Private and family company boards often underestimate CEO succession until circumstances force the issue. When that happens, the costs of delay, ambiguity and misalignment rise quickly. What is the most important thing a private or family company board can do to ensure that the company has an effective plan for CEO succession?
Succession Is Strategy, Not Replacement
The most important thing a private or family company board can do to ensure effective CEO succession is to treat succession as a strategy-driven, continuous governance process — not a one-time “replacement” exercise.
The obvious starting point is a multiyear CEO pipeline: Identify internal talent early, invest in development, and revisit succession readiness as part of annual strategy and performance reviews. This discipline is table stakes — but a paradox lurks. A long development process can inadvertently produce a CEO who is perfectly suited to yesterday’s strategy, not the company’s next phase. Markets shift, ownership goals evolve, disruption accelerates — and boards sometimes develop candidates around the current CEO’s style, fitting the present business context instead of the capabilities the future business model will demand.
The way to avoid this pitfall is to anchor succession planning directly to the company’s three-to-five-year strategy and risk landscape: the next growth chapter (scale, acquisitions, turnaround, digital transformation, expansion), the emerging client and stakeholder environment, and the leadership attributes required to thrive. Succession must be forward-looking, not retrospective.
This is where the contribution of the independent director becomes critical. Independent directors sit outside management and internal politics and can provide the objectivity and process discipline that succession planning requires. They help ensure decisions are grounded in evidence — not preference — by insisting on structured evaluation tools (competency frameworks, 360-degree feedback, personality assessments) and by testing assumptions about candidates’ readiness, leadership behaviors and ability to lead change. They are also well-positioned to challenge “favorites,” legacy thinking and cultural inertia, particularly when internal successors may reinforce norms that the company must evolve.
Private and family boards can overestimate internal readiness, especially when the company’s future requires different leadership muscles than the current model. That risk increases further with private equity sponsors, lenders and minority investors, for whom CEO credibility often affects investment decisions, valuation and financing confidence. Even if the board prefers an internal successor, an independent director can recommend benchmarking internal talent against the external market or maintaining a short list of credible external profiles to avoid being limited to only one option.
In short, the independent director’s role in a dynamic business environment is as process steward, governance anchor and objective evaluator, ensuring the board selects not merely the next CEO, but the right CEO for the company’s future.
Carol Casazza Herman is a director of Haley & Aldrich.
Succession Planning Is Risk Management
The most important thing a private or family company board can do to ensure the company has an effective plan for CEO succession is to discuss it routinely — in advance of a CEO transition — to prevent emergency decisions and, ultimately, increased risks and negative consequences to the company.
The only things certain in life are death, taxes and CEO turnover. According to Challenger Gray & Christmas and the Russell Reynolds “Global CEO Turnover Index,” CEO turnover hit record highs in 2025, with 1,586 CEOs departing private companies and 446 leaving public companies. CEO tenure now averages just 36 months. Private-equity-company CEO churn was 70% within the first two-year investment hold period, with lower turnover for family CEOs at 20%. Yet too many times, private and family company boards do not discuss CEO succession routinely as part of their strategic plan. They may feel the CEO is performing as expected, fear losing the CEO because of the discussion being misinterpreted as the first step in the chief executive’s firing, fail to understand the process or simply do not feel the need for succession planning.
Insufficient succession planning and poorly managed CEO transitions can undermine any business and significantly impact its performance. Private and family businesses can be particularly affected. The processes, dynamics, relationships and sometimes conflicting generational visions of these companies are complex, involving both executives and family members. Studies show potential declines in shareholder value and revenue frequently follow a change in private and family company leadership.
It is imperative to establish a formalized, documented and regularly updated CEO succession plan as an ongoing strategic initiative and not a one-time event. A clear, objective process, including desired leadership traits based on long-term strategy and active engagement of independent directors to mitigate personal or family biases, is needed.
Key steps of private company CEO succession include:
Active board governance. The board must take full responsibility for the process. This may include forming a committee, which may include the outgoing CEO but should never be delegated to him or her. The board must be aligned on the process, update it annually and communicate with key stakeholders.
Formal process and timeline. Create a written plan outlining the process and timelines for identifying and developing candidates.
Define the profile. Identify specific skills, experiences and culture fit the company needs in the next leader based on future strategy, not current or past requirements. Ensure alignment on the profile between board and management.
Development and talent pipeline. Identify and develop high-potential internal candidates, and provide mentorship, training and exposure to the board. Evaluate external talent for fresh perspectives and potential filling of necessary skill gaps.
Documented plan and emergency planning. Create a formal written plan that includes emergency protocols if the CEO leaves suddenly as well as a clear, scheduled transition timeline.
Family alignment. In family businesses, the family council and shareholders must align with the board to ensure the successor chosen is consistent with family and business goals.
The CEO succession discussion should always be separated from the CEO evaluation during executive sessions to maintain a robust and objective process.
Valerie Darling is lead independent director of Sequentify, independent director on the national board of Private Directors Association and advisory board member of Life Science Works.
Don’t Wait to Decide the Who
“You have brains in your head. You have feet in your shoes. You can steer yourself any direction you choose” – Dr. Seuss
However, to get there and be ready, you must start the succession process early and treat it as a continuous, strategic discipline rather than a one-time event. Starting early, ideally years before a planned departure, unlocks several critical advantages for a board that are otherwise impossible to achieve.
