Succession planning

Sunday November 22 2020
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A great idea, vision or belief can spark off a successful business. But what empowers it to create a lasting value for its stakeholders and society, is fostering capable and committed leaders for the future - leaders who can take the organisation to the next level and establish an enduring legacy.

More so, in the light of globalisation, increasing workforce flux, shifting talent needs, increasing cross-border operations and evasive consumer and employee loyalty; the need to create committed, capable leaders is more vital then ever before.

Hence, increasingly around the globe, CEO succession planning is an important function of the board of members. Also, with average CEO tenures continuing to shrink, not only is succession a priority, but also a recurring concern.

Contrary to popular opinion, succession planning should not be limited to the top-end of the organisation. If the organisation has to thrive in a global marketplace, it is essential to create a pipeline of leaders throughout the company.

Each employee has to feel empowered and accountable for his/her contribution to create an inclusive culture of ownership and inspired performance.

But in spite of its pervasive essentiality, succession planning still continues to remain a sore point for most organisations - more so, for family-owned enterprises, since there are intrinsic conflicts between retaining and relinquishing management control.


Chief obstacles to succession planning in family-owned businesses include:

• Transition of power between owners and the management;

• Dealing with divergent family interests;

• Maintaining objectivity in face of the family’s emotions;

• Dealing with family friction and nepotism;

• Informal policy structures;

• Perception of fairness – returns from ownership v/s reward for management.

Research indicates that almost 70 per cent of family-owned businesses fail or are sold before the second generation, while only 10 per cent function as active privately-held companies for the third generation to lead.

Once the organisation has clearly demarcated the need for succession planning, the process has to start with an objective and unbiased analysis of the organisational structure.

This will begin with a clear understanding of the current and optimal level of roles and responsibilities, followed by the creation of a structure based on the company’s current and future business operations’ needs.

Because it is difficult to demarcate between family and business relationships, clarity of role acquires even a more significant focus in family-led firms.

The key objectives of succession planning are:

• Institutionalising and preserving the business model;

• Providing a stable yet scalable policy structure to achieve the desired organisational goals;

• Creating a sustainable value for all stakeholders;

• Enhancing organisational potential for attracting talent, finances, customers and resources;

• Facilitating globalisation and meeting future challenges.

The next step is to evaluate the skills and qualifications.

This will call for some uncomfortable steps including replacing or bringing in new talent. Once the right talent has been brought in, the next challenge is retention and empowerment.

Establishing a fair and transparent process of capability evaluation and subsequent empowerment might entail further decentralisation of the decision-making process.

Also, adequate training and development programmes will have to be introduced to enable skilled employees to be prepared for taking on senior management assignments in the future.

In family-owned businesses, additional attention will have to be paid to defining roles and functions of family governance and company’s own governance bodies.

Finally, a fair and an inclusive remuneration system with right incentives will be necessary to retain and encourage good talent - one that is defined by performance and not family ties.

In effect, succession planning requires a powerful and consistent level of commitment, strong internal control processes and high corporate governance practices.


By Azim Jamal