Good Governance, Succession, and Why External Validation Matters—Even for Internal Candidates

Selecting the Chief Executive Officer is the most consequential decision a board makes. Thoughtful boards do not simply choose a leader; they establish a process that aligns with their governance duties of care, loyalty, and obedience. This process should begin with succession planning and with prioritizing objectivity, transparency, and the organization’s long-term strategic needs, especially when a strong internal candidate exists.

Yet, despite its importance, meaningful succession planning remains inconsistent across healthcare. A recent American Hospital Association (AHA) governance survey found that 49% of hospital boards lack a formal CEO succession plan. Similarly, MGMA reported in July 2024 that just over one in three medical group leaders (36%) have a succession plan for leadership positions, while 57% do not, and another 7% are unsure. With such significant gaps, the board’s obligation to establish a disciplined, objective process becomes even more critical.

When to consider internal first.

If the board is largely aligned around naming an internal leader as their next CEO, it’s prudent to seek external validation by experts skilled in leadership assessment before launching a national search. Independent assessment is part of good governance and due diligence: it tests assumptions, benchmarks the role against the external market, and confirms the alignment between the organization’s future needs and the candidate’s readiness.

In cases where the board is divided, the recommendation is to include that internal candidate in the executive search firm’s candidate pool while conducting a national search.

Why use an executive search firm for internal candidates?

Boards often assume search firms are only useful for external hiring. However, an unbiased partner strengthens the integrity of an internal hiring process by:

• • Applying structured, competency-based evaluation and leadership assessment tools.
  • Benchmarking the position against external talent and evolving requirements.
  • Interviewing the board, senior team, and key stakeholders to validate candidate fit and surface blind spots.
  • Managing confidentiality and sensitive dynamics across the board, the CEO, and the executive team.
  • Sensitive handling of the internal candidate to assure transparency to the process and open communication channel.

This approach promotes perceptions of fairness and legitimacy among internal leaders. Even when an internal candidate is ultimately chosen, a third-party process signals that the decision was based on merit rather than assumption.

“For the board, it is an act of good governance to make sure that they have the right person in the job for the CEO. Sometimes the right person is sitting right in front of them, and they just need that external validation by experts to give them the confidence that they can move forward with that leader,” says Susan O’Hare, Healthcare Practice Leader.

The risks of skipping a firm for an internal selection.

Foregoing an external partner can lead to significant drawbacks:

• • Reputational Risk: External stakeholders may criticize a process that appears insular. The first misstep by a new CEO will invite scrutiny of this decision.
  • Internal Trust: Executive team members may feel overlooked if their input on the new leader is not sought.
  • Opportunity Cost: The board may overlook a stronger external candidate or settle for a status quo hire that slows transformation efforts.

Governance in action during transition.

A well-structured governance framework improves transition outcomes by reinforcing checks and balances and clarifying expectations. Boards should clearly define what first-year success looks like, maintain open communication with the new CEO, and establish a regular schedule for evaluation and feedback. Too often, boards postpone discussions about succession planning until urgency compels a decision, leading to misalignment. A disciplined internal review creates the right conversations, aligns the board, and helps set the internal candidate up for success if selected.

Clarity on roles.

The board’s responsibility is to hire and supervise the CEO; it should not concern itself with restructuring the leadership team. A skilled search partner can help map interim coverage for any gap created by an internal promotion, while also respecting the boundary that the CEO is the one who hires their team.

A practical path forward.

If you are confident in your internal assessment, initiate the external validation process. This can include evaluations from a search partner, stakeholder interviews, and market benchmarking. Be prepared with an external profile should confidence drop.

If the board is split about their confidence in the internal leader compared to a larger candidate pool, then launching an external search with a trusted partner should occur. 

In both cases, it is essential to document the objective rationale (continuity, culture, speed, risk mitigation), communicate the process transparently, and ensure alignment on expectations before the first day.

In short, effective governance involves not only selecting the right candidate but also the method used to make that choice.

Seeking external validation gives boards the confidence that they have looked beyond their walls while honoring their internal strengths. Engaging a search firm can help facilitate an unbiased succession process, ensuring that the best fit for the next CEO is found.

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