Even though Coca-Cola's board of directors defied traditions and considered outsiders for the top job, it ended up opting for a veteran insider -- E. Neville Isdell -- though not the heir apparent.

After current Chairman and Chief Executive Officer Douglas Daft announced his intention to retire in February, the board went through a protracted and publicly scrutinized search, reportedly considered some 100 candidates and garnered loud criticism for the appearance of a disorganized selection process. The board received an "F" for succession planning, and the ongoing leadership jitters suppressed Coke's stock price.

Failure to prepare for leadership transition is a common affliction. Boeing was forced to turn to a board member and previous CEO as the replacement to Phil Condit when he was forced out because of the corporation's repeated ethical failures. At Motorola, the presumed insider heir to Chris Galvin -- Michael Zafirovski -- was passed over in favor of an outsider. Tom Stewart, author of "Wealth of Knowledge," notes that the average board plans for succession as well as the average person plans for death. Neither does it well.

When Lou Gerstner took over the top job at IBM, one CEO told me he thought it would be the last time a leader could be hired directly from the outside to take the helm at IBM. Gerstner had a steep learning curve. Mind you, he did darn well. The company was in desperate need of transformation, benefiting in this instance from the outsider's advantage of a new lens into the corporation's strategic focus, and the independence to challenge the company's legacy.

But can companies of Coke's or IBM's complexity on a global scale afford the uncertainty of an outside hire, and the delayed leadership impact as the outside CEO learns the business? Increasingly, CEO appointments are from within. Fewer than 10 of the current Fortune 100 CEOs were hired from the outside.

The exception is in turnaround situations, where insiders are viewed as part of the problem. The assumption is that insiders are too embedded in the current business strategy to lead the company into recovery, and too weak to make the hard and painful decisions to transform the operations or replace the leadership team.

Unless they seek dramatic turnaround, boards of complex global corporations should be biased toward CEO candidates from the inside, with good reason. The leadership demands of massive, complex, global conglomerates competing in sophisticated technological spaces across rapidly changing markets may be too great for outsiders to grasp, even if they've previously run companies elsewhere (75 percent have).

They must understand the corporation's internal operations and structure, key customer relationships, the regulatory environment and global supply chains, and they need an internal support team of loyalists. This takes time.

Investors and the financial markets are demanding demonstration of these characteristics from the person at the top very soon after a new CEO's appointment. The Economist magazine reports that "business influencers" expect to see turnaround within a mere 22 months. Booz Allen, the consultancy, studied CEO succession, and found that outsiders are more prone to get fired and their average tenure is shorter, by three years, compared with inside CEOs. In short, there are valid reasons to focus on individuals groomed within for the top job.

Succession planning is the weakest link in the typical board's performance. Why? CEOs are ultimately responsible for grooming their successor, yet few are emotionally willing, or able, to accept that their role will end. Jeff Sonnenfeld of Yale University reports that among his study of 100 recently retired CEOs, almost a third had made no preparations for retirement.

Grooming a successor requires the fortitude to commit to a departure time frame years ahead of the event. The grooming process entails a gradual shift of responsibilities to the successor, and far more consultation with the heir apparent than the leader is used to. Succession for the CEO is sometimes experienced as an act of relinquishing power. Few are accustomed to it, or like it.

It's natural, then, that most CEOs won't initiate an exhaustive process of grooming a cadre of potential successors on their own. And boards do not enjoy the conflict inherent in nudging, cajoling or even strong-arming their own chairman to move toward a successor against his will.

Yet that is precisely the role boards must play. It is their most important obligation to shareholders -- to guarantee a smooth transition to a prepared, qualified successor. And they can give the CEO an incentive to participate by tying CEO compensation to the execution of a succession process and the readiness of quality next-in-line leaders. On this issue, the buck stops with the board, not the CEO. They're accountable for the smooth transition once the CEO is gone. Otherwise, it's Coke redux.