According to Harvard Business Review, 63% of privately held companies have no succession plan in place. At the same time, the average age of CEOs in S&P 500 companies is 58. So far, so good. However, the average tenure of top executives in one company today is just 3 to 5 years.

Interestingly, women tend to develop their careers within a single organisation – for example, starting as entry-level specialists after graduation and gradually, patiently advancing through mid-level to senior leadership roles. Men, on the other hand, more often progress by changing companies. That is the reality of small countries and markets, whereas large markets offer a far greater variety of career growth opportunities.

The most important and first question every organisation and its leader should ask themselves is this: Do we have people in our team who will be capable of leading the company’s next stages of development in the coming three to five years?

And this question is not only about operational continuity, but also about cultural inheritance, shared values, and the ability to drive necessary change. Leadership transitions require significant resources, so starting from scratch every time is rarely a wise approach.

Leadership succession can be particularly sensitive and “painful” for family-owned businesses, where the founder is both the owner and the manager. Cases in which the next generation successfully takes over the leadership reins are, unfortunately, more of an exception and a fortunate coincidence than a general rule. Children rarely share an interest in their parents’ business, its field of activity, or the management skills required for continuity and transformation.

One of the most common mistakes made when thinking about a successor is to focus not on qualities and competencies but on who would be the most comfortable fit in the leadership role. The only right starting point for preparing the ground for a new leader is the company’s strategic development direction for the coming years – from which the leadership succession profile naturally follows.

The next step is identifying and assessing talent. Who in our organisation could we start investing in today with a view to a future leadership transition? The most frequent concern at this stage is whether the right people are being chosen and developed. It often helps to turn the question around – what will happen, and where will we end up, if we do nothing?

The competition for new talent is becoming increasingly fierce, as the number of young professionals continues to shrink. Nevertheless, it is always worthwhile comparing the company’s own talent pool and future leaders with what is available outside the organisation – in other industries and companies. It is also important to remember that not all good specialists make good leaders.

The biggest mistake is perceiving a leadership change as a crisis – something exceptional, unexpected, and disruptive, rather than as a natural part of the company’s lifecycle. The next most common pitfall is the absence of clear criteria for selecting and evaluating potential successors, as well as the lack of comparison between internal and external talent.

A company’s ability to ensure leadership continuity is an extremely positive and confidence-building signal not only for employees and business partners but also for investors. Investors are willing to pay a higher price for a company that has a clear, structured, and functioning leadership succession system in place.

One of the most significant risks from an investor’s perspective arises when a company’s strategy, operations, and reputation are closely tied to a single individual.

Leadership continuity is not merely an internal matter. Building leadership reserves and managing succession is a clear indicator of organisational maturity, governance quality, and risk management. It also sends a strong message that the company has reached a healthy stage of development – one that no longer begins and ends with the influence or life path of a single person.

Although our economy and business environment span only a few decades, we can already see that more and more companies are putting leadership succession on their agendas – a positive sign for the long-term sustainability of the economy as a whole.