CEO succession planning: The definitive step-by-step guide (with template)
In 2024, 202 CEOs left their roles, a significant increase from the six-year average of 186; the global tech CEO turnover rate was 90% higher in 2024 than the previous year. This volatility of the market and executive roles has put CEO succession planning in the spotlight, with a recent annual survey conducted by Diligent Institute, Corporate Board Member, and FTI Consulting revealing that the challenge of succession planning for the CEO and senior executives has more than doubled, rising from 14% to 30% of the most pressing issues faced by directors.
Under the best-case scenario, the CEO is doing a stellar job and gives the board of directors several years’ advance notice of impending retirement plans. The worst-case scenario is losing a CEO with little notice because of an illness, injury, death or another unexpected crisis situation. Best practices for succession planning assume that boards have a clear written plan to replace the CEO, whether the departure is anticipated or sudden.
Here, we’ll explain how to build an effective CEO succession plan, including:
- The importance of CEO succession planning
- Key elements of an effective CEO succession planning process
- Essential roles and responsibilities
- A step-by-step guide to CEO succession planning
- CEO succession planning tools, templates and best practices
The importance of CEO succession planning
A CEO succession plan provides a detailed roadmap from recruitment to appointment, paving the way for boards to hire a CEO.
While a CEO succession planning template gets boards off to a good start, board succession committees must customize their succession plans to account for the company’s unique needs, size, corporate culture, competitive stance and strategies. Doing so is important for:
- Stability: A well-prepared transition plan helps mitigate risks associated with sudden leadership departures, whether due to retirement, resignation or unforeseen circumstances. Without a clear succession strategy, organizations may face disruptions, shareholder uncertainty and a decline in performance that is difficult to recover from.
- Momentum: A strong CEO succession plan identifies and develops internal talent and includes a structured process for external recruitment if needed. This ensures the right leader is chosen, helping the organization maintain momentum toward its strategic goals.
- Investor and stakeholder confidence: A CEO succession plan illustrates that the board takes a proactive approach to governance. It signals to investors and stakeholders organizational resilience and reinforces trust that their investments or jobs are secure.
In this special 150th edition of The Corporate Director Podcast, hosts Dottie Schindlinger and Meghan Day are joined by Diligent's CEO & President Brian Stafford and Annalisa Barrett, Senior Advisor at KPMG’s Board Leadership Center, discussing the growing importance of CEO succession planning and more.
Key elements of an effective CEO succession planning process
CEO succession planning is a strategic process that ideally happens over time. Many of these assets should be ready should you need to act quickly to replace a CEO — or even if you’re preparing for an upcoming retirement.
The strongest succession plans include:
- CEO success profile: Write a detailed outline of the ideal candidate, including required skills, experience, leadership qualities and alignment with organizational values and strategies.
- Leadership development and pipeline: Identify internal candidates you can nurture and train for the role through training programs, mentorship and executive coaching. List any external candidates who could also be a good fit.
- Emergency succession plan: Document your contingency plan for unexpected CEO departures, specifying interim leadership, decision-making processes and operational continuity strategies.
- Long-term succession strategy: Create a roadmap for planning transitions, detailing recruitment methods, evaluation criteria and timelines for identifying and selecting the next CEO.
- Selection and assessment framework: Develop a set of criteria and processes for evaluating internal and external candidates, including performance reviews, leadership assessments and board approval steps.
- Board and stakeholder engagement plan: Involve the board, directors, key stakeholders, and investors in the succession process to ensure alignment and governance best practices.
- Transition and onboarding plan: Build a structured process for integrating the new CEO, including knowledge transfer, executive team alignment and performance expectations.
- Communication strategy: Map out how you will announce the leadership change to employees, investors and internal stakeholders to maintain trust and confidence.
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Discover moreCEO succession planning roles and responsibilities
The executive search process requires the involvement and commitment of several committees and individuals. The process requires the collaboration of the board’s executive committee, board of directors, search committee chair and search committee. The search committee chair and the committees each have specific roles, tasks, responsibilities and levels of authority.
Responsibilities of the executive committee of the board of directors
The inception of a CEO succession planning template begins with the executive committee of the board. The executive committee selects the search committee chair and the committee members.
In addition, the executive committee is responsible for establishing and approving a compensation plan that is in line with compensation trends and meets the organization’s needs. The committee is also responsible for developing a policy to review the CEO’s compensation plan periodically.
As shareholders expect an executive’s compensation to align with performance, the executive committee establishes short — and long-term performance objectives for CEOs, including initial 90-day and annual performance reviews. By virtue of the resolution of the board of directors, the executive search committee delegates the responsibilities for conducting the search to the executive search committee.
As the search process winds down, the executive committee works in conjunction with the search committee to decide which candidate to offer an employment contract to. The executive committee usually has an attorney review the final employment contract.
Responsibilities of the board of directors
As noted under ‘Responsibilities of the executive committee of the board of directors,’ the board of directors provides the resolution for the executive committee to establish a search committee. The board is also responsible for approving any necessary policies the new CEO must adhere to.
Finally, the board of directors ratifies the final candidate as outlined in the organization’s bylaws.
