What Is Succession Planning, and Why Is It Crucial To Your Business in Malaysia?

As we approach the end of 2021, businesses in Malaysia and around the world have been encouraged, incentivised, and arguably required to implement digitalisation strategies to survive in the new normal. The pandemic-enforced reality has meant that this is crucial to the immediate survival of businesses, particularly for smaller or medium-sized companies. 

And while most of the talk these days has been about digitalisation, a strategy that is often overlooked is succession planning. There may, of course, be other business processes or practices that may seem more urgent, but the need for succession planning is commonly explained with an old adage: if you fail to plan, you plan to fail. 

In the best of times, succession planning is crucial. And at the worst of times, succession planning is, again, crucial. ‍

What is succession planning, exactly?

At its core, succession planning is a process that involves the long-term planning for transitions and replacements for positions of senior leadership in an organisation. This can be part of a planned transition towards an external candidate, or internal employee(s) in a company, if/when an organisation’s leaders resign, retire, or move on. 

In many companies, succession planning is handled by the HR department; in larger organisations, there may even be a dedicated team handling the entire process. Once suitable candidates have been identified, succession planning also includes the process of training, or mentoring employees ahead of time, and ahead of an eventual promotion into senior management. 

So, why is a succession plan important? Naturally, leaders play a huge part in the success of any business — this is why an effective succession plan can mitigate the risk of any sudden leadership changes. While the timeline for things like retirements can be roughly predicted, senior figures in a company may also depart for better offers, or even different countries or regions — changes that are significantly more difficult to plan for. 

For public-listed companies, a good succession plan can also help to maintain goodwill with the board of directors, and crucially, shareholders. And for smaller businesses, succession planning can even involve plans to transfer ownership of a company to a select group of individuals in the future. ‍

3 steps to create an effective succession plan

At the end of the day, a good succession plan is an essential part of future-proofing your company, and protecting the business against any future, potential changes. But having a succession plan is one thing. Designing and implementing an effective succession plan, on the other hand, is a different challenge altogether. 

To help you do the latter, here are a couple of things that employers and HR professionals should be taking into account when designing a succession plan for your business. ‍

1. Identify future needs of the company

The first thing you’ll want to do is to identify the future needs of your company, specifically when it comes to leadership. Speak to existing leadership at the business, and gauge what is needed in future management to ensure continued success for the business. 

For example, the past few years have been about digitalisation — this trend is set to continue, so it might be worth investing in future leaders who have the required expertise, or background, to excel in a world of cloud-based services, and even automation tools. ‍

2. Cultivate talent as future leaders of the company

This (almost) goes without saying, but the success of a succession plan hinges upon the candidates chosen. As such, the identification of the right candidates as future leaders of the company is, arguably, one of the most pivotal cogs in the succession planning process. 

Requirements can vary from company to company, but it’s important to look into the specific requirements and needs of the business, and whether you can find the future leadership from within the company — or via external candidates. It’s also worth noting that the mindset of selected candidates will be a hugely important factor here, so be sure to select the right candidates for your business’ succession plan.

This list shouldn’t be a static, never-changing document, of course. Set an agreed-upon frequency for a regular review of the right candidates — this can be a yearly process, or even something like 6 months. ‍

3. Create an action plan, and be transparent about it

Once you’ve selected the right candidates, you should invest in their development and also be clear and transparent with them about future career development plans. Create an action plan, so that the employee is aware of any future training or development opportunities — and so that the business can eventually transition over to their leadership when the time is right. 

At the end of a day, a well-designed succession plan will help you prepare the business for the future — while offering development opportunities to retain high-performing and high-potential employees in the company. And from a sourcing point of view, it’s (almost) always more affordable to hire from within, particularly for senior leadership roles in an organisation.