At last week’s Democratic National Convention, President Joe Biden did something that was personally difficult and monumentous: He passed the baton to Vice President Kamala Harris.
Biden’s age seemed to be the most significant factor that ultimately led him to step away from this year’s presidential race. When Biden was inaugurated in 2021, the 78-year-old became the oldest U.S. president. And the cognitive slowdown often associated with people as they grow older was on full display at the debate in June against the former president and Republican nominee, Donald Trump. After weeks of stiff pressure, he ended his campaign and endorsed Harris.
Regardless of how you feel about the turn of events, succession planning is inevitable—whether you’re in charge of a country or a business. There is a time when every executive needs to step back and let the next person in line (or a new hire) take over.
The reasons vary: Some may be getting too old to be an effective leader, or they may work at a company with a mandatory retirement age. Some may have better opportunities elsewhere, while others find they’re no longer suited for the time’s economic, competitive or regulatory circumstances. There are also personal situations, such as family commitments or conflicts with board members.
Each business leader needs to think about their succession—some say it should even be part of your priorities from day one. This special edition of Forbes CEO zooms in on the issue of succession planning, looking at what both leaders and businesses need to do to consider and prepare the next generation.
With the right forethought, training and planning, the handoff can go smoothly to a capable leader who can carry on your legacy.
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More executives are having shorter tenures. According to a 2023 analysis from organizational consulting firm Korn Ferry, 11% of new CEOs leave their positions within the first year. A third leave by the end of their third year. The annual turnover rate for all CEOs, according to 2023 statistics from BoardEx, is at 13.2%, a three percentage point increase over the previous year.
BoardEx said last year’s numbers may be inflated, considering many CEOs stayed longer than they might have planned as companies navigated through the shutdowns, supply chain difficulties, inflation and wild swings in consumer behavior that surrounded the Covid-19 pandemic. The number still feels high, though the CEO turnover rate is the smallest out of all C-suite positions, according to BoardEx. Looking at Fortune 1000 companies, between 2018 and 2022, 11.8% of CEOs left their jobs—much fewer than the 16% of CFOs, 18.9% of CHROs, 21.2% of CMOs and 27.3% of COOs.
Still, most CEOs are sticking around a bit longer than three years. Research from Spencer Stuart found the average S&P 1500 CEO’s tenure was 8.9 years. The vast majority of CEO departures—86%—were for non-acrimonious reasons of retirement or leaving for another opportunity.
RHR International CEO Jessica Bigazzi Foster.
How do executives know when it’s time to........© Forbes