Succession in private companies is a topic handled differently by each boardroom across the country. Some boards are proactive in their planning, recognizing the value in preparing for the unexpected, guarding institutional knowledge and adhering to their fiduciary duty of protecting the company’s long-term interests. Some boards have either hit a good stride with the team they currently have, have too many agenda items to attend to and let succession slide to the bottom of the board’s priorities, or simply think succession is a topic best saved for a later time. All boards, however, have a legal and practical interest in protecting the company from economic, geopolitical, or life-event level shocks; protecting the company’s value; and protecting the company’s (and the board’s) credibility in the moment as well as heading into the future. With such gravity on the line, what then is holding so many companies back from solidifying their succession plans?
Succession’s Misconceptions
Jeanette Gorgas, who serves on the boards of Unison Energy, Aspiriant and Granite Comfort LP, says the biggest misconception private company boards tend to have about succession planning is thinking it’s all about the CEO. According to Gorgas, “In reality, it’s about ensuring the long-term continuity and value of the business. Many boards treat succession as an event that begins when there is a perceived CEO performance issue or when a CEO begins discussions about retirement. However, the strongest boards view succession planning as an ongoing process of building leadership capacity, assessing talent and preparing for multiple future scenarios. If succession planning only starts when there is an opening, the board has already lost valuable time.”
Laura Juarez, who serves as a director of K.G. Stevens, Excab Inc. and Top Notch Distributors Inc., says one of the biggest misconception private company boards hold is that succession is an event about selection rather than a strategic pillar of business continuity. Juarez says CEO succession is one of the most consequential things a board does, bigger than a contingency plan in the event of an emergency or a recruiting season for a planned exit. “Privately held companies place a premium on trust and long-term relationships, which can make them slower than public or private equity-owned companies to have the hard conversation about the right leader at the right moment or about a retirement everyone can see coming,” Juarez says. “I’d encourage us to stop calling it succession planning and start calling it leadership continuity. That single word change moves the board’s attention from the what to the why. Continuity means continuously validating that the leader at the helm is the right one for what the business needs right now and staying honest with ourselves as those needs shift. Done well, this runs alongside the strategic plan as a continuous, evidence-based dialogue. It’s not a project you spin up when a CEO signals retirement and it doesn’t take a back seat to whatever fire is burning that quarter.”
Despite its paramount importance, succession still gets pushed down the agenda and left for moments when the time has already passed for a theoretical conversation about succession and instead dipped into a “What do we do now?” sequence of events. Sam Judd, board chair and chair of the audit committee, plus member of the nom/gov and compensation committees of HEI Civil, says, in his experience, many private company boards tend to view succession planning as a check-the-box exercise and actually end up falling short in treating it as a critical ingredient to both long-term success and a potential short-term CEO departure. “Boards and management alike often believe that they’ve got time and there are more important and immediate priorities. There is at times overconfidence or even a blind spot that they have the people needed for today and the future,” says Judd. “In private and family companies, this can be especially dangerous because loyalty, tenure and familiarity can create a false sense of readiness. The company may have strong operators, but that does not mean it has a prepared CEO successor.”
Don’t Ignore the Squeaky Wheel
The old adage about how the squeaky wheel gets the grease certainly applies to succession planning in private company boards more than ever amid stacked agendas, a growing cacophony of economical and geopolitical distractions, and a tumultuous and unpredictable market.
Quite simply, succession should never become an emergency project. “Usually, it’s not what the board is discussing — it’s what they aren’t discussing,” says Gorgas. “If the board cannot name two or three credible CEO candidates and articulate their development needs, they’re behind.”
Juarez suggests asking every director on your board three questions to determine where your board is at on succession planning:
- What’s our short-term contingency plan if the CEO is gone tomorrow?
- What’s our long-term leadership continuity plan given where the business is headed?
- What are we actively doing right now to build readiness for both?
“If you don’t get a concise, consistent answer from everyone at the table, you’ve found your gap,” says Juarez.
Another warning sign that your board isn’t keeping succession planning top-of-mind, according to Juarez, is a structural one. “If succession and leadership development aren’t regular standing topics in your executive sessions, they’re hopes, not priorities. That’s not an indictment of the board: It’s an invitation to upgrade.”
“One of the clearest warning signs [your board is waiting too long to talk about succession planning] is when strategy and growth discussions are disconnected from the talent required to execute them,” says Judd. “The board may approve expansion plans, acquisitions, new markets or operational transformation without a clear view of who will lead those efforts.”
Judd says another sign that the board isn’t prepared for an unexpected succession event is when the same one or two names appear as the answer to every future leadership question. “That suggests the company has a thin bench, not a succession plan. Boards should also be alert when management discussions focus heavily on current performance but rarely address future leadership capacity, development needs or emergency coverage for key roles.”
Identifying Tomorrow’s Leaders Today
Ten years ago, boards widely emphasized operational excellence and industry expertise as must-haves for CEOs coming into a new role. Those qualities are still important, but today they are table stakes. “The leaders who stand out are those who can lead through ambiguity, inspire people during constant change, attract and retain exceptional talent, and make difficult decisions with incomplete information,” says Gorgas. “Emotional intelligence, resilience, adaptability and learning agility have become just as important as technical competence. The pace of change has accelerated dramatically, so the ability to evolve has become a competitive advantage.”
