Why succession plans fail, and how boards can fix them

Almost every listed company in Malaysia has a succession plan. Far fewer have a succession decision they would be comfortable defending. The gap between those two things is where most boards are currently sitting, and it usually goes unnoticed until a chief executive resigns.

The plan itself is rarely the problem. It exists, it is reviewed annually, and it satisfies the Nomination and Remuneration Committee. The problem is what the plan is made of.

The plan that satisfies the auditor

A conventional succession plan names two or three candidates per critical role and assigns each a readiness horizon: ready now, ready in one to two years, ready in three to five. It looks rigorous. The difficulty is that those horizons are almost always derived from performance appraisals and the personal impressions of whoever happens to be in the room.

Performance in the current role is a weak predictor of success in a larger one. It measures whether someone is doing today’s job well, not whether they can carry a materially different set of demands. A finance director who runs an efficient function is not thereby demonstrating that they can lead a listed group through a restructuring.

Strong current performance is routinely mistaken for readiness for a bigger role. Without a common standard, “who is ready” remains a matter of opinion.

Three failures that repeat

Across assessment work with government-linked companies, listed groups and multinationals, the same three failures appear with striking regularity.

• The bench is too shallow to be a bench. Two names per role is not a pipeline; it is a pair of hopes. When one leaves, the plan collapses to a single option, and a single option is not a decision.
• Readiness is asserted rather than assessed. Nobody can say what “ready in two years” was measured against, which means nobody can say what would have to change for it to become “ready now”.
• The plan is never tested against the strategy. Succession is planned for the organisation as it is, not the organisation the board has committed to building.

What changes when readiness is measured

The correction is not more paperwork. It is a shared standard: an explicit description of what the next role actually demands, and structured evidence of how each candidate performs against those demands rather than against their current one.

Once that standard exists, three things become possible that were not possible before. Candidates can be compared with each other rather than each against their own history. Development can be aimed at specific gaps rather than at general improvement. And the board can see, in one view, which roles are genuinely covered and which are exposed.

That is the shift from a plan that files to a plan that decides — and it is the reason NBOL treats succession as a diagnostic problem before it is a development one.

Questions worth putting to the next meeting

• For each critical role, what specifically would a successor have to be able to do that the current holder does today — and what is genuinely different?
• What evidence sits behind each readiness rating, and who produced it?
• If our strongest internal candidate left this quarter, what would we actually do?
• When was the plan last tested against the strategy rather than against last year’s plan?

A board that can answer those four questions has a succession plan. A board that cannot has a document.