Why you shouldn't neglect business succession planning

Estimated Read Time: 4 minutes

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In 2024, the key to a ‘future-proof’ business is strategic foresight. However, a PwC global family business survey found only 8% of Singaporean family businesses had a formal, detailed and well-communicated succession plan. Additionally, research firm Asian Private Banker found 57% of Asia’s high-net-worth individuals have not done any legacy planning, compared to 32% in the West. When it comes to this lack of business succession planning, research shows that business leaders consider it a lower priority compared to other day-to-day responsibilities and cite not planning to leave in the near future as the top reason for not having a succession plan.

There’s no doubt that business succession planning is crucial for long-term success and sustainability. Don’t be fooled into believing that leadership development and succession planning are strategic imperatives reserved only for large corporations. As of 2022, Singapore has over 299,800 Small and Medium Enterprises (SMEs), which make up 99% of all businesses in the country and employ 71% of the total workforce. It’s critical that these businesses also focus on safeguarding their futures.

Join us as we discover what business succession planning is and why it is imperative for high-performing organisations. And, why succession goes beyond leadership, and right to the heart of stakeholder confidence.

The succession experts

Robert Half’s Executive Search practice is one of the world’s leading advisories for board of directors and supervisory boards. Our bespoke advisory model is renowned for combining a hands-on boutique approach with our global strength and versatility. We take great pride in our proven track record of filling mission-critical executive positions for our clients – in particular for SMEs and mid-sized companies, whether they are listed, private-, family-, or private equity-owned.   

When it comes to succession planning, Andrea Wong, Managing Director of Robert Half Singapore, is a true expert. With more than a decade of experience in the recruitment industry, Andrea is a trusted thought leader on employment, recruitment and workplace trends, and has observed the importance of business succession planning firsthand, especially in the finance space.

Andrea says, “We advise and accompany our clients beyond the mere search assignment – both the company and the candidate – because we are convinced that finding the right candidate is just the beginning of building a future-oriented and sustainable company management and leadership approach.”

“Having partnered with clients from a broad spectrum of market sectors, it’s clear that leadership development and succession planning are essential, irrespective of whether you’re a private equity firm or a small business. A long-term vision is fundamental. It’s important to recognise that strategic planning and succession planning are not mutually exclusive when it comes to long-term strategic planning. Delivering the best appointment is as much about the future as it is the present – if you want to future-proof your business, adaptability and proactivity are not optional, they’re essential.”

The succession specifics

Many leaders are unsure what the true value of business succession planning to future-proofing a company is.

It might be uncomfortable to think about, but there are many ways you can suddenly lose a top leader. From death to illness, unforeseen leave to unexpected resignation, there are certain things you simply cannot predict. Although you can’t predict, you can plan – it’s leadership development and succession planning that will ultimately help you to survive when the unexpected hits.

Understanding the different types of succession can help your business prepare for various scenarios and maintain continuity. Looking ahead requires you to understand the different types of succession planning, as well as the legal and financial implications that come with each. Every business is unique; therefore, careful assessment is critical in determining which approach is most appropriate for your organisation.

Let’s review each of the succession planning options below:

1. Emergency succession planning

This is centred around unexpected events, such as the sudden departure, illness, or death of a key leader. Emergency succession planning ensures that there is an immediate replacement or interim leader ready to step in, minimising disruption and maintaining stability during a crisis. Often, it involves identifying internal candidates who can temporarily or permanently assume leadership roles with little notice.

2. Long-term succession planning

This is a proactive approach that identifies and develops potential leaders over time. Long-term succession planning involves a strategic process of grooming high-potential employees for future leadership positions through mentorship, training, and professional development initiatives. The goal is to ensure a seamless transition when current leaders depart.

Andrea says, “Long-term succession planning is pivotal in building a robust pipeline of qualified internal talent for leadership. It’s a valuable way to reduce the talent gap by cultivating and retaining potential leaders who can step up when the need arises. In my experience, long-term succession planning has been an effective way to enhance resilience, support growth, and mitigate risks.”

3. Family business succession

A Deloitte study on Asian business families found that 60% of Singaporean family businesses are in the developmental stage of succession planning.

This approach focuses on transferring leadership and ownership from one generation to the next within a family-run enterprise. While family dynamics can make it distinctly challenging, it can be effective through careful planning, clear communication, and the involvement of external advisors who can help to navigate conflict if required.

With the rise of family offices in Singapore, family business succession may become more popular. The number of family offices in Singapore is estimated to be around 1,100 as of June 2024, making it a leading global hub for this type of business.    

Successfully passing a family business to the next generation requires thoughtful planning and honest conversations. Start discussions early about the future of the business, making sure to include all key family members and stakeholders. Conversations about the goal of the business will help decide whether to keep it in the family, sell it, or bring in professional management. 

4. Succession for specific roles

This approach focuses on succession planning for certain critical roles rather than entire leadership teams. This is particularly useful in industries where certain positions are particularly vital to the company’s success, i.e., a Chief Technology Officer in a tech company. This form of business succession planning helps to ensure continuity in areas that are crucial to company operations.

