As Disney has learned, choosing a new CEO isn't easy

The Walt Disney Company is getting a new CEO.

Josh D’Amaro, who has been with the company for 28 years and most recently ran its theme parks, will be the second to take over from Disney’s longtime boss Bob Iger. Disney whiffed the last time it tried to replace Iger — Bob Chapek lasted less than three years before Iger returned in 2022. It joins a long list of companies, nonprofits, and professional sports teams that have stumbled when their leaders passed the baton.

Choosing a CEO has higher stakes than almost any other decision a company’s directors will ever make. But boards don’t get the chance to do it that often because good leaders tend to stay put.

Yo-Jud Cheng, assistant professor of business administration at the University of Virginia, said it’s not uncommon to see tenures upward of 10 to 15, and getting to 20 years. She said when succession planning is done well, a board gets to know people at the company who could become its next leader.

“So that could be having dinners with executives around board meetings, it could be having individuals in the firm to come in to do presentations with the board,” Cheng said.

Companies want to have someone who’s ready to take on the role when it’s time. But Cheng said they don’t want to anoint them too soon.

“If everyone in the firm sees, ‘Okay, this is the next person,’ oftentimes talented people will leave,” she said.

Another potential stumbling block is when the current CEO gets a little too involved with the process, said Deb Rubin, senior partner at the leadership consulting firm RHR.

“It is hard for a CEO to be completely objective about the next phase and who should be there, and what their own shadow has been in the organization,” she said. “They are an important input, but they should not be the primary driver.”

Rubin said the board needs to think about choosing a leader not just for the company that exists now, but for the company that will exist in the future.

“There’s a tendency to want to hire a clone if the last CEO has been tremendously successful, and to hire the opposite if a CEO has basically failed,” Rubin said. “The reality is it’s somewhere in between.”

The day that a new CEO takes charge, the company should start planning for its next one, said Anthony Nyberg, faculty director of the Center for Executive Succession at the University of South Carolina. But the boards Nyberg talks to tend to put off those discussions.

“Because we’re human, it’s hard to have conversations with people about, let’s think about your successor,” he said. “They often don’t want to think about when their end might be.”

A CEO’s identity is intertwined with that of the firm, Cheng said. So companies aren’t just choosing a good leader — they’re choosing the next face of the company.