It's also prudent to know how the talent stacks up against competitors. When you develop a business strategy—launch a new product, enter a new market, build a new division—you likely conduct a detailed competitor audit. When the time comes for a new CEO, the board should have a thorough understanding of the executive talent pool in their industry as well as some promising executives tangential to the focus sector.
Companies also want to be several moves ahead. Think of this process as a chess game. If you are scrambling to find a chief executive replacement, you probably made a wrong turn in your succession planning. In larger companies like the Fortune 500, time and careful preparation will let you think two or three CEOs ahead. This approach will broadly develop internal talent to succeed incumbents across the enterprise.
Additionally, building a bench of potential successors from the existing C-suite or deeper within the organization those with institutional knowledge and groomed through on-the-job training, formal development and mentoring, may be an effective approach to hedge against leadership change risk.