Why Most Mid-Market Transitions Fail and How to Future-Proof Yours
“Only about 30% of family businesses survive into the second generation, and just 12% make it to the third.” — PwC Family Business Survey 2023 [1]
For mid-market companies—those between $30 million and $800 million in revenue—succession better be more than a personnel decision. It needs to be an enterprise-wide moment. A system-wide test of culture, team dynamics, governance, leadership maturity, and operational resilience.
Yet too often, mid-sized companies treat succession as a seat or two to be filled. But this plug-and-play proves to be the downfall of so many promising businesses. Rather the companies that approach succession as a true company-wide transformation thrive.
The Fatal Myth: Succession as a Solo Event
Succession is not a linear event. When key leaders and players exit — whether a founder, key executives, VPs or team leads—they take with them:
- Tacit judgment patterns
- Informal authority webs
- Formal structure
- Clear decision rights
- Team dynamics
- Cross-functional cadences
- Key external relationships and credibility
- Embedded rituals
- Culture / relationship tones
- Etc.
Replacing a leader without rewiring the enterprise invites a host of system failures.
Across all industries, when there is a shift among the key leaders and executives there is 27–46% failure rate within 24 months [2].
Harvard Business Review estimates that flawed C-level successions collectively destroy ~$1 trillion in market value each year [3].
For a mid–sized business this represents millions in lost value.
Succession Isn’t a Seat—It’s an Ecosystem
New leaders inherit not just a title, but an entire psychological and operational ecosystem. This change disturbs the equilibrium—especially if the prior system was player dependent, undocumented, or reliant on tribal knowledge. Change can be a good thing, but the research and case studies show succession – even in just a single seat – brings with it more change and organizational impact than anticipated.
Incoming leaders bring their own communication styles, judgment filters, and risk tolerances. Learning gaps – more importantly, significant maturity gaps – emerge quickly. Even successors with strong academic pedigrees often lack experiential wisdom. They haven’t weathered liquidity crunches, internal power struggles, or macro shocks. As a result, early missteps are common—marked by flawed judgment, overconfidence, or misread organizational signals. These amplify and echo throughout the organization where the succession impact is multipled.
The Rise of Self-Selection: Who’s Really Ready?
Succession, done well, doesn’t just elevate talent —it reveals talent. It exposes those who are both willing and capable of operating at the next level verses those who just like the sound of it.
This model where succession is not a coronation but rather a crucible is the invention of the Flickinger Performance Group – a national consulting firm specializing in mid-sized companies going through a transformation. In their work, a pattern arises where they best talent and future success of the business is revealld in those who are most fluent in organizational thinking—and the first to lean into discomfort without being asked.
These aren’t always the longest-tenured or highest-ranking. They’re the ones who self-select. In other words, The best leaders don’t just wait for the call—they self-select. They begin operating beyond their swim lanes. They engage cross-functionally. They respectfully challenge legacy assumptions. They honor the organization’s past, work in the present and push it forward into the future. They build coalitions, show-up with a shareholder mindset, are coachable, humble and hungry and demonstrate enterprise-wide thinking even before having formal enterprise-wide power.
The succession process needs to surface these individuals—not just by nomination, but by demonstrated behaviors that prove to be a pattern, not just a one-off. An organization’s future is setup for failure when it simply names successors. Instead, succession should be a system built to test, try and reveal who self-selects “up”, “at”, “down”, “over” or even “out.”
When Succession Fails, Systems Fracture
The cost of failure isn’t just reputational—it’s operational:
Organizational Fragility
Resulting Consequence
Undocumented decision rights
Confusion, power struggles
Shallow bench strength
Scramble for interim coverage
Uncodified rituals and routines
Cultural disorientation
Rigged or legacy-dependent systems
Functional breakdowns (HR, IT, Finance)
Weak governance
No way to track or course-correct the transition
These risks can turn a carefully groomed successor into a cautionary tale—especially in companies where founder shadow looms large or informal culture governs decision-making.
The Three-Phase Playbook for Enterprise-Wide Succession
Successful transitions are engineered, not improvised. They begin years before the actual handoff and touch every layer of the organization.
