The video investigates the concerning trend of rising CEO turnovers and the impact poorly managed transitions have on companies' market value. Isabelle Berwick, hosting the FT Working It podcast, examines why effective succession planning is crucial yet often neglected by boards. The dynamic business environment demands leadership adaptability, yet many companies struggle, especially post-pandemic and geopolitical shifts like the invasion of Ukraine. With a 19% increase in CEO departures, factors such as retirement, burnout, underperformance, and misconduct contribute to the turnover. Despite the stakes, $1 trillion is lost annually due to mismanaged transitions.

The discussion highlights insights from Valerie Mocker, a board advisor, and leaders at Goldman Sachs to point out the importance of succession planning and leadership development. Emphasis is placed on embedding succession practices within company culture, with proactive preparation and engagement being vital. Essential leadership qualities encompass managing human factors, addressing unintended consequences, and employing feedback effectively. The CEO's ability to step back, reflect, and seek feedback plays a significant role in maintaining their position and leading sustainably.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. succession [səkˈsɛʃən] - (noun) - The process of inheriting or assuming a position, title, office, or property. - Synonyms: (inheritance, accession, takeover)

succession planning is a hard thing to talk about.

2. burnout [ˈbɜrnˌaʊt] - (noun) - A state of physical or emotional exhaustion, often caused by prolonged stress or overwork. - Synonyms: (exhaustion, fatigue, collapse)

Although the full reasons for exits aren't always disclosed, retirement burnouts, changing roles, underperformance and misconduct are often cited.

3. dynamic [daɪˈnæmɪk] - (adjective) - Characterized by constant change, activity, or progress. - Synonyms: (energetic, vigorous, active)

The world is too dynamic to keep up.

4. transition [trænˈzɪʃən] - (noun) - The process or period of changing from one state or condition to another. - Synonyms: (changeover, shift, transformation)

While some CEOs recognize when the time is right to plan a transition, others need to be told to step down by their boards or are even abruptly removed.

5. misconduct [ˌmɪsˈkɒndʌkt] - (noun) - Improper or unethical conduct by a person in a position of authority. - Synonyms: (misbehavior, wrongdoing, misconduct)

Although the full reasons for exits aren't always disclosed, retirement burnouts, changing roles, underperformance and misconduct are often cited.

6. ego [ˈiːɡoʊ] - (noun) - A person's sense of self-esteem or self-importance. - Synonyms: (self-esteem, self-worth, self-image)

It's never about the technical ability. What we need to train them in is the kind of softer factors, the human factors, the understanding how to strategize and how to really navigate and organization how you also navigate people who have very big egos.

7. choreography [ˌkɔːriˈɒɡrəfi] - (noun) - The sequence and arrangement of movements, particularly in organizational planning and transitions. - Synonyms: (arrangement, coordination, planning)

I think there are three opportunities here that companies can really up the emotional choreography of how the CEO leaves...

8. empowering [ɪmˈpaʊərɪŋ] - (adjective) - Giving someone the authority or power to do something. - Synonyms: (authorizing, enabling, commissioning)

They are also the CEOs who will be more collaborative, more empowering, and also more effective in leading their teams.

9. navigate [ˈnævɪˌɡeɪt] - (verb) - To find one's way or manage a course or path through something. - Synonyms: (steer, guide, move through)

...how to really navigate and organization how you also navigate people who have very big egos.

10. retrospect [ˈrɛtrəˌspɛkt] - (noun) - A survey or review of a past course of events or period of time. - Synonyms: (review, reconsideration, reexamination)

In retrospect, making time and space for regular talks with trusted people can bring long term incremental gains in the quality of their leadership and extend tenure.

How to fix the CEO succession problem - FT Working It

Chief executives are stepping down at record rates. Badly managed transitions have cost companies billions of dollars in lost market value. If you've got a good company with good product, the next most important thing is who's in charge. You may have been a great CEO 10 years ago. Are you going to cut it now? Businesses need stability, so why are so few putting plans in place? I'm Isabelle Berwick. I host the FT's Working it podcast and I write a newsletter about the workplace. In this series, I'll explore some of the most pressing issues around the future of work and talk to senior leaders about how they are making work better.

The world is too dynamic to keep up. You have to do leadership development for everyone. CEO turnover is at an all time high and over the past few years we've seen many high profile leaders leave and in some cases regain their top positions. There are a couple reasons why we are getting so many new CEOs right now. The first one is that during the pandemic, lots of companies held on to their CEOs for perhaps longer than they might otherwise. The second thing that happened is since Russia invaded Ukraine, the whole environment has changed for companies. Interest rates are higher, costs are higher, we've had killer inflation. We've shifted from a sort of growth environment to a much more constrained environment. So companies need different kinds of leaders.

