Smart Succession Planning for SEA Organisations: Minimise Risks and Costly Mistakes to Maximise Transitions

In the ever-changing business landscape, a robust succession plan is vital. This blog provides insights into the current state of succession planning in SEA organisations in 2023, addressing the challenges and mistakes that can arise. It highlights the importance of the process, offers strategies for better readiness, and introduces Accendo’s TalentPulse—a tool to enhance succession planning and mitigate its pitfalls. Embrace proactive succession planning for lasting organisational success and resilience. 

Introduction

Succession planning is essential for all organisations, including those in the Southeast Asia region, to identify potential successors, enabling smooth leadership transitions and ensuring business continuity. This proactive talent management strategy addresses succession challenges and cultivates a resilient workforce capable of navigating dynamic business landscapes. A robust succession planning program minimises the negative impacts of poor planning and enhances overall succession readiness. 

Understanding Succession Planning in HR

Succession planning is a strategic process that organisations use to identify and develop internal talent to fill mission-critical roles. This involves creating a roadmap to ensure a smooth transition of responsibilities when key personnel leave the company. 

According to a survey, 72% of companies in Southeast Asia are concerned about a shortage of skilled talent, making succession planning crucial for bridging the skills gap and ensuring a steady pipeline of qualified candidates.

At the same time, succession planning is not limited to top-level executives; it can also include potential successors for various positions at different levels of the organisation. Here are the key elements of succession planning: 

• Identifying critical roles – these roles may have a significant impact on business operations, decision-making, long-term strategy, and organisational success. 
• Talent assessments – assessment tools that are needed to assess and identify high-potential employees who possess the necessary skills, experience, and leadership qualities.
• Leadership development – once successors are identified, they must be given adequate training and development opportunities to prepare them for their future roles.
• Career pathing – creating progression opportunities is crucial for retaining top talent and encouraging employees to stay committed to the organisation.
• Performance management – regular performance evaluations help to track the progress of potential successors, enabling the company to address any skill gaps or areas for improvement. 

Effective succession planning ensures a smooth leadership transition, retains top talent and sustains competitiveness. Inadequate planning, however, harms performance, culture, and talent retention. Thus, investing in succession planning is crucial for a resilient, future-ready workforce. 

Costly Mistakes in Succession Planning

Succession planning is vital for identifying and cultivating individuals to fill vacant key roles, ensuring smooth leadership transitions. Despite its significance, several costly mistakes often hamper this process, affecting organisational success. Here are three common costly mistakes that organisations make in succession planning: 

Lack of clear criteria and assessment

A major mistake in succession planning is the absence of clear evaluation criteria for candidates. This can lead to subjective decisions and favouritism, thus eroding the process’s credibility. Without well-defined standards and objective assessments, personal connections could drive promotions over qualifications and skills, resulting in misplacements, inefficiencies, lower morale, and reduced performance. 

Neglecting development and preparation

Organisations mistakenly assume that identifying potential successors is sufficient to ensure a successful transition. However, not investing in their development and preparation can lead to failure. Without proper training, mentoring, and exposure to new challenges, successors may lack the skills, experience, and confidence needed to excel in their new roles. This can result in increased turnover, decreased productivity, and a lack of alignment between the successor’s abilities and the demands of the position. 

Poor succession planning can result in substantial financial losses. A survey revealed that companies in Southeast Asia faced an average financial impact of 60% in terms of lost revenue due to leadership vacancies caused by inadequate succession planning.

Not anticipating future skill needs

Industries are rapidly changing due to technological advancements and shifting market demands. Failing to identify emerging skill requirements and adapting the succession plan accordingly can lead to an inability to meet future challenges. Organisations might end up with successors who are ill-equipped to address new trends or lacking in the skills necessary to drive innovation and growth. 

The Impact of Poor Succession Planning on Organisations

Overlooking succession planning challenges can expose significant risks, resulting in potential declines in productivity, work quality, and overall business performance. Acknowledging the ramifications of inadequate planning is essential to mitigate these risks.  

Poor succession planning leads to financial risks for the business

Key positions that remain vacant for too long can result in increased recruitment costs which may lead to decreased productivity, causing potential revenue loss and higher operational costs. Organisations end up hiring external candidates, thereby incurring additional expenses for training and onboarding. 

Moreover, market confidence may decline, impacting the organisation’s stock value and investment opportunities. 

At the same time, compliance and legal issues can arise due to unprepared successors, and customer relationships may suffer. Internal repercussions include lower employee morale and increased turnover, resulting in further hiring and training expenses. 

