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succeeding at ceo succession
Models for the Asia Pacific Board
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CEO succession planning has emerged as an important topic in Asia, as companies focus on building pipelines of senior executive
talent in a region where demand for experienced leaders continues to
outpace the supply.
Planning for the succession of the CEO and selecting a successor are uni-
versally considered fundamental responsibilities of the board of directors,
and many elements of succession planning are similar, regardless of a com-
pany’s industry, size or geographic location. These include tying the profile
of the future CEO to the strategic direction of the company, surfacing
potential successors, and evaluating and developing candidates.
But companies in Asia face unique pressures related to the pace of growth,
the availability of experienced executive talent and the governance and owner-
ship models, and these must be taken into account in succession planning.
To better understand succession planning in an Asian context, Spencer
Stuart brought together board directors, CEOs and other senior executives
in Singapore for a panel discussion featuring Hsieh Tsun-yan, an
independent director of Sony Corporation, Bharti Airtel and Manulife Finan-
cial; and Koh Boon Hwee, chairman of Yeo Hiap Seng and a board direc-
tor of Agilent Technologies. Among the topics they discussed were succes-
sion planning strategies, the different succession dynamics in family-owned
and government-controlled companies, the characteristics Asian boards look
for in CEO candidates, and the extent to which practices from the West can
be adapted to Asia. Moderating the discussion was Michael J. Anderson,
the managing director of geographies for Spencer Stuart who is responsible
for the firm’s offices globally.
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succession planning: a model for asia Corporate governance and succession planning in Asian
companies must be understood in the context of three
common corporate ownership structures. In state-
owned or government-influenced companies, the gov-
ernment plays a role in helping companies execute
their strategies consistent with national initiatives and
expects to have some involvement in CEO succession
decisions. In family-run businesses, succession typically
takes place through the family. The family is highly
invested in the business, personally and financially, and
family members often are more willing to confront each
other when issues arise; however, deep personal rela-
tionships can breed conflict or feuds or keep the family
from considering outside perspectives or leadership at
key times. Finally, succession at independent private or
public companies can differ from the West because of
the realities of rapid growth in the region and shortage
of executive talent.
As a result, while Western succession planning practices
can offer some useful ideas to Asian companies, for
example, in the areas of talent development and career
pathing, others can be ineffective or inappropriate, said
Hsieh and Koh. For example, a process that pits multi-
ple candidates against one another is less desirable in
an Asian context, where boards are more likely to priori-
tize maintaining harmony among executives and retain-
ing key players after the leadership transition. The top
leadership bench in Asian companies is thinner than
those in multinational corporations, so Asian compa-
nies cannot afford the departures common in highly
publicized succession “races.”
When succession planning works well, the process
draws on the inherent strengths of the business and is
aligned with the governance structure. In a well-run
succession planning process, the board looks to the
CEO to develop succession candidates, regularly dis-
cusses the strengths and developmental needs of those
individuals and has frequent exposure to potential suc-
cessors, so directors are able to develop opinions about
the candidates over time.
From left: Michael J. Anderson, Koh Boon Hwee and Hsieh Tsun-yan
“If you are on the board andCEO succession hasn’t beenplanned as a routine, the CEOmay see it as a threat...”
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“There is no single formula. The process works better
if it is viewed as part of the governance routine,” said
Koh. “If you are on the board and CEO succession
hasn’t been planned as a routine, the CEO may see it
as a threat if it’s introduced; however, if it’s already a
routine practice, everyone takes it as a part of the
DNA. Therefore, the board should introduce a regular
succession planning process when a new person joins
as CEO if it doesn’t exist already and put the onus on
the CEO to surface internal candidates as part of a
succession plan.”
characteristics of an effective ceoAnother difference between East and West is the view
of the CEO role. Asian company boards are wary of the
Western-style “superstar” CEO, and prioritize the team
over the individual. So-called superstars can struggle in
that environment, while insiders who are comfortable
with the culture tend to do a better job, said Koh.
In this context, it is important for a CEO to build and
grow a strong team and have the emotional intelligence
to understand that he or she does not necessarily have
all the answers. Humility is a valued trait in such an
environment. “I did research on the top 10 killer dis-
eases of CEOs: Across the board, CEOs who lost their
humility were the ones who suffered the biggest down-
fall,” said Hsieh.
