Leading beyond three generations

On November 8, we will witness the transition of China’s leaders at the 18th National Congress of the Communist Party of China. One of the central figures at the helm is Vice Premier Li Ke Qiang. Despite earlier scandals surrounding his administration as Governor of Henan Province from 1998 to 2004, Li Ke Qiang rose up the political ladder and is slated to become China’s next premier. Increasing questions from external observers about Li’s moral compass and his ability to lead one of the world’s economic superpowers highlight a more critical problem. Despite being in power for nearly seven decades, the Communist Party has yet to develop a transparent system of governance and succession planning for itself. While age and term limits effectively remove the possibility of top leaders staying in power infinitely, the rules of the Chinese leadership succession process do not align groomed leaders to a core set of values. Observers have remarked that the leadership succession process rests on the principle of favouring those who fall into line, not those who are independent-minded and wants greater change in China’s political system. If this is true, then the plan to keep the Communist Party will eventually backfire, as China will need bolder leaders with moral courage to facilitate the transition of China’s economic development model, from one that is labour-intensive and export-oriented to one that is innovation-driven and sustainable^[1].

Similar to the Chinese Communist Party, majority of Asia’s companies do not have a transparent system of succession planning and leadership development. In fact, the topic of succession planning remains highly sensitive for many Asian companies, especially family businesses which form a significant majority of private enterprises. While a growing number of companies have started to embrace this issue by implementing leadership development programmes, others continue to regard this with a lower priority, preferring to deal with it only when it is too late. Founders of family businesses may assume that their children will eventually take over the reins. Without a clear sense of purpose and strong set of core values as a basis for leadership selection, even large Asian family-owned conglomerates encounter great difficulty in ensuring smooth succession planning. Reliance, India’s largest business group, was forced to split in 2010 due to a bitter family row between two brothers that lasted more than five years^[2]. Samsung Group’s succession plans are being threatened by an ongoing family feud^[3]. Fortunately, more Asian companies have adopted a more sustainable approach to leadership selection and grooming. For example, Tata Group of India, a-family-enterprise-turned-global-conglomerate, has taken increasing steps to improve its succession planing process, promoting insiders to rise as leaders within the organisation based on Tata’s core values and in tune with the company’s culture. It appears that the Tata family does recognise that to ensure the longevity of the business and secure the happiness of the family, they must distinct between ownership, control and management and appoint the most competent and aligned members to run the company – even if they are not a Tata. Originally said by Chinese philosopher Mencius (孟子): “道德传家，十代以上，耕读传家次之，诗书传家又次之，富贵传家，不过三代。” This can be translated as: “In a family, moral values can be passed down across ten generations or more. Knowledge and wisdom can be transferred from generation to generation. Yet, the transfer of wealth and riches can last no more than three generations.” Building strong core values and culture within the family extends the success of the family. Regarding the organisation as the corporate equivalent of a family unit, the founding generation takes on a crucial role in conveying its fundamental values to the next generation. A succession planning programme that fails to integrate core values into its training and selection criteria will not identify the right leaders to steer the organisation forward. For Asian organisations – especially family-owned enterprises – to escape the curse of not lasting beyond three generations, it is crucial to develop the organisation’s succession plan based on its fundamental purpose and core values. In the course of serving several family businesses, we have developed a leadership ascension programme based on the following cycle, which will give companies a higher chance of grooming leaders sustainably.

1. Define a career ladder, based on technical competencies and the organisation’s core values.

First, define what it means to be a leader within your organisation. Ask yourself what it means to be a leader at each level, based on your expectation of what the leader should be able to do and the values that he/she should practice. The values chosen for each level is dependent on the skills, competencies and level of responsibilities required for that career position and should be customised to your organisation. The table as shown here is an example of a 4-level career ladder, based on five core values (Mutual Success, People Development, Accountability, Excellence and Best-In-Class) for a Singapore-based SME operating in the Oil & Gas industry. This was developed by Consulus, as part of the Leadership Ascension Programme for this client. The final level refers to the highest career level that a staff can be promoted to, which is the same level as the business founder. Example:

2. Allocate career levels to positions in the organisational structure.

Once you have clearly defined what it means to be a leader at each level within your organisation, review and adjust the organisational structure. This is of course subject to your business model. Then, allocate the career levels to positions within the revised structure, taking into account job competency requirements for your leadership development plan. Often companies at this stage may need to create new positions, which may stay vacant for a period of time. This is to ensure that there is a position available for the type of leader as specified in the career ladder and signals to staff that there is a clear development track in place for them to grow within the organisation.

3. Identify likely candidates who can assume the roles.

With the allocation in place, identify likely candidates using the leadership criteria as defined in the career ladder. These candidates may come from various departments. If you do have a second tier of managers within your organisation, consider them as the candidates for your first round of assessment. To remove the perception of unfair promotion, assess candidates using a 360-degree approach:

• CEO Review. This is a one-on-one interview between the CEO and the candidates on an annual basis, which gives him time to nurture his relationship with the candidate and to ascertain if the candidate shares the same direction as the CEO in building the company.
• Leadership Review. This is a performance review provided by the candidate’s supervisors or mentors. This will offer a balanced approach to the candidate’s capabilities.
• Peer Review. This review allows the candidate’s peers to comment on his/her work performance and leadership abilities. This offers a more balanced review of the candidate’s leadership and ability to work with others and makes it easier for others within the organisation to respect the candidate should he be selected to be groomed further as a leader.
• Business Impact Review. This is a quantitative performance review, pegged to business key performance indicators (KPIs) and actual output. This will help to moderate any biased expectations as the review is based on business statistics, actual ideas and innovation impact.
• Personal Report. This is a personal report submitted by the candidate, detailing his/her accomplishments and goals within the organisation and how it relates to the organisation’s core values and vision. This allows the top management to review the difference in personal and corporate objectives, indicating the degree of individual alignment with the organisation.

3. Customise leadership development roadmap for candidates based on their strengths and gaps.

After the first round of assessment, invite the candidates to a one-on-one session to inform them of the results. Based on the candidate’s individual strengths and gaps as identified in the assessment, advise the candidate on the development track he/she should take and customise the roadmap accordingly. Candidly explain to the candidate why he/she is or is not promoted, what they must do to upgrade themselves or move up the career ladder in terms of core values and business performance. This can include taking on specific assignments or addressing any cultural mindset issues. Also take the opportunity to share your vision with them and get them to commit to their own growth.

4. Monitor the progress of the candidates.

During the grooming process, you need to commit time and energy to coach the candidates. Share with them your thoughts about the organisation. Create a schedule to mentor and coach them, building a mutual understanding of each party’s needs and wants. While the programme requires strong commitment from both the founders and the candidates, the integration of core values into the process of succession planning reduces the possibility of grooming the unsuitable leaders.

Tang Ying Chun is the Strategy Manager at Consulus.

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1. http://www.iss.europa.eu/fr/publications/detail-page/article/chinas-leadership-succession-new-faces-and-new-rules-of-the-game/ 2. http://www.telegraph.co.uk/news/worldnews/asia/india/7690414/Family-feud-that-threatened-to-destabilise-India-settled-in-court.html 3. http://www.reuters.com/article/2012/05/29/us-samsung-lawsuit-idUSBRE84S18V20120529