Most enterprises lack a succession plan. Here are the real costs of not having a successor, and who pays the price.
The financial implications draw the most attention, but beneath the surface are costs far more consequential.
Operator Insights
Every executive I work with will tell you they take succession seriously, and most of them believe in its importance. The best leaders start thinking about who comes after them almost as soon as they take the job. I recently watched a client step into a new chief people officer role and, within weeks, she was already considering who she wanted behind her. That instinct to prepare for a day that may still be years away is exactly the right one.
The research tells a different story about how often that ambition becomes a reality. By some estimates, fewer than a third of companies have a formal succession plan in place. In my experience that figure is about right. The distance between how seriously leaders say they take succession and how many have actually done the work is wide, and isn’t about how much they care. They are busy running the business, setting strategy, and chasing growth. It’s easy to see how long-term planning falls off, quietly and consistently, to whatever is most urgent that week. Given the unrelenting environment we are all navigating, few leaders are able to slow down enough now to move faster later.
I spend a good deal of my time with executives right at that inflection point when the need for a succession plan arrives. The cost of being caught without a successor arrives in layers, and the layers that do the most damage are the hardest to see in advance.
Financial Cost: The potential to compound quickly is significant
Replacing a senior executive can cost well over twice their annual salary once you add up interim coverage, onboarding, lost productivity, and the long ramp to full effectiveness. A transition that catches a company unprepared usually means paying for two problems at once: keeping the function running today and finding the right person to hold the role for the next five or ten years. When the upheaval costs a second senior leader, as it often does, both problems double.
Substantial as those figures are, the financial cost is also the most manageable. It is visible and it can be budgeted. The expensive part of a failed transition is everything that comes after.
Strategic Cost: Everything keeps moving, but not always in the most optimal direction
When a leader leaves, strategic direction leaves with them. The business does not pause while the organization regroups. Clients still expect to be served and commitments still have to be met, so the work continues without anyone clearly setting its course. Decisions slow, judgment calls get deferred, or made by people without the full picture. Momentum that took years to build begins to dissipate, and competitors do not wait for a company to find its footing.
The damage deepens when the board and the management team do not agree on where the company is going. With no chief executive left to mediate, that disagreement often resolves badly, and someone is installed because they were next in line, or because the choice felt equitable, rather than because they suit the direction the business needs to take. A transition ideally is an opportunity to reconsider what the company will require in one, three, five, and ten years.
- Lauren Argenti Rawlings | Head of Consello Talent, U.S.
Talent Cost: The trickle-down effect will impact both retention and recruitment
The leaders one level down from the CEO watch a transition more closely than anyone. When a capable chief operating or financial officer sees the chief executive depart and is not asked to step in, even temporarily, they begin asking the questions that usually precede a resignation: what the plan is, whom they will report to, why they were passed over, and whether it is time to look elsewhere.
This is the consequence I most want boards to understand. A poorly handled transition at the top almost always becomes a retention problem below it. Lose one of those senior leaders during the search and the company faces a second succession on top of the first, which tends to force a premature promotion of someone not yet ready for the role. Each departure also removes institutional knowledge that no replacement can simply be hired to restore.
Now and then the pressure produces something better than expected. I have seen a company elevate someone and discover a leader no one had recognized, a person who performs under pressure in ways the existing hierarchy had never allowed them to show. It is a welcome outcome, though not one any board should plan around.
There is also a cost in the message an abrupt exit sends to any executive a company is trying to recruit. If the last leader was dispatched without much grace, the next one notices, and quietly wonders how secure the role really is.
Culture Cost: The company's DNA starts to blur
This is the deepest cost and the last one anyone names, because it does not surface for months and never resolves into a figure.
It is not only the senior team that takes its cues from the top. Middle managers and junior employees look upward too, for tone, for culture, and for a shared sense of where the organization is headed. Most of it originates with the leader. Remove that without a plan in place and it has switched off the north star the rest of the organization navigates by. That is the real hazard of mishandling a transition, and the reason it was never simply a question of who holds the top job. An unmanaged change at the top puts everyone in the company at risk.
What I would change
Three changes would make the most difference.
First, stop assuming your succession plan is complete with a single heir. The strongest plans define a profile, the kind of leader the company will need, and identify two or three people capable of potentially growing into it. The pace of change in today’s world makes it unwise to stake everything on one person and one path. The old observation that what got you here will not get you there has never been more accurate, and the executives succeeding today are those built for transformation rather than those who suited the prior era.
Second, and this is a position I firmly believe in, be willing to bet on a candidate who does not look obvious on paper. No one is born a sitting CFO. Someone took a chance, at some point, on every leader a company admires. A driven candidate with something to prove will often outperform the safe, credentialed hire, provided the aptitude and the technical ability are credibly there, which is not negotiable. Boards hesitate to do this for an understandable reason. Many have had difficult experiences before and have watched the risk go badly, so caution feels prudent. More often than it should, that caution costs them the better leader. Sometimes that leader is already inside the building, holding years of institutional knowledge and only lacking the title, though it is worth being honest about the cases where a company is changing so quickly that deep tenure has become a liability rather than an asset.
Third, accept an uncomfortable truth. People are not predictable, so transitions never will be either. Even a well-constructed, well-aligned plan can fail, and a company may have to run two searches in succession. That unpredictability is part of what makes this work interesting, and it is precisely why planning matters. The purpose of succession planning was never to guarantee the outcome. It is to ensure that when change arrives, and it always does, the company moves forward from a considered position rather than from a standing start.
A company should never be caught unprepared at the top. Those that understand this do not treat succession as a crisis to be survived. They treat it as a discipline that runs continuously in the background, and they are usually the ones still standing, and still hiring, while their competitors scramble.
The views and opinions expressed herein are solely those of the individual authors and do not necessarily represent those of The Consello Group. Consello is not responsible for and has not verified for accuracy any of the information contained herein. Any discussion of general market activity, industry or sector trends, or other broad-based economic, market, political or regulatory conditions should not be construed as research or advice and should not be relied upon. In addition, nothing in these materials constitutes a guarantee, projection or prediction of future events or results.
