Challenges in Succession Planning
Succession planning is a crucial aspect of a company's strategy, yet it can be difficult to execute effectively.
Two companies, Diageo and GSK, illustrate different approaches to succession planning. In one instance, a CEO was ousted after a two-year tenure and a 43% decline in share price, with the CFO appointed as an interim replacement. The board chair stated that the goal was to "securing the best candidate… to take the company forward" while avoiding a leadership vacuum.
In contrast, the second company announced the COO's promotion to CEO three months in advance, with the current CEO staying on until September 2026 to ensure a smooth transition. This move was met with a 3.6% increase in shares, as investors praised the company's "succession success".
"securing the best candidate… to take the company forward"
- Diageo's approach: interim CEO appointment after a sudden departure
- GSK's approach: planned succession with a smooth transition period
Author's summary: Succession planning can be challenging, as seen in Diageo and GSK's different approaches.