5. External succession planning

While internal succession planning is common, some businesses look externally to fill key positions. External succession planning involves identifying potential candidates outside the organisation who can bring fresh perspectives and targeted expertise.

Andrea says, “External succession planning can be highly beneficial for organisations looking to innovate or change strategic direction. However, it must be noted that it requires a thorough selection and onboarding process to integrate new leaders effectively.”

Related: 7 steps to refining your succession planning process

The succession scenarios

To grapse what business succession planning is, let’s imagine two different businesses: the first is an entrepreneurial, investor-backed technology company, moving fast, with few hierarchies and quick decision-making. But it needs a leader for the next chapter. The second is a multinational public corporate, still adapting to high inflation, geopolitical tensions, and volatile supply chains. It has specialists in each department but is considering executive leadership skills in an ever-changing world.

Where will they both find talent? On paper, they have a lot going for them, but Cameron says at least one of them has a challenge.

“We know that many Singaporean businesses don’t have a succession plan for top roles. It doesn’t matter whether a business is public, private, or family-owned; what matters is a clear line of sight for young executives to the C-suite, and a plan to replace departing leaders.

A lack of business succession planning creates uncertainty when businesses need exactly the opposite. It’s a vital tool to help employees, customers, and investors feel confident about the future,” she says.

So, for both corporates and scale-ups alike, here are six succession planning tips to consider:

1. The supervisory board should be involved in discussions about new executive leaders. A business focused on disruptive growth will need different leadership to a business seeking stability, for example. The board can positively influence the succession process and take an objective view.
2. A leadership development programme will help to create a group of potential candidates. The succession story can then be communicated with employees, customers, and investors. This will give them confidence, but it will also provide a boost to commercial fortunes by positively positioning a business in its market.
3. Existing C-suite leaders might consider executive coaching to help them transition out of their current position into a non-executive role. Sometimes it’s hard for an entrepreneurial founder to step back and hand over the reins. Executive coaching can help them to adjust to new dynamics and the mandate of a new leader.
4. A time-limited transition period can help. Existing leaders can pass on their knowledge, but new leaders will be clear on exactly when they can take over. The longer the transition period, the longer new leaders might be watched.
5. Both internal and external candidates will need a strong backbone to cope with succession situations. External candidates will require a high level of emotional intelligence to empathise with departing leaders. Internal candidates have the advantage of being able to build trust and showcase their skills over time. That said, they may need to navigate historical power dynamics. In both cases, the supervisory board can play a supportive role.
6. Cultural fit is vital in succession planning. The cost of hiring the wrong person is more substantial than the investment of hiring the right one. A considered plan, and close relationships between the board and its advisors, will help to make the process as smooth as possible.

When it comes to safeguarding the future of your business, succession planning is critical. In an era where businesses are navigating multiple crises and rapid change, business succession planning is instrumental in instilling confidence in employees, customers, and investors. Whether you’re a corporate business recruiting from a growing pool of talent, or a fast-growing tech start-up looking for an external scale-up leader, know that you have multiple options when it comes to leadership development and succession planning.

Whatever your circumstances, developing a long-term succession plan is one of the most important steps you will ever take – not just for yourself, but for everyone else with a stake in your success.

Looking for your next leader? Let experience take the lead with Robert Half’s Executive search.

 

FAQs

1. How is succession planning different for a small business?

While succession plans are just as important in small businesses as they are in large businesses, some unique factors make succession planning different in a small business.

These factors include:

• Personal relationships and dynamics – Often they are more personal and tightly knit.
• Limited internal candidates - A smaller pool of employees means there are fewer
• Internal candidates available for leadership roles.
• Resource constraints – Compared to larger corporations, small businesses may lack the resources for comprehensive leadership development programs.
• Owner dependency – Many small businesses are tied to the owner’s vision and control.
• Flexibility and Adaptability – The agility of small businesses allows for succession plans to be implemented quickly.

2. How do I know if I need a succession plan?

If you answer ‘yes’ to any of the below questions, you need a succession plan:

• Does my business rely heavily on key individuals for its success?
• Does my business face potential risks from unexpected departures?
• Does my business aim for long-term growth and stability?

3. Who should be involved in developing a succession plan?

• Senior leadership
• HR professionals
• Key stakeholders such as board members or advisors.
• Potential successors and department heads (if possible)

4. How much does it cost to create a succession plan?

There is no set cost when it comes to succession plans. Costs will vary depending on the complexity of the business, the resources required, and the involvement of any external consultants.

While there may be some costs involved, don’t overlook the costs associated with not having a succession plan in place.

5. What is the disadvantage of succession planning?

While the advantages of succession planning far outweigh the disadvantages, it’s important to recognise potential disadvantages. These may include:

• The time-consuming nature of the planning process.
• The heavy resource requirements.
• The internal competition and tension that may stem from multiple employees vying for the same leadership role.