The Leadership Bench Problem No One Wants to Admit

David: Boards and senior executives are navigating a world where strategy ages quickly, talent is stretched thin, and technology is reshaping leadership itself. In this season of Pearl Meyer Unscripted, we're exploring the real conversations happening today in boardrooms and the C-suite—and the new rules and adaptations required for executive leaders to be effective. 

To kick things off, we're going to dive into a topic that seems to be on the minds of most company leaders—succession planning—as we explore the leadership bench problem that no one wants to admit. 

On paper, most organizations have succession plans for their CEO and perhaps the broader C-suite. In practice, many boards quietly worry about whether their leadership bench is really strong enough, or deep enough, for what's coming. Other boards may have blind spots about this and may not be worried enough. Flatter organizations, higher burnout, and increasing skill demands have made executive development more complex and demanding than it appears.

In this episode, we explore why traditional executive succession approaches are struggling to keep up, what boards are underestimating about leadership readiness, and how CEOs are rethinking pipelines for a very different future. This is a candid conversation about talent risk and why it's becoming one of the most material risks boards and CEOs face today.

I'm thrilled to be joined by Peter Thies, managing director at Pearl Meyer, who has worked with dozens of boards and CEOs on this topic of executive succession over the past two decades. Welcome, Peter.

Peter: Thanks, David. Happy to be here and looking forward to the conversation.

David: Great. Let's start with something that is on everyone's mind, which is: Why do so many succession plans look solid on paper, but may be insufficient in reality?

Peter: Great starter question, David. There are actually four things that we see happening that tell us that these plans are insufficient. One is what we would call ‘check the box.’ Succession plans for most companies are essentially what we call ‘boxology.’ You have boxes, you have lists of roles, and lists of two to three potential successors for each role. They feel nice and tidy and clean during the board talent review, but they actually lack specifics on how the company is actually preparing their executives to become enterprise leaders in today's fast-changing business climate. So, check the box is one of these.

A second thing that we're seeing is that most succession plans are actually replacement plans. They're focused on staffing the C-suite roles as they exist today, instead of preparing executives to be in those roles in the future, which may be different roles by the time they get there.

The third thing is that most of these plans are short-term oriented. Boards are getting much better at emergency succession planning, which is great, but only 58% of directors, in a recent study by Spencer Stuart, said that their boards develop succession plans for successors across different timelines, not just concerned about the emergency succession or sudden loss of leadership, but who's ready now, one to two years from now, three to four years, and so forth. 

And finally, there's a lack of focus on actual development of leaders. Most of this is focusing on assessing them. But the jobs of CEOs and C-suite executives are actually getting harder. Successors have to be resilient, adaptable, and high in what we call ‘learning agility.’ And in plain English, that's the ability to deal with uncertainty in first-time challenging situations. 

So, what does that mean? That means that development needs to have intentional, thorough, and rigorous approaches to helping leaders get to the next level. Seventy percent of learning actually happens on the job. So, assessment and coaching is not enough. Companies need a development system, so to speak, that actually helps these leaders gain skills through experience. So, there are a lot of reasons why current approaches in many companies are still insufficient.

David: I mean, this sounds so logical and makes a lot of sense. I’m just wondering what common dynamics you are seeing then, between boards and CEOs, that are hindering this kind of a rich succession planning process?

Peter: One is that, very frequently, the board and their CEOs don't really have what we would call the appropriate alignment conversation. And alignment on what? It's alignment on what the company is going to need in their future CEO. By the time the transition happens, the job may be different, and the company's needs, strategically, might be different. 

Second thing is there's a little bit of reluctance at times by board members to get involved in the development of CEO successors. Now, their intentions are good. They're trying not to micromanage. But there's a critical role for boards to get involved in the development in a somewhat more active way. It can be in the form of mentoring. It can be in the form of advising them on strategic projects that the candidates are assigned in order to kind of stretch their strategic muscles. It might involve introducing them to other boards and giving them opportunities to join boards. 

And then, the whole net-net of this is that, what do boards see in their senior most executives in the company? It's mostly during board meetings. That's not real life. That's a performance. And whilesome succession plans do a good job of technically preparing leaders through job rotations, international assignments, special projects, most don't start preparing the new CEO for the actual day-to-day challenges of the role.

David: Right, so what I'm hearing is the board's role is not just identifying successors, but actively getting involved to help prepare a set of potential successors and really work at getting to know those people in one way, shape, or form. That's a core role as a board member. What other practices, Peter, have you seen that are helping boards and CEOs navigate this process and create this richer succession process.

Peter: Yeah, I’d say that there are a few tangible tactical things for directors—and not only the committee that's responsible or accountable for leading the board work on succession, but the whole board. Like I mentioned before, the first tactical thing is, do the work of jointly creating and aligning on that profile of the future CEO. Could be some interviews with board directors in between meetings, having a special session board meeting where they work specifically on that CEO profile. That's one. 

