Succession Planning: Leadership From Within | 「後継者育成」 組織内からリーダーをどう育てるか

Originally written in English

This article first published at The HR Agenda Magazine [July-October 2015 issue].

The Chrysanthemum Throne – Japan’s existing monarchy – is said to go as far back as the 6th century and the imperial succession has continued uninterrupted right up to the present emperor. This record of continuity is unsurpassed by any other existing monarchy, not only in neighboring Asian countries, but in the world.

The political authority of the emperor may only be symbolic but its continued existence is a lesson on effective succession planning which is, without a doubt, as relevant to running a business as it has been to running the affairs of a nation.

What is Succession Planning and its Benefits? Succession planning in modern business parlance refers to a process of determining critical roles within the company, identifying and assessing possible successors for people currently in those roles, and providing those possible successors with the appropriate skills and experience for future opportunities. Experts generally agree that succession planning is a combination of the following key elements:

− Recruiting the right people. − Providing them with proper training so as to develop their knowledge, skills and abilities. − Preparing them for advancement or promotion into more challenging roles. − Dealing with the fact that eventually there may be a need to replace talented employees.

Succession planning is important not just in terms of organizational development and providing a means of identifying and preparing suitable employees to replace key management roles. It is also a means of averting risk, particularly the risk the company faces due to the loss or demise of any of its key personnel.

As such, it is not unusual for succession planning programs to require the most senior-level executives to review those at the next levels to maintain a steady pool from which replacements may be chosen to fill each senior position.

Planning is vital because leadership does not mature overnight. Moreover, sometimes talents are not innate and need years of grooming. Organizations will need to prepare candidates with high leadership potential not only to ensure minimal disruption to management responsibilities but to minimize the impact on organizational effectiveness.

Not too long ago, most of this planning was focused on key management and leadership roles, much like grooming the successors of empires and kingdoms. Recently, however, succession planning has been steadily evolving to include not just an organization’s most senior positions, but managers and team leaders at all levels.This new view of succession planning, according to experts, reflects the transition of leadership development from being a specialized activity to a company-wide culture that is relevant throughout the organization.

The Inside-Outsider Approach to Succession Planning Unfortunately, according to Harvard Business School Professor Joseph Bower, most companies pay little attention to the issue of succession so they end up hiring either an outsider who quickly gets mired in corporate politics, or an insider who knows the business but does not have the ability to lead.

In his book, “The CEO Within: Why Inside Outsiders are the Key to Succession Planning,”Bower insists that the best candidates for the top posts are not just insiders per se, but insiders who have somehow maintained as much detachment from the local traditions, ideologies and shibboleths as any outsider. This “inside-outsider” knows the company intimately but is outside the mainstream and hence still capable of providing a dispassionate perspective.

There is no debate that insiders outperform outsiders. Bower’s own study of the top 500 companies in the U.S. led him to conclude that insiders performed better than outsiders regardless of the overall climate of the company at the time of their appointment. Being insiders may have given them an acute understanding of the organization and its culture, as well as the skills and knowledge that outsiders would only be able to accumulate over time, albeit with some difficulty.

Succession Planning in Japan Interestingly, in Japan, some of the most successful companies are also among the oldest. These are typically family businesses whose control and management have been handed down in succession for centuries.

Shrine builder Kongo Gumi used to be the oldest company in the world until its unexpected demise in 2006. The business is said to have started when Prince Shotoku invited a carpenter from Chosun (present-day Korea) to construct the country’s first Buddhist temple. Soon, business became brisk – brisk enough to last for 40 generations. What made the company last for more than 1,400 years? In an April 16, 2007 Business Week article, Kongo Masakazu , the company’s last patriarch, cited flexibility as a key factor.

For instance, rather than always handing the reins to the oldest son, Kongo Gumi chose the one who best exhibited good health, a sense of responsibility, and talent for the job. Moreover, it did not always have to be a son. The 38th Kongo was Masakazu's grandmother. Another factor that contributed to Kongo Gumi's extended existence was the practice of allowing sons-in-law to assume the family name when they joined the firm. This common Japanese practice allowed the company to continue under the same name, even when there were no male heirs in a given generation. What pulled the company down was not bad management but bad debts that went as far back as Japan’s post-war reconstruction in the1950s.

Another good example is Kikkoman, the world’s largest producer of soy sauce and soya products, which was founded in 1630 by Shige Maki of the Mogi family who ventured into business after she lost her husband in the battle of Osaka Castle. Her small business officially became a global brand in 1917 when eight branches of the family merged their companies together.