Future-proofing the role. It gives the board time to align on the future needs of the company and identify candidates equipped for upcoming strategic challenges.
Developing talent. Long planning horizons allow the board to identify and actively develop internal, high-potential leaders through stretch assignments and formal mentoring, which significantly reduces transition risk.
Benchmarking and ensuring optionality. Being detailed in planning provides a window to quietly scan the external market and benchmark internal talent against industry standards, ensuring the final choice is truly the best fit for the business. It also ensures business continuity by having a “ready now, ready in three-to-five years” list (of internal and external candidates) in the event of an unforeseen event.
Neutralizing emotions. In family or founder-led firms, ongoing discussions normalize the topic, removing the personal sting and reducing the awkwardness or anxiety that can arise when a CEO feels threatened by the mention of their successor. As part of an ongoing dialogue, it allows for a transparent, merit-based and culturally aligned process if a co-founder or family successor is not a viable business strategy.
By making succession part of the company’s strategic business planning process, private and family boards move from reactive crisis management to intentional value creation. Summarizing CEO succession planning in Seussian simplicity: Start early, plan for the future, benchmark, be transparent, have clear and culturally aligned criteria, and review and update annually as part of the company’s strategic business planning process.
Kate Hermans is chair of Clue by Biowink and director of Mid-Atlantic Diamond Ventures.
Name the Strategy Before Naming the CEO
Boards of privately held or family-owned companies err when they fail to embrace the need for a CEO succession plan that is ready to deploy in either an emergency or anticipated transition. The most critical step in that process is the first one: Taking the time to engage in a disciplined process to gain clarity and consensus on the board’s strategic priorities for the next three-to-five years.
With a consensus in hand, the board and, by extension, its selection committee lay a foundation that will help sidestep false starts, troubling internal debate and negative (sometimes embarrassing) shareholder and stakeholder perceptions, as was witnessed during the recent turmoil at Disney during its CEO selection process.
Executing on that consensus and next steps, the selection committee should draft a scorecard that lists the board’s priorities and the data-driven outcomes that will represent achievement in each instance. It’s a tailored approach that establishes a clear line from the board’s strategies, which should be reviewed and recalibrated periodically to match the board’s expectations for the new CEO.
It’s helpful to note that scorecard ratings will be informed both by candidates’ responses to the typical search criteria (leadership and style; operational skills; customer, product and services experience) and how candidates demonstrate their capacity to execute in line with the enterprise’s vision.
The intention is to go beyond candidates’ historical managerial performance and recent career trajectories and select the candidate who best aligns with strategic priorities, can deploy and engage corporate and human capital, demonstrates empathy, self-awareness and social awareness, and communicates with transparency in critical board and stakeholder relationships.
It’s not a task to be taken lightly, nor is it an enterprise for the faint of heart. The rigor will help diffuse confusion during the selection process. It’s also an opportunity for periodic scrutiny of whether the company is on track regarding emerging risks and innovation opportunities.
Easier said than done? Maybe. Disney’s high-profile case can serve as a cautionary tale. Simply naming a new CEO is not enough. A board first must take care to identify and agree on strategic priorities.
Is the process different for a family-owned business? Not in broad outline, but the succession plan should reflect any formal expectations around the eligibility of family members or nonfamily candidates.
A viable CEO succession plan will assure shareholders that the enterprise is doing all it can to realize resilient growth and enhance shareholder value.
Marsha Vande Berg is global independent director of Quantum Advisors India.
Succession Is a Governance Discipline
In my experience serving private company boards, the most important thing we can do to ensure effective CEO succession is to treat it as governance architecture, not a future event.
Succession is not about naming a successor. It is about reducing institutional dependency on one individual while aligning leadership capability to the company’s next strategic chapter. Independent directors are central to that discipline. They bring external benchmarking, portfolio-level pattern recognition, and the independence required to ensure the CEO profile reflects forward strategy and market realities, not familiarity or comfort.
In private companies under roughly $500 million in revenue, the primary risk is concentration. Strategy, capital relationships, customer confidence and, increasingly, AI and cybersecurity oversight often reside with one dominant leader. Boards at this stage should prioritize structural clarity: defined decision rights, documented strategic frameworks, regular executive exposure to lenders and directors, and a deliberate authority-transfer road map. Even at this level, understanding how AI can differentiate offerings or how cybersecurity builds market trust should shape the capabilities required of the next CEO.
As companies scale beyond $1 billion, the risk shifts from personality dependence to strategic fragility. Multiple business lines, ecosystem partnerships, leverage structures and digital transformation initiatives require scenario-based CEO profiles, emergency succession protocols and formal governance exposure for internal candidates well before transition.
Consider the case of Barry-Wehmiller: Their growth through disciplined acquisition has been supported by leadership systems that distribute authority and embed culture institutionally. The company’s succession strength reflects architecture, not individual reliance.
In private equity-backed companies, this governance rigor intensifies. Sponsors evaluate succession through scalability, velocity and enterprise resilience. Independent directors are essential in balancing sponsor timelines with long-term durability.
As revenue grows, failure modes shift — from overcentralization to governance misalignment. Boards that scale succession sophistication accordingly turn leadership transitions into visible evidence of institutional strength.
Robert Barr is chair of Caboose Inc.