Cultural fit can be difficult but not impossible to assess
in external candidates. When considering external CEO
candidates, boards should spend significant time with
each to get to know them and then discuss collectively
how individual candidates are likely to fit in with the
organization. “Outsiders are not always a perfect fit
culturally, so boards have to consider the potential
tradeoffs between the expertise a candidate brings and
their cultural fit with the organization,” said Koh.
A common succession planning mistake boards make
— regardless of region — is failing to identify the skills
and capabilities that will be required of the future CEO,
rather than the skills that are critical in the present.
“The CEO should be selected based on the future
requirements of the company and not past and current
performance and challenges: therefore, multiple tools
are needed to make the right decision,” said Hsieh.
“Especially if the company or industry is undergoing
rapid change, it is important to evaluate internal candi-
dates in the context of future needs, over and above
their operational or technical competence, to under-
stand whether they will be up to the task of leading the
organization in the future.”
assessing and developing talentAn effective CEO succession planning process requires
a pipeline of executive talent, and the board plays an
important role in ensuring that the CEO is developing
the next level of executive leadership inside the com-
pany. Yet, at many young and fast-growing Asian com-
panies, there can be a relative lack of bench strength.
Because these companies have grown quickly, they
frequently have younger executives in more senior posi-
tions than their Western counterparts or have underin-
vested in leadership development. To ensure that talent
development is a priority, the board needs to put in
“If a father makes his son CEO but still yells at him at
the dinner table, then he’s still in charge.”
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place incentives to encourage the CEO to groom future
leaders.
“In the best-run companies, the board will have access
to executive team members, who will regularly attend
board meetings and make presentations to the board,”
said Koh. “The board also should be exposed to high
potentials another level down; it’s too late to wait until
they are reporting to the CEO. A confident CEO, mean-
while, is comfortable exposing his or her team to the
board.”
Executive talent development can be somewhat more
complicated in family companies, where potential suc-
cessors may struggle to become autonomous and learn
to lead in the shadow of the current CEO, who may be
a parent. “Titles may not mean anything in a family-
owned company,” said Hsieh. “If a father makes his
son CEO but still yells at him at the dinner table, then
he is still in charge.” Patriachs and matriarchs’ trouble
in letting go and evolving their own identity can be the
biggest obstacle to successor development in family
businesses.
One way that Western companies sometimes employ to
evaluate the performance of finalist candidates relative
to each other is the “horse race,” in which two or three
top internal candidates are given challenging assign-
ments, and their performance in these assignments is
evaluated. While these sorts of tests can be used effec-
tively, particularly if the competition among candidates
is not disclosed publicly, they can be counterproductive
in Asian companies because the “winning” CEO will
need the help of his or her competitors for the role in
order to be successful; without a large executive bench,
organizations cannot backfill executive talent as easily as
many Western companies, said Hsieh.
While it is not always possible to prevent the loss of
key people in a CEO transition, the board and CEO can
improve the chances of retaining critical talent by com-
municating directly with them about their role in the
organization and the expectations for them. “I often
work with individuals on CEO succession workshops
where I encourage them to plan their teams after the
CEO mandate is given to them. Most times you find
that people were so focused on reaching the top, they
failed to see the other contenders as critical assets they
needed when they became CEOs,” said Hsieh. “We also
encourage the participants to think through what they
would do if they didn’t become the CEO. This helps
prepare them to weigh carefully other eventualities,
including the benefits of being a supportive team mem-
Koh Boon Hwee
“Many times, the internal candi-dates are well-known, so boardsend up concentrating on theirdeficiencies, while outsiders tendto be well-presented.”
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ber to someone else being CEO. Very often, managers
are only trained to win. Thus, this helps them deal with
the broader picture of success in life and a broader set
of institutional outcomes to prepare for.”
internal versus external candidates: what works best for asian companies?While there has been a growing preference for internal
candidates among Western companies, boards
frequently consider external candidates as part of the
CEO selection process or benchmark internal candi-
dates against external talent. By contrast, Asian compa-
nies favor internal candidates and are less likely to
benchmark candidates against external executives.