While some CEOs recognize when the time is right to plan a transition, others need to be told to step down by their boards or are even abruptly removed. Between October 2023 and October this year, more than 1800 US CEOs announced their departure. That's a number 19% rise from the previous year. Although the full reasons for exits aren't always disclosed, retirement burnouts, changing roles, underperformance and misconduct are often cited. Poorly managed CEO transitions IN S&P 1500 companies have resulted in $1 trillion of lost market value annually. With so much at stake, why are some boards not getting this right?

To find out more about effective succession planning, I went to my alma mater, St Catharines College, Oxford, which is itself undergoing a leadership transition, to meet Valerie Mocker, CEO of coaching firm Wing Women and an experienced board member and board advisor. I know that whenever I read surveys of boards, they always say CEO succession planning is one of the top priorities for us as a board. Do you think that actually happens in practice? On a personal level, you know that saving for retirement is important. That doesn't mean that you actually save enough for when you're going to retire. And in the same way as sports, we very easily get dragged into the day to day business of what it means to be a board member. So you meet and you discuss quarterly reports. But we certainly, as boards in general, don't spend enough time on succession planning.

succession planning is a hard thing to talk about. Essentially you need to Talk to your CEO or CEOs and to the executive team and say, so once you leave, who could take over your job? It's not an easy conversation. What's the attitude of CEOs themselves to succession planning? It is important that we have CEOs at the top who have come in knowing that at some point their role will change or they might have to leave to make room for new people. So you set the expectations right from the start.

Yeah. I would always ask this question in the interview process already about how long do you want to stay, what do you want to do after you leave and what are you going to do in the time that you are here to train up people so that they can also follow in your footsteps once you leave. They are also the CEOs who will be more collaborative, more empowering, and also more effective in leading their teams. What happens when transition is forced, A CEO resigns, or there's ill health, or there's a scandal? How should boards react in those circumstances and how quickly should they seek a new CEO?

In an ideal world, you want to find the right candidate and not the most readily available candidate. That's why succession planning is so important. And when we talk about succession planning, ideally I like to talk about succession practice. So you need to have people in the organization who you give the opportunity to to practice taking over a role with more responsibility so that if you have a crisis, you have people who are immediately able to step up. And where you as the board know, I trust these people to take over the job, even if it's just for a certain period of time.

It's never about the technical ability. What we need to train them in is the kind of softer factors, the human factors, the understanding how to strategize and how to really navigate and organization how you also navigate people who have very big egos. It's not enough to just be the busy bee who does really good work. One of the reasons why I built Wing Woman is to make sure that we have a space where people learn what these rooms of power look like. After speaking to Valerie, I realized the value of having a continuing and wide ranging focus on succession planning.

Not just for the person at the top, but for all sorts of roles. Experience and practice is vital and that task of securing a diverse talent pipeline is even harder. Boards are actually getting older. Spencer Stewart research on UK boards shows that 90% of board members are now over 50. There are CEOs who stay on who. Everybody wonders when they will go, but people don't want to push them out, like Jamie Dimon at JPMorgan Chase or Larry Fink at BlackRock, who are both seen as sort of important big figures in business. And so nobody's going to tell them to go. But there is concern sometimes that they are not planning appropriately for the future.

Jamie Dimon, for example, has a reputation for having pushed out lots of people who could have been his successor and have gone on to run other banks. He would, of course, say that his new generation of potential successors is equally good and, you know, and the bank will be in great hands if and when he decides to retire. It is the single hardest thing for a company in many ways. If you've got a good company with good product and a business model that will throw off money, the next most important thing is who's in charge. And so, you know, I guess you could say the average tenure, I think, is now around five years for big public companies, which means they don't screw it up all the time.

But that means one out of every five companies is changing CEOs every year. Goldman Sachs, the global investment bank, has been working on a method to help keep their leaders in place. I went to the bank's office in London to find out more from its chief learning officer, James Fulton, and leadership consultant Kate Lai, who worked together to help leaders both inside and outside Goldman Sachs.

One of the prime tools that every leader has every year is the tool of feedback. And what we can do is make sure that that's more useful both to the leader themselves and to the organization, and particularly at senior levels. I think some executives worry that it's political, that feedback they receive isn't unbiased about performance, but it's affected by rivals who might yearn for that seat, by people with opposing agendas. If you ask most CEOs, when's the last time you got feedback that genuinely made you stop in their tracks? It will be years. Wow. And is that their choice or because they feel they've got to the top, or is it because they don't have time? Why is that?

Well, if you think about it, to give your boss's boss's boss serious feedback, you've got to be really vested in doing that, haven't you? Why would you do it? It's a Career end. Career suicide. Yes, career ending. So I think you should absolutely bank on the fact the more senior you get, the less people are going to tell you things that will be distasteful to you. And you have to actively put processes in place which Goldman have to make sure that their partners don't operate in an echo chamber. Goldman Sachs has just over 46,000 employees, of whom just 400 are partners. New partners are selected every two years and this sophisticated feedback program helps them to develop as leaders.

