Succession Planning: Why Waiting Is the Costliest Mistake a Leader Can Make

Succession planning is a bit like having good insurance. You barely notice it when things are running smoothly, but the moment a key leader leaves unexpectedly, you feel every single gap you neglected to fill.

In the world of retail and D2C, I see so many boards that know they should be planning for the future. Yet, the conversation is always pushed to "after peak trading" or "once this transformation project lands."

The problem is, a sudden resignation or a health scare does not wait for a convenient time. When it arrives, the board is forced to react under immense pressure, instead of calmly choosing from a set of well-prepared options.

When it is done early and treated as a continuous process, succession planning quietly protects your company's value and strategy while also securing the future for your people.

Why Do We Keep Postponing the Inevitable?

Leadership change is a recurring, predictable event. The rate of CEO turnover remains structurally high, and in the US retail sector, the problem is accelerating. One report showed that CEO exits in US retail jumped 79% year-on-year in the first three quarters of 2025 alone.

Despite this clear trend, very few organisations feel ready.

A recent study found that only 14% of leaders feel confident in their organisation’s succession plan. This is a stark figure, especially when leadership consistently ranks as a top business concern.

In retail, our relentless trading rhythm makes it even easier to delay. There is always another urgent reason. The real danger is that the gap between knowing succession is important and actually doing the work widens quietly. That is where both value and resilience are lost.

The Real Cost: When Strategy Walks Out the Door

When a senior retail leader exits without a plan, the biggest risk is the sudden loss of momentum.

A widely cited estimate suggests that mismanaged CEO successions can destroy nearly one trillion US dollars in market value each year through underperformance. That staggering number captures something boards see in real life: delayed decisions, stalled projects, and missed opportunities.

In a retail business, this looks like:

• Promotional and pricing decisions taking longer to get signed off.

• Major supply chain projects slowing down mid-implementation.

• Digital and data teams pausing their roadmaps until a new leader sets the direction.

A considered succession plan dramatically reduces this exposure. From the assignments we handle at Nicholas Alexander, I see a common pattern: boards consistently underestimate how much informal knowledge and drive lives in just one or two key individuals.

You cannot replace years of embedded judgement overnight. You maintain strategic continuity by preparing your own credible leaders early.

Investor Confidence: Markets Are Watching How You Handle Change

Investors expect leadership changes to happen. What they judge you on is whether you were ready for it.

A planned transition tells investors that the board has done its work. A sudden exit followed by an urgent external search signals the opposite. This is particularly true in the UK, where recent data shows that more than half of new FTSE 100 CEO appointments are external hires, suggesting weaker internal pipelines compared to other markets.

This logic also applies to private equity owners and lenders. They actively probe the depth of your leadership bench when deciding how much risk they are willing to back.

In my experience, boards that can speak confidently about their internal pipeline earn far more trust in conversations about capital. That trust often translates into better support for your biggest projects.

Internal Morale: People Stay When They See a Path Forward

The way you handle succession sends a powerful message to everyone inside your business about their own future.

Research from DDI’s Global Leadership Forecast shows that organisations with strong succession management are significantly more likely to rank among top financial performers. More importantly, strong leadership pipelines correlate with higher employee engagement and retention.

When your best people see a clear path for advancement, they are more likely to stay.

In retail, where high-calibre talent is heavily courted by competitors, an unclear succession plan can trigger avoidable churn. Replacing senior executives is also incredibly expensive. Recent estimates show that the cost can reach up to two times their annual salary when you factor in search fees and lost productivity.

When you treat succession as a visible, ongoing process, you send a different signal entirely. You show your team that development and opportunity are being managed thoughtfully. That belief is one of the strongest anchors you can create.

How to Get Started: Practical Steps for Retail Boards

Succession planning becomes powerful when it is a regular discipline, not a one-off workshop. Here are the steps I encourage every retail and D2C board to build into their annual rhythm.

1. Identify Your Critical Roles: Start with the CEO, then list the handful of positions where an unplanned exit would genuinely destabilise the business.

2. Map Your Internal Talent: For each critical role, agree on who is ready now, who could be ready within two years, and who is a longer-term prospect.

3. Align Development with Your Gaps: Give a potential successor ownership of a cross-functional project or exposure to the board to prepare them for the next step.

4. Plan Your External and Interim Options: Decide in advance how you will use experienced interim leaders to protect the business during a transition.

5. Review the Plan Twice a Year: People move and ambitions change. Build succession into your regular board agenda so the plan stays live and relevant.

A Final Thought

In retail, the cost of delaying succession planning rarely appears as a single headline number. It shows up in slower decisions, wobbly execution, nervous investors, and talented people who quietly move on.

The best time to start this work was yesterday. The most practical and effective time is now, while you still have the breathing room to create options rather than react to a crisis.

When you treat succession as a core part of how you run the business, it becomes one of the most powerful ways to protect the value you have all worked so hard to build.