Talent Management
Fiona Lam
17 Jan 2017
At Far East Hospitality, the responsibility of steering the succession planning initiatives rests with the CEO together with the heads of HR, operations, and marketing, who support and facilitate the strategy, programmes, and processes.
“We meet weekly, and the people, performance and development thrusts are always on the agenda,” says Arthur Kiong, CEO of the regional hospitality operator.
The company’s parent, property development group Far East Organisation, was founded as a Christian enterprise and thus “governed by the principles of stewardship and grace,” says Kiong.
“So we are all stewards of the organisation, responsible for the complete wellbeing of the business and for handing it over to the next steward in a better state than when it was handed to us,” Kiong says.
Far East Hospitality’s heavy emphasis on people development and grooming the next generation of leaders is, however, not such a common sight on the Singapore business landscape.
A 2013 global poll by Robert Half found that Singapore had the lowest rates of succession planning for Chief Financial Officer roles in the world. Local finance leaders were the least likely to favour being replaced by a subordinate as part of a talent pipeline.
This year, a survey by PwC and the Singapore Chinese Chamber of Commerce and Industry revealed that only one in five family-run firms have structured succession plans. More than half of the firms cited succession planning as a business issue for them.
Without a systematic approach to succession planning, many companies rely mainly on replacement planning instead.
Replacement planning focuses on immediate needs and securing immediately-available personnel. It assumes the organisation chart will remain unchanged over time, and does not go further than naming employees as back-ups for the incumbents in top positions.
In contrast, succession planning focuses on developing high-potential people for long-term needs, instead of merely identifying them as replacements. The goal is to build deep bench strength such that whenever a critical position is vacated, the company has a selection of qualified candidates available internally for advancement.
More strategy needed
“Succession planning must be approached as an ongoing process rather than an item to check off on an annual agenda,” says Anthony Devadoss, Managing Director and Vice President for Asia-Pacific at search firm BTI Consultants.
“Robust succession planning contains many elements, especially leadership development, corporate culture, and strategic planning, and thus needs to be seen as a critical component in its own right,” Devadoss says.
Unfortunately, lapses and oversights, such as not communicating with the succession candidates or failing to get their support and understanding, can significantly hamper succession plans.
Other common mistakes include procrastinating at the start of the planning process, having an insufficient collaboration of thoughts, not investing enough in learning and development for the identified successors, and not adhering to a set timeline.
Many organisations also take a ‘fill-in-the-box’ compliance view, by simply building organisation charts and highlighting executives who are expected to be ready for career progression in a certain number of years.
Graham Poston, Regional Managing Partner at executive search firm Heidrick & Struggles Singapore, cautions that this approach can create a false sense of security.
“It does not identify, address and track the critical few development priorities in order to help these leaders fully realise their potential,” Poston says.
“As a result, the succession process often stagnates. Charts can still be stating executives as ‘ready in two years’ even after the two years have passed!”
In many cases, the company will end up having to expend significant resources to make an external hire, instead of promoting an employee.
Key benefits
“Good, strategic succession planning enables companies to have the right people in the right place at the right time, to achieve desired business results,” says Devadoss.
It also develops qualified pools of candidates prepared to fill critical or key positions, and improves employees’ ability to respond to changing environmental demands.
The resultant stability in leadership and other positions helps sustain a high-performing culture.
Annie Yap, Group Managing Director and Chief Strategy Officer at recruitment firm AYP says it is essential for companies to keep on functioning even when they lose their key players.
Effective succession planning also serves as contingency planning, and makes it simpler for companies to handle unforeseen attrition, she adds.
At the same time, employees will tend to stay longer if they understand the organisation has made feasible arrangements for their futures.
“Generally, it makes for an exceptionally positive air inside the organisation and leaves employees fulfilled in terms of career advancement and job motivation,” Yap says.
Not just for CEOs
Devadoss recommends organisations expand their succession planning process beyond identifying and developing successors just for the company’s top seat and senior management roles.
“Ideally, it should include other key positions, such as specialists, risk management, and compliance office bearers. For these, HR must develop leadership programmes to train employees to take on mid-management roles early in their careers,” he says.
This will help create a talent pipeline and address the current shortage of middle managers as well, he adds.
At Far East Hospitality, a three-year target has been set to develop a strong core of future leaders at both the corporate and operations levels.
The plan involves plotting career development paths for all of the company’s management and specialist staff.
“In particular, those with the highest current estimated potential will be further challenged and tested to assess their leadership potential and capacity,” says Kiong.
To help them perform and manage effectively as leaders, staff members receive mentorship as well as customised training and development opportunities.
Far East Hospitality’s succession planning focuses on positions such as the Chief Operating Officer, Chief Marketing Officer, the directors of sales and marketing, and general managers.
“We emphasise leadership training and development for these staff because it takes time for people to come into their own,” Kiong says.
