Succession planning vital as fewer organisations are handing control to family members

Author: Kirsty Tuxford | Date: 4 May 2016

Long-term planning needed to develop leaders of the future, warn experts

Succession planning is increasingly important as handing over the reins to offspring or family members becomes a less common practice.
 
Over the past four years, 58 per cent of all new CEOs in the Middle East have been recruited from outside the organisation, according to Strategy & Research, the strategy consulting unit of PwC. This shows a marked increase on the 33 per cent of the previous four-year period.
 
During 2015, the Middle East had one of the world's highest succession rates, as 21 per cent of the region's largest organisations changed their CEO. This figure however, is largely down to higher than average CEO transitions in Saudi Arabia.
 
There are certain challenges relating to finding senior successors that are specific to the GCC, explains Jon Ashcroft, senior business director, Executive Search at Hays. “There is a lot of high-calibre talent in this region. However, private sector bosses often seek to hire candidates with specific experience from within the same industry or sector – candidates that can instantly add value,” he says. “This makes the hiring of senior talent more challenging. If an organisation operates in a fairly niche field they may look to recruit from other parts of the world, but the majority of senior-level recruitment that we handle is for candidates that are already in the region.”
 
Some organisations are underestimating the time needed to execute a succession plan. “A reasonable number of organisations, but certainly not all, are guilty of not planning far enough in advance,” says Ashcroft. “As a result, not only do they not allow themselves sufficient time to find the right talent, but also do not allow for an adequate handover period.”
 
Neha Mohunta, senior consultant with Aon Hewitt Middle East, has also identified a lack of planning as a big challenge. “Succession planning is a proactive process,” she says. “In organisations – public or private – where this exercise is viewed as an ad-hoc activity it is always hard to identify the successor. Leaders are not built overnight and can seldom be thrown in the deep end to survive. They need to be developed with the right support structure to ensure that they are not set up for failure.
 
“However, the challenge is still not the shortage of talent, but the unwillingness of leaders to invest in building a succession pipeline,” adds Mohunta. “Effective succession planning requires an equal commitment from the leader and successor. Unfortunately, this commitment is only met halfway as leaders tend to view the exercise with skepticism, resulting from insecurity or inadequate time to plan development.”
 
Traditionally, the practice of what the West refers to as 'nepotism', known in the GCC as wasta, has been a common part of succession planning – especially in family businesses. Experts now say that this practice is obsolete.
 
“Nepotism is not the succession challenge the region is facing,” says Mohunta. “Organisations today operate in what has come to be known as a volatile, uncertain, complex and ambiguous (VUCA) environment. Rethinking what roles warrant succession planning, identifying successors who display relevant competencies, and investing in an infrastructure that enables development is the need of the hour. Based on our experience across government entities, Islamic institutions and private family owned businesses in the region, organisations that are on board with the new succession agenda are already seeing growth ahead of industry standards.”