Months 1-18: Who is Capable – System and Culture Diagnosis
- Use advanced talent mapping for succession and restructuring for scale
- Interview teams to surface shadow norms and undocumented rituals
- Map decision dependencies tied to outgoing executives
Months 18 – 36: Who is Willing – Proving Grounds & Self-Selection
- Create rotational assignments (P&L, investor calls, crisis simulations)
- Formalize coaching and peer-support circles to close emotional and strategic maturity gaps
- Forge team cohesion through offsites and role-based workshops—recalibrating leadership away from founder-centered gravity
- Enact dry-run transitions (board presentations, close processes, market decisions)
- Assign interim stewardship to functional leads and identify breakdowns
- Codify cultural playbooks: “how we close a deal,” “how we hold a standup,” etc
- Move workflows out of heads and onto dashboards; fix escalation paths; realign roles and decision rights
Months 36 – 60: Who’s Ready to Win – Rituals and Rhythm
- Plan ceremonial handoff events that are both symbolic and operational
- Introduce balanced governance: standing committees, dashboards, and communication rhythms
- Track metrics monthly: revenue velocity, customer satisfaction, employee sentiment
- Use 360 reviews and coaching to detect adjustment pain points
- Hold quarterly retrospectives with leadership, board, and advisors
Case Studies: Transitions That Teach
Benson Electric (U.S. – Industrial Mid-Market)
Following a sudden CEO loss, new leadership:
- Established governance through a steering committee
- Codified culture into universal weekly routines
- Systematized HR and finance SOPs
- Introduced executive coaching for alignment and role clarity
In just 12 months, turnover fell, efficiency improved, and growth resumed [4].
Wallenberg Family (Multigenerational Legacy)
Six generations of business continuity were preserved through:
- Early exposure of heirs to P&L responsibility
- Independent board governance
- Codified norms and formalized transition pathways
McKinsey reports that family businesses with this level of governance outperform peers by 33% in economic spread and 10% in turnover [6].
Ceridian (SaaS, >$1B Revenue)
To prepare for the transition of CEO David Ossip in 2021, Ceridian:
- Formed governance committees with independent directors
- Created leadership institutes to groom internal successors
- Upgraded IT systems and processes
- Maintained transparency with employees and investors
The transition was met with confidence from stakeholders and yielded continued growth [7].
Stories Over Lists: Bringing Complexity to Life
Succession success doesn’t live in a spreadsheet. It lives in the lived experience.
In Jack’s story at Benson Electric, we see a system rebuilt from the edge of collapse. In the Wallenberg family, we see preparation as a generational discipline. In Ceridian, governance and systems maturity paved the way for stability.
Each narrative reinforces four truths:
- Learning gaps matter—early exposure builds resilience
- Systems break in silence—deliberate stress-testing exposes failure points
- Cultural routines carry power—they must be preserved and reframed
- Governance isn’t bureaucracy—it’s scaffolding for renewal
The Final Word: Succession Is Existential
Succession isn’t optional—it’s existential.
Treat it as a plug-and-play hire, and your enterprise will crack under pressure. Treat it as enterprise transformation—and you renew.
In essence, succession isn’t a seat to fill. It’s a system to evolve.
Works Cited
- PwC Family Business Survey 2023 – https://www.pwc.com/gx/en/services/family-business/family-business-survey.html
- McKinsey: “Why CEO Transitions Fail” – https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/ceo-transitions
- Harvard Business Review: “The High Cost of Poor Succession Planning” – https://hbr.org/2021/04/research-why-nearly-half-of-new-ceos-fail
- HBR: “Siblings and Succession in the Family Business” – https://hbr.org/1998/01/siblings-and-succession-in-the-family-business
- Inc.: “Succession Planning for Growth in the Mid-Market” – https://www.inc.com/tdbank/succession-planning-for-growth-impact-the-mid-market-approach.html
- McKinsey: “Secrets of Outperforming Family-Owned Businesses” – https://www.mckinsey.com/industries/private-capital/our-insights/the-secrets-of-outperforming-family-owned-businesses
- Ceridian Q2 2022 Earnings Call Transcript – The Motley Fool, August 4, 2022. CEO David Ossip. https://www.fool.com/earnings/call-transcripts/2022/08/04/ceridian-hcm-holding-inc-cday-q2-2022-earnings-call-transcript/