However, he stresses this does not mean that other specialist staff, such as the directors for revenue management, sales, and housekeeping and rooms are unimportant.
“Our strategy for these positions is to cultivate a wide base of talents and hone their technical and managerial skills,” Kiong explains.
A group effort
Both the board and the CEO have pivotal roles to play in an effective succession planning strategy.
Best practices typically entail strong commitment and involvement from the board and upper management, along with a regular talent review process which cascades down the entire organisation.
In successful initiatives, the senior leaders are usually personally involved and hold themselves accountable for grooming leaders, while employees are also committed to their own self-development, says Devadoss.
“Senior leaders should form a partnership with HR, to ensure the succession planning process addresses challenges such as diversity, recruitment and retention,” he adds.
“This must be aligned with the business strategy which clearly articulates the business case for doing succession planning.”
At AYP, upper management and the HR department are jointly responsible for succession planning, which focuses on key positions including managerial roles.
AYP’s initiatives are integrated with other parts of its talent management strategy, such as performance management, learning and development, compensation, and assessment.
Training and developing talents is a particularly strong focus, to help the company groom potential successors in ways that best fit their strengths.
“We also automate the succession planning process for more efficiency and less operational risk,” says Yap.
Never too soon
While views may vary in terms of exactly how soon the wheels of succession planning should be set in motion, the consensus appears to be that companies can never start too early.
“The ultimate succession planning strategy starts from the very beginning of your employee development programmes,” says Devadoss.
Likewise, Heidrick & Struggles says it receives constant feedback from clients saying they wished they had started doing so earlier.
Over the last few years, however, more firms have begun to embed succession planning as a continuous practice and culture.
“These forward-thinking organisations no longer treat succession planning as a one-time event to be kickstarted only as the incumbent leader approaches the end of their tenure,” says Poston.
Companies that start early reap benefits such as greater visibility into the true capability of internal successors; accelerated organisational performance; a team of leaders capable of leading future success; and greater flexibility in deploying high-potential talent to critical roles, Poston says.
Far East Hospitality spots talent as early as one year into their initial roles.
The company’s engagement with employees also extends beyond the formal half-yearly appraisals. “We keenly engage with them on a weekly basis, which allows us to identify high performers readily,” says Kiong.
“We actively discuss their aspirations with them. Everyone wants to do better in their careers, but not everyone wants to take on heavier responsibilities or tougher assignments.”
Hurdles
One difficulty Far East Hospitality faces is striking a balance between hiring new blood and promoting employees from within.
With the company’s highly centralised support functions, promotions bring “a huge advantage in setting high-potential executives up for success”, Kiong says.
However, at the same time, hospitality is a highly dynamic business.
This requires the company to continually evolve its processes and be creative in order to address growing customer expectations and become more efficient, Kiong says.
“Without fresh ideas and perspectives, we could fall into the trap of ‘groupthink’ very easily,” he adds.
Another hurdle is the difference in employer-employee relationships today.
“These days, there is less loyalty between companies and employees,” Yap says.
Younger workers generally do not have high rates of retention, which means they often do not stay long enough for the company to include them in succession plans, she adds.
Finding out what motivates these employees to retain them is therefore critical, but still extremely difficult.
The ‘ready now’ myth
Many succession planning exercises also focus on selecting ‘ready now’ successors, which some experts advise against.
Poston believes this tends to lead companies to favour candidates with proven track records and reputations in roles of similar scope and complexity.
“No candidate, whether internal or external, is ever 100% ready until they have been in the role for a period of time,” he says.
For example, external candidates need to adapt to a different culture in the workplace, while internal candidates must step up and build different relationships with their former peers.
Poston says, “Nobody is perfect. If someone looks too good to be true, they probably are. Dig deeper!”
Movies, not still shots
At its worst and with bare minimum effort, succession planning offers a one-point-in-time snapshot assessment of the available candidates, made close to the end of the incumbent’s tenure. But Graham Poston, Regional Managing Partner of Heidrick & Struggles, Singapore, says an effective succession planning project should have far more elements and detail.
Rather than this polaroid still shot, HR should be aiming to produce a movie, he says.
Poston says succession planning is a team sport requiring different stakeholders, who often have different starting agendas, to align and collaborate with each other.
Drawing further on the production metaphor, he says an organisation’s Chief HR Officer needs to play the role of the casting officer, and work with that alignment in mind.
“The Chief HR Officer works closely with the Chairman of the Board (or the film’s executive producer), the CEO (the director), and the incumbent leaders and their potential successors (the lead actors and their understudies,” Poston adds.
Talent management
Article Summary:
Too often, employers neglect developing strategic succession plans. HRM Asia reveals that HR needs to go beyond just putting names in boxes on an organisational chart if it wants to build an effective leadership pipeline.
Sub Category:
Succession Planning