Earlier in Juarez’s career, a potential succession candidate was a strong tactician, someone who could integrate and execute, could carry a CEO role a long way, because, as Juarez puts it, the change cycle was longer and more forgiving. That is no longer true. “Today’s CEO has to hold the vision steady while staying genuinely agile within it and has to do that with a workforce that expects autonomy and values-aligned behavior on tough subjects, not just direction from the top,” says Juarez. “McKinsey’s research on CEO excellence backs this up: Their data on thousands of CEOs points to boldness as one of the strongest predictors of standout performance, alongside the discipline to reallocate talent and resources toward what creates value instead of protecting the status quo. That’s on top of what we already know is core to the job: humility, team building and a commitment to stakeholder win/win.”
Judd says the best successors combine strong conviction with the humility to listen and learn. “The essentials have not changed as much as some people suggest. Judgment, integrity, financial discipline, strategic capability and leadership presence still matter enormously. In private companies, cultural fit is also critical because the CEO must operate effectively with the owners, the board, the leadership team and often the family,” says Judd. “What has changed is the premium on collaborative leadership. The command-and-control CEO is less effective in many organizations today. Boards should look for leaders who can build teams, attract talent, communicate clearly, adapt quickly and lead through influence as well as authority.”
Of Remedies and Antidotes
Remedies are broad cures for ailments small and large — hydration remedies headaches, but also aids in digestion. Antidotes are specific cures for specific ailments — a snake or insect bite that can only be alleviated by a certain decoction or a prescribed pill for a rare but deadly disease. Similarly, private company boards approaching succession planning should look inward to decide what the next generation of leaders will accomplish as well as what hardships they will need to solve. Does the board need a remedy or does it need an antidote? How should boards decide whether the next CEO should come from the family, inside the organization or outside the business?
“The right answer is highly situational,” says Judd. “The board should start with the reason for the transition. Is this a natural retirement, performance issue, generational handoff or is there a need for strategic reinvention or a crisis response? The context should shape the candidate profile. If the company needs significant strategic change or a performance reset, an external candidate may be the better choice. If the business is performing well and there is a qualified internal leader, an internal successor can reduce risk because that person already understands the culture, history, people and operating realities of the company. Family candidates should be evaluated with the same rigor as any other candidate.”
Judd says a family member can be the right answer, but only if they have the capability, credibility, readiness and desire to lead. “The board’s job is to help owners separate family aspiration from business requirements and realities.”
Juarez is candid that this is her own view and not a universal one: Boards need to “go broad before they go narrow.” She elaborates, saying, “Start with the criteria, not the candidate, and build the pool broadly. This matters most when everyone already assumes a family member or internal candidate will get the job.”
Family businesses should not default to favoring a family member as CEO, according to Juarez. “The board’s job is to shepherd the business toward whatever potential its shareholders have defined for it. When your shareholders are clear about what they want the business to become, everyone can rally around that as True North, and all shareholders, including potential family member successors, win in the long run.”
Gorgas suggests private company boards looking down the barrel of succession should start by asking themselves not “Who deserves this opportunity?” but “What does the business need over the next five to 10 years?”
“Every option has advantages. Family members often bring long-term commitment and a deep understanding of the company’s values, among other essential qualifications. External candidates may introduce capabilities the organization has never had,” says Gorgas. “The board’s responsibility is not to preserve tradition — it is to ensure the company has the leadership needed for its next chapter. Sometimes, that means selecting a family member. Sometimes, it doesn’t. The business strategy should drive the decision, not legacy or familiarity, and talented boards understand this can be a delicate situation and that it must be navigated in a graceful manner.”
Beating Succession to the Punch
Private company boards have an opportunity to develop their successors over a long period of time, given proper structure and deliberate intentions. Many boards exercise this opportunity to avoid leadership hiccups, keep everyone informed of the plan and to provide a clarifying view into what little about the future we can control. Succession is an ongoing process, not an event to be worked up to and wound down after it has passed.
“If management is not already doing serious succession planning, the board needs to push for it. That includes reviewing the process, understanding the output and revisiting it regularly as the business evolves,” says Judd. “The board also provides an independent reality check on leadership readiness. Directors can identify development gaps, suggest stretch assignments, encourage exposure to board-level issues and mentor high-potential executives.”
Judd says boards should get to know potential successors directly through board presentations, special projects, informal dinners and other settings where judgment and leadership style become visible. In some cases, Judd suggests the board may also need to begin the CEO transition conversation before the CEO is ready to have it. “That requires judgment and diplomacy, since avoiding the topic does not serve the company.”
Juarez says potential successors need real exposure to the board, not distant observation or secondhand assessments. “In the best version of this, your independent directors become allies and scaffolding for emerging leaders, and that support gives those leaders a real edge when a role does open up. Most of us would rather build a pathway for our internal team wherever we can, and directors who’ve lived this in their own careers, who know what works and what doesn’t, are positioned to help,” says Juarez. “It also gives emerging leaders time to build governance acumen and a working relationship with the board itself, both of which will serve them well once they’re the one sitting in that seat.”