Responsibilities of search committee chair
The chief elected officer or officer-elect usually serves as the search committee chair. The chair is responsible for providing leadership to the search committee and convening meetings with the search consulting firm and the search committee. As the main liaison, the chair is the primary contact for the search committee, the search consulting firm, the board, and the CEO or interim CEO.
Responsibilities of the search committee
The composition of the search committee should be carefully chosen due to the importance of their duties. The executive committee should seek to appoint search committee members who have the time to be fully engaged in the process because the duties are brief but intense. Search committee members need to have the qualities of being honest, fair and open to all candidates and should be fully committed to the process and the outcome.
The search committee members should not have any conflicts of interest and should be willing to be forthright during deliberations. It’s common for executive search committee members to be willing to sign a confidentiality agreement, agreeing to keep the search committee’s work private until the board officially announces the appointment. Additionally, search committee candidates must agree to follow the established search guidelines and policies and to accept the final decisions of the search committee and the board.
The CEO search committee reports to the chief elected officer of the executive committee. A search consultant is often enlisted to lead the committee's activities progressively. The search committee’s responsibilities include creating a job description and announcing the position. After pre-screening candidates, the search committee conducts the initial in-person interviews, narrowing the prospects to a short list of potential candidates. The search committee collects additional information, checks references and performs background and credit checks.
Finally, the search committee selects the final candidate and presents the individual to the board of directors for ratification. The executive committee may also collaborate with the search committee on the potential CEO’s compensation package and employment contract.
Step-by-step guide to CEO succession planning
The succession planning process should begin while your CEO is still in place. This means the process is as much about preparation as it is about appointing a new leader. Working across several committees, the board will:
- Assess organizational needs and leadership gaps: Evaluate your organization’s current and future needs. Analyze the business strategy, goals and industry trends to identify leadership gaps. This step should also include assessing the current CEO’s strengths and areas where future leadership could evolve to meet organizational demands.
- Develop internal leadership talent: Identify and cultivate high-potential leaders within the organization. This involves assessing current executives and emerging leadership talent and providing them with professional development opportunities. Offer training, mentoring and cross-functional expertise to help internal candidates gain the necessary skills and expertise.
- Define the CEO success profile: Create a clear, detailed profile of the ideal CEO, aligning with the organization’s strategic vision, culture and values. This profile includes competencies, skills, leadership style and industry experience required for the role. It should also consider the challenges the organization anticipates, whether it’s managing growth, navigating a crisis or implementing a new strategy.
- Establish a selection and assessment process: Develop a transparent, structured process for selecting and evaluating potential CEO candidates. This includes defining the assessment criteria and a set procedure for vetting internal and external candidates.
- Engage the board and key stakeholders: Engage the board of directors, key stakeholders and even senior management in the CEO succession planning process. Regularly involve them in discussions around leadership needs and ensure they’re aligned with the overall direction of the succession plan.
- Prepare for emergency and planned successions: Develop contingency plans for planned and unexpected CEO transitions. Establish clear protocols for emergency situations, such as sudden health issues or abrupt departures.
- Execute the transition and onboarding strategy: Once you identify a successor, provide structured onboarding and transition support to ensure a smooth leadership handover. This includes introducing the CEO to key internal and external stakeholders, sharing relevant organizational knowledge and aligning them with the executive team and company culture.
- Communicate the plan and process transparently: Clear and open communication is essential during a CEO transition. Inform employees, investors and other stakeholders about the succession plan, timeline and rationale.
- Regularly update the succession plan: CEO succession planning isn’t a one-time task. It should be reviewed and updated regularly to reflect changes in the business environment, leadership needs and organizational priorities. This keeps the plan relevant and effective as the landscape shifts.
CEO succession planning tools and templates
In a perfect world, succession planning committees will have plenty of advance notice of a retiring CEO and be well prepared to conduct a massive search for the best candidate. Even if they have to find and hire a CEO on short notice, having a well-designed CEO succession planning template and a board portal can make doing the impossible seem possible.
