A lack of comprehensive succession strategy means CEO departures can trigger a cycle of damaging events in organisations, research by consultancy Armstrong Craven has found.

In its report The Butterfly Effect: CEO Movement and The Chain Reaction, seen exclusively by HR magazine, Armstrong Craven analysed 20 recent CEO moves and their resulting impact. It found the subsequent moves that were triggered, sometimes lower down the company, have cost the businesses an estimated £25 million.

But despite this huge price tag CEO succession planning remains poor, with 61% of CEOs planning to leave their organisation within the next five years not having a successor in mind.

Armstrong Craven COO Rachel Davis told HR magazine that the “reactive” nature of senior executive search has to change. “It’s time we broke the reactive cycle of executive recruitment,” she said. “We need to become more proactive in terms of succession planning.

CEO tenure is declining and you’ve got more movement, and businesses are growing so fast and dealing with new challenges, skills and ways of working.”

The report found the majority of CEO and senior hires tended to be external, leaving competitor organisations short of talent. Little surprise then that only 18% of HR professionals say they have a strong future leadership bench strength, with 23% stating their succession strategies are restricted.

Davis called for more HRDs to sit on risk committees, and to consider the potential problems connected to not having a strong succession pipeline.

“Where does responsibility for succession planning sit?” she asked. “It needs to be at the top of the chain. Rethink your approach to succession. It’s not enough to consider what skills you need now; what skills will you need in the future?”

This article originally appeared in HR Magazine on 22nd July, 2015. View the full article here.

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