“The board should be actively involved in leadership development — not by managing executives directly, but by ensuring the company has a strong leadership pipeline,” says Gorgas. “That means regularly reviewing talent, discussing succession below the CEO level, understanding the strengths and development opportunities of key executives, and ensuring future leaders are given meaningful stretch assignments. Boards should know the leadership bench well before they ever need to make a succession decision.”
Planned Versus Unplanned Succession
Even with a planned succession plan in place, how can private company boards prepare for the unexpected vacancy of a key leader?
“First, I would challenge the premise that every board has a planned succession process. Many private company boards do not in my experience, and even fewer have a strong emergency succession plan. Boards need both: a long-term succession process and an emergency plan. The emergency plan should identify who can step in immediately, what authority that person will have, how the board will support them, how communication will be handled, and what process will be used to determine the permanent solution,” says Judd. “This should not be limited to the CEO. Boards should also understand succession risk around other critical roles, including the CFO, the COO, key commercial leader, and family executives whose relationships or institutional knowledge are central to the business.”
Juarez says “emergency succession planning can turn into a fire drill even with the best plan on paper. You always think you’re ready until the day you find out you’re not. What I’ve seen most often is real agreement on who paired with a readiness plan that’s still theoretical rather than something your team has actually rehearsed. A good plan names an interim CEO, sketches a draft org chart showing how the change cascades through the rest of the organization with supporting development plans that are alive and well, and includes a short-term workplan you could mobilize within business days of the event. It also includes written processes only the CEO knows. Those documents might be the last opportunity the CEO has to speak to their people.”
What often gets missed, according to Juarez, is succession planning can’t be about one person alone. “It has to account for how roles and responsibilities shift for everyone around that person, what added support they’ll need, whether that’s more board engagement or outside coaching, and a communication plan for how you explain the transition internally and externally. Treat it exactly like any other emergency response plan — written, specific and rehearsed.”
Gorgas agrees, “Companies don’t get to choose when leadership transitions occur. Emergency succession planning is one of the board’s most important risk management responsibilities. Every board should know who assumes leadership tomorrow if the CEO is suddenly unavailable, what decisions that individual is authorized to make, how key stakeholders will be informed and what the process will be for evaluating longer-term leadership options.”
Successful Successions
The most successful successions often fly under the radar because, by the time they occur, it is after years of preparing that person for the role. “The best transitions started early, had meaningful board involvement and were treated as a disciplined process rather than a single decision. The full board was aligned on what the company needed, what the candidate profile should be, and how the transition would be decided and supported,” Judd says. “Transitions struggle when the process is vague, political, overly personal or dominated by one individual’s preferences. They also struggle when the board underestimates the importance of onboarding the new CEO, aligning the leadership team and clarifying the role of the outgoing CEO or family leader after the transition. Successful succession is not just naming the next leader but also preparing the organization to follow that leader.”
The board successions Juarez has watched struggle all shared the same pattern of “too much hope, a lack of radical candor and too many decisions made on qualitative gut feel instead of a disciplined process.”
The distinction Juarez draws is succession is the moment someone assumes the title. “Continuity is the ongoing rhythm around it, and that rhythm needs real process, courageous leadership and clear metrics that tell you exactly where you stand against what you agreed you’d need.”
Gorgas notes a similar theme in successful successions, where “the board and CEO are aligned early, leadership development is intentional, communication is thoughtful, and the incoming CEO had opportunities to build credibility before taking the role. Expectations were clear, and the outgoing CEO understood when to step back and allow the new leader to lead.”
One year after a succession has taken place, signs as to whether the right choice was made become apparent. After three years have passed, that choice is still rippling throughout the organization. So how do you know if your board selected the right candidate to carry the company forward into the future? “In one year, I want to see performance, strategic execution and culture indicators holding steady or improving, with nothing eroding underneath the surface,” says Juarez. “The new leader should have co-created an upgraded operating rhythm with their team: how people are led, how planning and measurement happen, and how the organization thinks about what’s next.”
In three years, Juarez says: “I’m looking for shareholders who are genuinely delighted with the outcome, and not only the financial results. I want to see a healthy stakeholder ecosystem, measurable progress against the strategic plan, and the family’s values and ethos still visibly alive in how the business operates.”
“One year after the transition, the new CEO should be fully in the role, advancing a clear agenda, working effectively with the board and owners, and building alignment with the management team,” says Judd. “The organization should not feel stuck looking backward or revisiting the decision.”
Gorgas looks for confidence and momentum. “Employees understand the new leader, the executive team is aligned, customers and investors remain confident, and the board has established a productive working relationship with the CEO. The focus has shifted from the transition itself to executing the strategy,” says Gorgas. “Three years later, succession should no longer be the story. The new CEO should have established a clear leadership identity, strengthened the executive team, advanced the company’s strategy and begun developing the next generation of leaders.”
The ultimate measure of a successful succession goes beyond selecting the right CEO. It is about creating a leadership culture where succession planning becomes part of how the organization operates, which ensures the company is always prepared — and preparing — for what’s next.