Developing Your Next CEO

Developing Your Next CEO

Building a Senior Leadership Talent Pipeline

Who will be leading your organization five years from now?

It’s a question I frequently ask C-suite executives. I’m not asking them to predict the future or anticipate corporate board decision-making. 

I’m encouraging them to take steps to equip their organizations to sustain growth and progress by investing today in the talent they’ll need tomorrow—and over the next five years.

I see the impact of a missing executive talent pipeline far too often. As a recruitment professional, I’m often brought in to help clients fill vacant executive-level positions. Unfortunately, there is a limited number of experienced leaders who have the necessary skills to step into these roles, while the number of executive-level resignations is growing. A study published in Wall Street Journal demonstrates the extent of this executive exodus: the turnover rate of CEOs was more than 13% in 2022, while CFO turnover increased to nearly 16% and COO turnover rose to an alarming 27%.

These numbers reflect more than the expected impact of Baby Boomer retirements. A CFO survey  found that 75% of C-suite leaders are seriously considering quitting their current job for one that more significantly invests in supporting their health and well-being. 

It’s clear that the pressures on executives intensified during the pandemic and have continued to accelerate. The World Economic Forum recently detailed the extensive and often unrealistic expectations for the C-suite leader: they must be “financially adept, growth-driving, sector-leading, culturally inclusive, DEI-delivering role models” who must be equally skilled at navigating generational divides, office politics, and market trends. Perfection shouldn’t be the expectation, but experience and expertise are clearly needed.

That may be why corporate giants like Target and Cargill are pushing back, or even eliminating, longstanding mandatory retirement ages for their CEOs and top executives. There are long-term trends showing that average CEO age is rising; for S&P 500 companies, the average incoming CEO was 53 in 2022 and 56 in 2023. But the longer tenure for seasoned C-suite leaders comes with a different risk: the risk of top talent leaving for a company where their path to the C-suite is more certain.

We’ve been spending a lot of time working with clients to equip them to focus much more intently on succession planning. Leadership development should be a priority for every organization, and developing executive-level talent internally is a strategic practice that delivers clear value. One important starting point is to identify those C-level roles where leaders may be retiring in the next one to three years and beginning to develop their successors internally. But this is only one aspect of planning needed to build an executive pipeline.

A strong leadership development program can offer a solid foundation, but it’s important to recognize that the skills necessary for C-level roles are different from those necessary to lead at lower organizational levels. Achieving operational excellence is, of course, necessary at all leadership levels, but senior leaders must be able to exercise strategic leadership. Anticipating market shifts, recognizing future challenges and opportunities, leading and managing organizational change are critical for senior leaders. To build an executive pipeline, top talent should be given opportunities to practice visioning behavior and demonstrate their capacity to make senior-level decisions. That means managing transformation efforts, shaping a supportive and growth-oriented culture, and building key communication, negotiation, and networking skills.

Make sure that your leadership development efforts reflect every level of leader your organization needs. Invest in a talent pipeline that will equip you to know precisely who should be in the C-suite five years from now.