Building Tomorrow’s Leaders: Succession Planning and Executive Readiness

Leadership transitions can define the future of a business. With challenges ranging from unexpected vacancies to planned retirements, having a robust succession plan is a strategic priority for companies of all sizes. Succession planning is more than just identifying potential successors. It’s about building a sustainable leadership pipeline that positions your organization for long-term success.

February 28, 2025

Insights

Despite its importance, only 35% of organizations have a formal succession planning process, leaving a majority vulnerable to leadership gaps. At the same time, 49% of organizations consider succession planning a top priority, signaling a growing awareness of the need to prepare for leadership transitions before they become urgent crises.

We asked our Leadership Consulting Partners about trends, best practices, and real-world examples to help you prepare for leadership succession and create a culture of executive readiness.

How has the approach to succession planning evolved over time, and should it be a top priority for all organizations?

Tim Wiseman
Managing Partner

Former Yahoo CEO Marissa Meyer once said, “The first rule of succession planning is always to have succession planning.” The Securities and Exchange Commission emphasized the importance of succession plans for investment advisor companies in 2016, which has influenced organizations of all sizes.

Succession planning continues to be top of mind for organizations. Whether it’s a nonprofit, family-owned organization, or Fortune 500 company, executives are thinking, “Do I have the right people ready to move into key positions? If they’re not ready, how do I get them ready?”

Succession planning has shifted from a secretive, behind-the-scenes process to one that’s fully transparent and strategic. Despite this shift, many organizations still struggle to put structured plans in place. Research shows that only 34% of family-owned businesses have a documented and communicated succession plan, increasing the risk of disruption when leadership changes occur.

In the past, it was rarely discussed outside the executive suite, but today, companies are openly preparing for leadership transitions. Having a formal succession plan should be a top priority, because it minimizes risks and ensures the right people are ready to step into key roles.

In times of uncertainty and opportunity, a company’s strength lies in its ability to adapt. Strong succession planning builds resilience, allowing for smooth leadership transitions and ensuring that long-term strategic objectives are always within reach.

What is the succession planning and executive readiness process?

Maryanne Wanca-Thibault, Ph.D.
Partner

At DHR, we recommend a five-step approach. First, understand the business context by engaging with key stakeholders about the organization’s current state and vision for the next three to five years. Second, define key skills and attributes needed for leadership roles, focusing on gross profit drivers and risks. Third, build an executive success profile of the minimum skills and a skill matrix outlining the preferred skills, focusing on business challenges. Fourth, assess candidates and identify development opportunities using scientific methods, such as DHR’s Leader Lens, encompassing behavioral interviews, executive aptitude appraisals, case studies or simulations, and 360-degree feedback. Finally, create development plans using the 70-20-10 model to prepare candidates for their next roles, concentrating on on-the-job learning, learning from others, and formal learning.

Succession plans should be structured, objective, and scalable. They should incorporate thorough, data-backed assessments of potential leaders, clearly outlined role expectations, and structured development frameworks to equip successors for future responsibilities. CEOs and boards must revise these plans regularly to align with evolving business priorities and rising leadership talent. Ongoing assessments and adjustments are crucial to ensuring the strategy remains effective in a shifting business environment.

Why do organizations need formalized succession plans, and can you share examples of success?

Justin Menkes, Ph.D.
Partner

Proactive succession planning is essential for managing anticipated and sudden leadership shifts while sustaining long-term success. A solid strategy helps organizations reduce the risks tied to leadership changes and stay aligned with their business objectives. Investing in succession planning reinforces stability and prepares companies for future growth.

Without clear plans, businesses risk operational setbacks, financial uncertainty, and difficulties in maintaining momentum. This is particularly concerning in publicly traded companies, where stability and confidence in leadership are critical. Forty-nine percent of public companies are actively developing CEO successors, yet nearly half still lack formalized/documented plans for a planned CEO departure to ensure a smooth transition.

A thoughtfully designed succession strategy ensures continuity, minimizes disruption, and prepares leaders to take on critical responsibilities. Examples of organizations doing this well include:

A company anticipated five executive retirements within three years. The organization needed to assess internal talent for promotion or determine if external hires were necessary. Prioritizing internal growth, they sought a clear view of their high-potential directors’ strengths and development areas. We assessed N-2 leaders, provided a detailed succession plan, and designed customized developmental programs.

In another engagement, we helped a CEO, who planned to retire within a year, find a successor to sustain the company’s growth. Evaluating internal and external candidates, we used leadership simulations, personality assessments, 360-degree referencing, and behavioral interviews as part of our Leader Lens tool. The board ultimately chose an internal candidate, setting the succession plan in motion.

Leadership Readiness Requires Ongoing Assessment & Development

Succession planning isn’t a one-time event but a continuous process that evolves alongside an organization’s growth and challenges. Regular leadership assessments provide valuable insights into talent readiness and highlight areas for improvement. By prioritizing continuous development, companies remain agile and prepared for future leadership transitions. While succession is a top priority for many, the fact that only 35% of companies have a formal process suggests more work is needed to turn intent into action.

Planning Your Next Future Ready Leaders

Leadership changes happen. How you respond is critical to long-term company success. With business strategy as the foundation, we help organizations understand their talent gaps, identify and develop leaders, and implement a succession strategy to ensure the right leaders are ready when needed.

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