A second one is to make development of executives a team sport, right? Get the directors involved in all the ways that I mentioned before, but also make sure the CEO, the CHRO, executive coaches you might bring in, specialists in investor relations, public relations, communications. It is kind of a team sport because the job is really complex. So, if you want to have your C-suite executives, and not just one or two people, but have your C-suite executives get more grounding in what it's like to be a CEO, boards have a role in that. 

And finally, the last practice I would offer here is to have the board think of themselves as continuing to the process of creating a community of enterprise leaders. Actually, what we find to be more helpful is to create a whole community of leaders at one and two levels down from the CEO. Don't just develop the chosen couple. And the reason is, even if you choose, as a board, one of the identified successors, you're going to have to backfill for their role. And if you don't have anybody else in the pipeline to backfill for that C-suite leader that was selected internally, you're having to start all over again. So, develop a community of leaders and the board can have a role in that process.

David: I suppose this goes to the fact that I read recently, Peter, that 80% of CEO appointments are first-time CEOs, especially those that are elevated from other internal roles at companies. And I want to go back to your point on helping these leaders to expect the unexpected. Talk to me a little bit more about that. That's an interesting topic.

Peter: Yeah, we actually had done a study with 75 CEOs, current and former, and we asked them the question, ‘When you became a CEO for the first time, what did you experience that nobody warned you about?’ What were some of those things that were, as a first time CEO, you thought you knew what the job was going to be, but there's a bunch of surprises. And actually, the number one thing that surprised them the most was how much time it takes to work with the board. It isn't just board meetings. It's all the calls in between board meetings. It's the fact that there is no such thing really as ‘one board.’ And that whole process of getting to know the board individually and collectively, and then engaging them appropriately in between meetings and during meetings, it takes a lot of time. 

The second thing that the CEOs told us when they first took the job, they actually realized that as soon as you get named CEO, those three letters now define you in the view of other people. The CEO says, I'm no different than I was yesterday, but as soon as that CEO title is on you, everybody, or most people, start behaving differently towards you—and it can be unsettling. Suddenly people that you've worked with for 20 years in the company, they don't want to sit next to you at dinners anymore because they're afraid of looking like suck-ups, right? So, you know, it's related to ‘it's lonely at the top.’ You start to feel a little bit more lonely in the job than you did before. It's really good for boards to be cognizant of that and to change their approach to working with the new CEO, assuming it's an internal pick, which is probably 80% of the time.

David: Very interesting. Is there a best practice, Peter, in your opinion, for boards and CEOs to work on the future spec of the CEO with the changes that are happening so fast in the remit of a CEO, but also the industries in which the CEO is working? Is there a best practice out there about how to stay ahead of what that next CEO really needs to look like?

Peter: I would say a leading practice, and not just because we do this with our clients, but for any company, that the ‘profiling process’ is what we would call this. It should be individual one-on-one conversations with the directors, with the board members, and the CEO. And sometimes you can have and get involved the CHRO or some other internal leaders, but have them give the opportunity to think about the future and how the job is changing.

In addition, have the board get some insight about the trends and opportunities and risks for that company in the marketplace and infuse that into your spec. For example, if you're in a business where AI could potentially disintermediate you, you're going to need people who know about that. You're going to need leaders who are able to use AI responsibly and strategically to gain an advantage versus having the company be all anxious about it. So that's an example. And so the practice really, it's not rocket science, it's conversations individually and collectively with the board and the CEO participating based on some data collected from them themselves, as well as some external data about the trends that are being seen, not only in CEO succession, but in the skills and capabilities in that particular industry.

David: Right, right. I'm looking at the time, Peter, and I see that we are closing in on the end of this episode. So I have one last question for you. And it's one that I was actually exploring with a client just yesterday, which is, what is one succession-related assumption that boards and CEOs should just let go of right now?

Peter: It's never too early to start succession planning. A lot of boards and their CEOs, they start the clock when the CEO and the board have a conversation about the current CEO's timeline. By that time, you're too late. Succession planning at the CEO and C-suite level should be an ongoing process of discussion. And the gold standard here is that if the board has a plan and they know what they will do under an immediate CEO succession scenario, for whatever reason, if some disaster occurs or scandal or quote-un-quote, the CEO wins the lottery and says ‘I’m out,’ you want to be prepared for that, which many boards are, but you also want to be prepared for the one to two year timeline transition where it's a little nearer. Also, the three plus year timeline. 

So it's never too early to start CEO succession planning. Don't just wait until somehow, through one conversation or another, the CEO brings it up and the board says, ‘oh we got to get started on it.’ There is no getting started on it. It's continuing to do their work on it.

David: Understood, understood. Well, Peter, thank you so much for your insights. Super revealing and great food-for-thought for all of us. Thank you again.

Peter: My pleasure.

David: My thanks to Peter for a great conversation around succession planning. On our next episode, I'll be joined by my colleague, Susan Sandlund, who has served on numerous private, not-for-profit, and public boards. Susan and I will explore what good governance looks like in a climate where volatility and uncertainty have become a constant, rather than the exception. I hope you'll join us.