Asking a successful CEO to prepare a successor can feel like asking them to accelerate their own exit. This creates one of the greatest paradoxes in the succession cycle.

The board owns the process of CEO succession, but its success often depends on the active support of the person being succeeded.

Without the CEO’s commitment, future leaders may never receive the opportunities, stretch assignments or board exposure needed to be truly ready.

That is why boards should be explicit about the CEO’s responsibility for developing internal talent. Progress should be reviewed regularly and with sufficient depth. Ultimately, the board’s assessment of the CEO should include succession planning and leadership development.

Another critical but often overlooked relationship is that between the NRC chair and the chief human resources officer (CHRO). A trusted, strategic CHRO provides valuable insights into leadership potential, development gaps and organisational readiness.

The future of the outgoing CEO is also an aspect that still receives too little attention. I have observed that people are more prepared to leave significant roles when they are moving towards something, rather than stepping into a void. Perhaps, boards should spend more time helping the outgoing CEO think about the next gig.

Internal or external?

The debate between internal and external candidates often starts with the wrong question. Research generally favours well-prepared internal successors because they understand the organisation’s culture, people and stakeholders, and often deliver smoother transitions.

External appointments, however, are more likely when a company requires a turnaround, significant transformation or capabilities that do not yet exist internally.

Rather than debating internal versus external, boards should first ask: What company are we trying to build over the next five years?

With that clarity, they are better placed to decide whether that future is best led by someone who knows the organisation intimately, or someone who can bring fresh perspectives and challenge established thinking.

Can AI improve CEO succession?

AI is becoming another valuable tool in the boardroom. When used well, the technology can help boards analyse leadership data, benchmark CEO profiles, identify blind spots, challenge assumptions and test scenarios.

But it cannot assess trust, judgement, resilience or character. Nor can it understand board dynamics, organisational culture or the chemistry between a CEO and the board. AI may improve the quality of succession discussions. It is unlikely to make succession any less human.

Test of board stewardship

CEO succession is one of the clearest tests of board stewardship.

The real measure of success begins after the announcement: whether the new CEO delivers the strategy, key talent stays, the organisation emerges stronger and the outgoing CEO leaves with dignity and purpose.

Succession should be part of the board’s regular rhythm from day one, not a sensitive conversation triggered only when change feels imminent.

Boards do not appoint CEOs for today’s company. They appoint these leaders for tomorrow’s company.

The best CEO succession plans prepare not one, but two futures: one for the incoming leader and another for the outgoing one.

The writer is a board director and council member of the Singapore Institute of Directors