Poor succession planning results in wrong candidate selection

Without a clear success profile, the risk of choosing the wrong successor increases. Subjective decision-making may result in selecting candidates who lack the qualifications and skills needed for the role.  

Furthermore, the consequences of selecting the wrong candidate can be detrimental. A mismatch between the candidate and the role can lead to reduced effectiveness and performance in the position. The US Department of Labor estimates that the cost of a wrong hire is at least 30% of the employee’s first-year earnings. 

Poor succession planning causes a loss of knowledge and expertise

When top talent leaves the organisation without a successor, the employee takes with them all the skills and knowledge they have gained while in the role. At the same time, they take all the relationships built with stakeholders which could have been leveraged to yield business results.  

Losing skilled employees in highly niche roles also increases the difficulty in finding good external candidates as a replacement due to the lack of talent in the market. The cost to replace a highly trained employee is expensive and could exceed 200% of their salary. As a result, significant effort and cost are required to retrain a new incumbent. 

A study found that only 35% of companies in Southeast Asia have a formal succession plan in place for key leadership roles, indicating a significant gap in preparing for leadership transitions.

Poor succession planning causes a loss of internal talents

It is significantly cheaper for internal talents to succeed in future roles as this saves the organisation time and recruitment fees. Furthermore, internal candidates already come with institutional knowledge without having to train from scratch. 

Promoting internal talents as part of career development and advancement opportunities can motivate and retain employees. This helps to strengthen their engagement and commitment to the organisation, thereby increasing employee performance and talent retention. In contrast, organisations will lose out on these as it can be easy to overlook internal talents with potential for external hires instead. 

Identifying the Indicators of Ineffective Succession Planning

Effective succession planning is crucial for organisations to ensure a seamless transition of leadership. However, certain indicators can point to succession planning challenges. Let us examine the following indicators while noting that addressing these succession planning challenges can help you ensure succession readiness. 

Absence of clear succession criteria

Ineffective succession planning occurs when there are no well-defined criteria for identifying potential successors. This may result in subjective decisions, favouritism, or uncertainty about who should be considered for key roles. Clear and objective criteria can help to ensure that the right candidates are selected based on their skills, experience, and potential to lead the organisation in the future. 

Lack of internal capability

When an organisation fails to identify and develop internal talent, it can lead to an inadequate pool of potential successors. Relying solely on external hiring for top positions can hinder organisational stability and may not align with the company’s values and culture. This could also reflect a failure to invest in employee growth and promote a culture of continuous learning. 

Organisations in Southeast Asia with effective succession planning reported higher employee engagement rates, with 76% of employees feeling more engaged when they see opportunities for career growth and development within the company.

No management budget or support

Effective succession planning requires support and involvement from top-level management. Without an adequate budget allocation and support from senior leaders, the process of identifying and developing potential successors can become stagnant. It is essential for management to recognise the importance of succession planning and allocate the necessary resources to ensure its success. 

Insufficient talent development strategies

Another indicator of ineffective succession planning is the absence of a well-defined talent development strategy. Organisations should have a structured approach to nurture and develop high-potential employees. This may include mentoring programs, leadership training, and exposure to cross-functional experiences to groom potential successors for future leadership roles. 

Inadequate cross-training and skill development

When employees are limited to specific roles without opportunities to acquire new skills or gain experience in different departments, the organisation faces a risk of being ill-prepared for unexpected departures or changes in leadership. Cross-training and skill development enable employees to become versatile and adaptable and increase the pool of successors who can handle various responsibilities.

How to Improve Your Succession Strategy

Amidst the ever-changing business landscape, navigating succession planning challenges and enhancing succession readiness is of paramount importance. This section delves into strategies aimed at fortifying your succession planning endeavours, fostering proactive talent development, and ensuring enduring organisational success. 

Creating a comprehensive succession plan

A comprehensive succession plan outlines criteria for identifying and developing leaders across levels, including career paths and transition timelines. This approach helps organisations proactively address gaps through targeted development, ensuring structured leadership growth and smooth transitions. 

Identifying and developing high potential employees

This step is vital in succession planning and requires a strong method to pinpoint individuals with leadership potential. Once identified, these individuals should receive targeted development opportunities to refine their leadership skills, expand perspectives, and face diverse challenges. This prepares them for future roles while elevating their current contributions to the organisation. 

53% of companies in Southeast Asia believe that their successors are not fully ready to take on leadership roles when vacancies arise. This highlights the need for comprehensive succession planning and targeted development programs.