So all the things you've talked about suggest to me that a leader who is aware of this, how they're changing, how they could progress, perform better, has a better chance of staying in post for longer. And either because they leave or because they're ousted by a board who's not happy with the changes, Would that be correct? If you're listening to disconfirming feedback and feedback from people who aren't thrilled, maybe with every part of your performance you have a chance to react to it, whether it's to dispute it or change it or act on it. Are you likely to drive better with.

With an accurate dashboard? Yes, you are. And similarly, you're likely to lead better and more sustainably with accurate and regular feedback. What would be a common things that executives might need to look at? I think one thing I see a lot is unintended consequences of their actions and words. You know, so they think they've done this in good faith and this was their intention, and they're genuinely baffled that it was interpreted like this or understood like that. I think leaders underestimate how crisp their communication needs to be and how repetitive it needs to be in order for people to understand. What does the boss think? Does that play into not really understanding the impact they have on the impact of power and status on the people around them.

It's quite common in our experience that executives don't realize how senior they are. They don't realize how many people are looking at them. So you even look at something or make a flip and comment about it. People take that as a judgment. You can't do that anymore. You can't do a lot of things. You can't do a lot of things. And people need to get really smart that quickly. We're all human. We don't want to think about the waters closing over our heads. And presumably that's magnified if you are a very powerful person who takes care of the psychological piece of preparing a CEO for transition.

Oh, honestly, sorry it's such a hot button for me. I Just think most succession plans are about the who and not about the how, you know, and I think there are three opportunities here that companies can really up the emotional choreography of how the CEO leaves because they fail to tune into, they fail to ask the question what really matters to people here. So they do the contract and the shares and all the legal stuff. And the reason I think you get so many sort of spanners in the work at the end is people realize things that they've invested decades in are going to be trashed and egos start acting out.

I, I think often they are disenchanted, they're distracted or they're trying to dominate it and say, I want my version of my legacy. Messages to prevail. I had a really interesting chat with James and Kate. One of the things that struck me was the importance they place on reflection and stepping back. Often leaders don't get a chance to do this, they're so busy. But making time and space for regular talks with trusted people can bring long term incremental gains in the quality of their leadership and extend tenure. Just things go wrong, people get sick, people have trouble keeping their pants on. You know, things happen.

If you're a really great business, you probably do have three or four people who you think could fill some of the great roles. In fact, you ought to. If you're a properly run business with a good board, they should have that. If you replace a long running CEO, as with most managers, the longer you do something, the things you are good at, you continue to do well. The things you are not so good at build up. And so by the time a long standing CEO leaves, whatever it was that CEO was slightly less good at is going to have built up as a problem. And so that's the other thing is the new CEO is going to have to deal with whatever didn't get dealt with before.

CEOs are very well rewarded and have sky high status. But it's lonely and hard at the top and some people burn out or have hidden mental health issues. Those pressures are enough to dissuade many talented people from going for the top job. As a way to combat this, some major companies have adopted the CO CEOs model. This leadership structure creates equal heads of an organisation. The co CEO model is a great one for bringing in fresh talent in the younger generation because you can have a more seasoned CEO who maybe the board trusts with, you know, the experience he or she brings.

And also if you have shareholders or certain stakeholders, they might not be as open to get someone younger in or someone who is maybe different to the typical type or who's outside of the industry. It makes it so much easier for you as a board because especially when it comes to succession planning, you don't worry as much about a person leaving and your CEO leaving because there's always a second person who can steer the ship and who can continue running the organization if for whatever reason One of the CEOs is deciding to leave.

Having people to share the burden with and having a spread of expertise sounds like a great solution for increasing CEO tenure. So why aren't we seeing more partnerships at the top? Perhaps because power is intoxicating and it can be hard to let go and let someone else share your platform. And being a co CEO is like any long term partnership, it comes with built in disagreement and friction. That's something that will need to be carefully managed if it's going to survive long term.

Whatever leadership structures being used, getting succession right is important when it comes to succession planning. Overall, I think most companies are doing a better job than they would have 10, 15 years ago. They of putting time and energy into it. Not only what do we plan for the CEO, what do we do if our CFO gets recruited away and therefore he's not there as a possible successor. So I think a properly run big public company at this point has spent quite a bit of time doing succession planning. They may not have done it well. And I also think that the ones where, you know it's a big personality in charge, particularly ones where the founders are still there, they're not as good at it because.

Because it's very hard to turn around and say Elon Musk, what's your succession plan? So I think succession planning is better than it once was. That doesn't mean some companies don't screw it up pretty badly. People get to the very top because they're single minded and focused. Some of them are never going to leave without being told to go. I think there'll always be dramatic CEO exits with all the anger and damage that can cause to the leader, to their team, to and to the business. For boards, keeping your existing senior people in position and performing well for longer has to be the starting point for any succession plan.

LEADERSHIP, BUSINESS, ECONOMICS, WORKPLACE DYNAMICS, CEO TURNOVER, SUCCESSION PLANNING, FINANCIAL TIMES