Free CEO succession planning template
| Section | Action items | Responsible parties | Timeline | Potential candidates | Status/Notes |
|---|---|---|---|---|---|
| Organizational Overview | Review the company’s mission, vision and strategic goals | Board, senior management | Q1 (annual review) | N/A | |
| Assess current leadership strengths and gaps | Board, HR committee | Q1 | N/A | ||
| CEO success profile | Define required competencies and qualities | Board, senior leadership team | Q1 | N/A | |
| Identify the experience and skills required for the CEO role | Board, external advisors | Q1 | N/A | ||
| Internal talent assessment | Identify internal CEO candidates (including current executives) | HR committee, board | Q2 | Candidate A (CFO), Candidate B (COO) | Evaluate leadership fit and potential |
| Evaluate readiness and development needs for internal candidates | HR committee, senior management | Q2 | Candidate A (CFO), Candidate B (COO) | Leadership potential assessments ongoing | |
| Develop a training/mentorship plan | HR, senior leadership | Ongoing | Candidate A (CFO), Candidate B (COO) | Mentoring plan in place | |
| External search criteria | Define the ideal external candidate profile if internal candidates are not viable | Search committee, board | Q3 | N/A | |
| Develop job descriptions and search criteria for external candidates | Search committee, external advisors | Q3 | N/A | ||
| Identify recruitment firms for external search | Search committee | Q3 | N/A | ||
| Succession plan timeline | Create a timeline for the succession process | Board, HR committee | Q1 | N/A | |
| Define specific milestones and deadlines | Board, HR committee | Ongoing | N/A | ||
| Board involvement and communication | Ensure quarterly updates on the succession planning process | Board chair, governance committee | Quarterly | N/A | |
| Communicate progress to stakeholders | Board, PR/communications team | As needed | N/A | ||
| Emergency succession plan | Identify interim leadership in case of unexpected departure | Board, senior management | Q2 | Interim candidate (Candidate C, VP) | Crisis management plan in progress |
| Develop protocols for an emergency CEO transition | Board, legal advisors | Q2 | N/A | ||
| CEO transition and onboarding | Create a transition and onboarding plan for the incoming CEO | Board, HR committee | After selection | Candidate A (CFO), Candidate B (COO) | Onboarding process designed |
| Assign mentors or advisors to the incoming CEO for a smoother transition | Board, outgoing CEO, mentors | After selection | Candidate A (CFO), Candidate B (COO) | ||
| Regular review and updates | Schedule an annual review of the succession plan and update as needed | Board, HR committee, senior management | Annually | N/A |
CEO succession planning software
A highly secure board portal ensures that the CEO succession plans remain confidential long after the board appoints a new CEO. The best software should include features like:
- Board composition and skills tracking: Software allows boards to track and evaluate the skills and competencies for CEO succession, helping identify gaps and areas for development.
- Collaborative workflows: Given the ongoing nature of CEO succession planning, it can be easy for the process to fall off board members’ radars. CEO succession planning software facilitates communication and collaboration between board members, HR committees, and senior leadership, making it easier to manage, evaluate and select CEO candidates.
- Real-time data and reporting: Real-time dashboards and reports make tracking the progress of succession planning efforts easier. These insights help boards stay on schedule and make data-driven decisions about succession.
- Document management and secure access: Succession planning involves sensitive information, and the best software encrypts documents in transit and at rest. This protects succession plans, candidate evaluations and related materials. It also provides one central repository of the planning documents so they don’t get lost during a CEO transition.
- Scenario modeling: Look for software that can simulate various leadership transition scenarios. This will improve the quality and accuracy of CEO succession plans for circumstances under which the current CEO may leave.
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Discover moreCEO succession planning best practices
Succession planning should be strategic, transparent and aligned with the company’s long-term goals. Following these best practices will help your organization prepare accordingly:
- Start early: Begin the succession planning process well before any potential transition. This will enable you to identify and develop potential successors long before the need for a change arises, mitigating the risk of disruption.
- Define leadership competencies: Clearly outline the skills, experiences and qualities the CEO role requires. These should align with the organization’s long-term goals and values to help identify a CEO who can uphold the organization’s strategic direction.
- Evaluate internal talent: Regularly assess the performance, potential and readiness of internal candidates. Providing leadership development programs, mentorship and strategic opportunities can help build their skills and prepare them for a future leadership role.
- Develop a diverse candidate pool: Consider internal and external candidates for the CEO position to ensure a broad pool of diverse options. Diversity in leadership can foster innovation, represent the company’s values and bring various perspectives.
- Foster board alignment and engagement: The board plays a critical role in succession planning. It’s essential that the board is on the same page about the right leadership competencies and remains engaged in the planning, evaluation and selection process.
Keep CEO succession planning on the agenda with ease
CEO succession planning is an always-on process. This can make it high visibility, but it can also make it easy to overlook. After all, if you have a CEO in place, planning for their departure can be a much lower priority than many of the risks, crises and opportunities that pass through the boardroom.
The reality, though, is that CEO succession planning is an investment in your organization’s future. Time spent on a succession plan now means less risk of disruptions, more competitive candidates and smooth transitions that support your strategic plan. Board management software can facilitate much of the succession planning process, but ensuring the tool you choose has the right features and functionality is important.
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FAQs
What is CEO succession planning?
CEO succession planning is the process of identifying and developing internal or external candidates to take over the role of CEO when the current leader steps down. This planning ensures the organization maintains leadership continuity, strategic alignment and operational stability during leadership transitions.
What’s the difference between emergency and long-term CEO succession planning?
Emergency CEO succession planning prepares the organization for unexpected leadership departures, such as sudden illness or resignation, ensuring a quick, effective transition. Long-term CEO succession planning, on the other hand, focuses on developing a pipeline of candidates and aligning them with the company’s strategic goals for a planned transition over time.
How does CEO succession impact investors and shareholders?
CEO succession significantly impacts investors and shareholders as it directly affects the company’s leadership, strategy and long-term direction. A well-planned succession process reassures investors of the company’s stability, reducing risk and maintaining confidence in future growth. Conversely, poor succession planning can lead to uncertainty, affecting stock prices and investor trust.
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