Challenges of Succession Planning
Succession planning can be a difficult process, as illustrated by two different companies, Diageo and GSK.
In the case of Diageo, the CEO was ousted after a two-year tenure, with a 43% decline in share price, and was replaced by an interim CEO, the CFO. 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, GSK announced the COO's succession to the top job three months in advance, with the current CEO staying on until September 2026 to ensure a smooth transition, resulting in a 3.6% rise in shares.
These two examples highlight the challenges of getting succession planning right.
Author's summary: Succession planning is a complex process.
- Diageo's approach was reactive, with an interim CEO appointment.
- GSK's approach was proactive, with a planned transition and a smooth handover.