Integrating succession planning into the company culture

To maximise effectiveness, succession planning must be deeply woven into the company culture. This entails cultivating a mindset that prioritises talent development and leadership continuity. Furthermore, integration into performance evaluations, goal setting, and career discussions solidifies its significance in an employee’s organisational journey. 

How Organisations in the Southeast Asian Region Implement Smooth Succession Planning with Accendo’s TalentPulse

Accendo’s Succession Planning software includes a combination of various talent assessment tools, an extensive success profile library, and a matching algorithm that speeds up the talent identification process to deliver quicker, cost-effective, and more accurate insights while ensuring a strong leadership pipeline to drive the business. 

Here are four noteworthy features of Accendo’s Succession Planning software: 

Holistic talent evaluation

Our innovative method employs diverse data points to optimise talent identification, mitigate biases, and ensure role compatibility. 

Accendo’s Succession Planning software utilises intuitive TalentPulse dashboards for comprehensive assessments, succession planning, and identifying successors for key roles. The platform provides insights into strengths, gaps, and streamlines talent review meetings, thus aiding organisations in building informed succession strategies. 

Extensive global success profiles

With over 30 years of dedicated research, Accendo presents a comprehensive repository of more than 3,000 globally benchmarked success profiles. This ensures precise candidate evaluation against universal standards for job excellence. 

This dynamic resource empowers companies to craft success profiles that outline essential qualities and competencies for critical business positions across diverse industries and hierarchical levels. This collection is regularly updated with 20 frameworks spanning 16 industries, ensuring alignment with current job market demands. 

Quick yet reliable decision-making

Time-sensitive decisions necessitate dependability, and our extensively validated algorithms, refined over years of advisory experience, empower you to swiftly pinpoint capable successors with certainty. 

Accendo’s Succession Planning software allows organisations to expand and intensify their pursuit of talent, leveraging diverse data to evaluate their capabilities and facilitate data-backed talent conversations that inform future planning. 

Consolidated candidate report outputs

TalentPulse provides comprehensive report outputs, encompassing the Development Report that features assessment outcomes and growth opportunities, alongside the Executive Report that incorporates supplementary insights obtained from interviews.  

These valuable reports play a pivotal role in candidate evaluation, pinpointing areas for enhancement, and facilitating well-informed choices pertaining to talent development and the orchestration of succession plans. 

A Telco’s Journey with Accendo’s Succession Planning Solution

Key Takeaways

Here are the key takeaways from our blog that highlight the critical consequences of poor succession planning.  

1. Lack of succession planning can pose significant risks, including financial risks for the business, wrong candidate selection, a loss of knowledge and expertise, and a loss of internal talents.
2. Embracing proactive succession planning is vital to bridge talent gaps, ensure continuity, and enable seamless leadership transitions. Accendo’s Succession Planning software facilitates robust succession strategies by evaluating candidates based on leadership, adaptability, culture fit, and technical proficiency, benchmarked against global success profiles. You can try Accendo’s Succession Planning software for free by filling up the form below and exploring your succession planning journey with Accendo. 

Frequently Asked Questions (FAQs)

What is the key factor to ensure the succession planning initiative is a success rather than just a paper exercise?

The key factor to ensure a successful succession planning initiative is active involvement and commitment from top leadership. It should be supported by concrete actions like mentorship, skill development, and opportunities for potential successors.

Is every single competency “testable” or are they mainly through questions, answers and experiences?

Not every competency is easily testable with questions and answers; some competencies may require practical demonstrations or performance assessments to evaluate effectively. 

Is there anything else to deliberate upon when deciding successors if the data already shows it all, e.g.: role-fitness?

Even if the data seems conclusive regarding role fitness, it is essential to consider potential unforeseen challenges and dynamic business environments. Regular review and ongoing development are crucial for successful succession planning. 

What is the appropriate age range for the company to develop a successor?

There is no specific age range for developing a successor. It depends on an individual’s skills, potential, and readiness to take on the role, regardless of age. 

Does it make any sense to promote someone with 80% role fit vs 95% role fit?

It can make sense to promote someone with 80% role fit if they have strong growth potential and can develop missing skills. However, promoting someone with 95% role fit is generally preferable as it reduces the risk of potential skill gaps and ensures a smoother transition. 

How many levels does succession planning usually involve in the organisational chart?

Succession planning can involve multiple levels in the organisational chart, depending on the company’s size and structure. Typically, it covers high-level executive positions and key leadership roles throughout the organisation.