Process is important when considering external candi-
dates, argue Koh and Hsieh, as boards must under-
stand the tradeoffs they are making between knowledge
about the company and breadth of business experience
or between cultural fit and specialized expertise. “Many
times, the internal candidates are well-known, so boards
end up concentrating on their deficiencies, while out-
siders tend to be well-presented,” said Koh. “If a com-
pany is highly complex, an insider will normally do
better even if a significant change is required, as the
internal candidate will understand it better contextually,
provided the right person is selected for the role.”
However, a board is wise to keep its eyes open for
talented people outside the company, even if the need
is not immediate, Koh added. “The board shouldn’t
make the mistake of subscribing to the views of any
single individual, including the CEO, in such an impor-
tant decision.” Another mistake boards can make is
deciding very late in the CEO succession process to
consider outside candidates, said Hsieh. “There has to
be an explicit point in the process early on when the
question of whether to have external candidates must
be considered. Very often, the board takes a call very
late into the process to start looking at external candi-
dates and this is a sure recipe for his/her failure, as
Hsieh Tsun-yan
“Very often, the board takes acall very late into the process tostart looking at external candi-dates and this is a sure recipe
for his/her failure, as there is nointegrated view and support
once the individual comes in.”
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there is no integrated view and support once the indi-
vidual comes in,” he said.
Meanwhile internal candidates can benefit from getting
a view of business beyond their company. Boards
should encourage senior executives to gain wider expo-
sure to related industries, by serving on an outside
board, for example, and building a strong network
among key stakeholders (e.g., regulators, press, non-
governmental organizations, unions and industry
observers). “Very often, if the CEO candidate is pro-
moted from within and has limited exposure outside
this company, they can have an insular view of the
world,” said Hsieh.
conclusionWhen planning for the succession of the CEO, boards
must consider a number of issues, including the neces-
sary experience, skill-sets and competencies that will be
required by the next CEO based on the company’s
strategic direction; the availability of internal talent; and
the advisability of seeking external candidates or con-
ducting external benchmarking as part of the process.
Although these issues are universal, the CEO succes-
sion planning processes of Asian companies also must
take into account the unique characteristics of Asian
business models, particularly related to culture, preva-
lent governance models, the executive talent pool and
the pace of growth in the region. By drawing on the
best of both Asian and Western succession planning
approaches, boards can tailor a process that produces a
steady pipeline of CEO-ready leadership talent.
From left: Ravi Thakran, managing partner of L Capital Asia, Malini Vaidya of Spencer Stuart and Koh Boon Hwee.
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Panelist Biographies
Hsieh Tsun-yan is the founder and lead counselor of
LinHart Group, a leadership services firm specializing in
advising boards and counseling CEOs on issues of
succession, leadership trajectory and top team effective-
ness. In a career spanning 30 years with McKinsey, he
served clients in a wide range of countries and indus-
tries, amassing a wealth of experience in corporate
transformation and leader development. He joined
McKinsey in Toronto and became its managing director,
Canada. Hsieh founded McKinsey’s leadership services
globally to help clients develop better leaders faster. He
returned to Asia in 2000 as managing director of
ASEAN practice and was chairman of Asia Client Com-
mittee until he retired in 2008. Hsieh is an independent
director of Sony Corporation, Bharti Airtel and Manulife
Financial Corporation. His board roles in Singapore
have included the Singapore International Foundation,
the National University of Singapore Business School,
the Institute of Policy Studies and the Singapore Sym-
phony.
Koh Boon Hwee is the nonexecutive chairman of Sun-
ningdale Tech, Yeo Hiap Seng and AAC Technolgoies.
He serves on the board of Agilent Technologies. In
addition, he is the chairman of the Nanyang Technologi-
cal University Board of Trustees. Koh was previously
chairman of DBS Bank and DBS Group Holdings (2005-
2010), Singapore Airlines (2001-2005), SIA Engineering
Company (2003-2005), Singapore Telecommunications
(1986-2001) and Omni Industries (1997-2001). He was
executive chairman of the Wuthelam Group of Compa-
nies (1991-2000) and, before that, managing director of
Hewlett-Packard Singapore (1985–1990), where he
started his career in 1977.
About Spencer Stuart
Spencer Stuart is one of the world’s leading executive
search consulting firms. Privately held since 1956,
Spencer Stuart applies its extensive knowledge of indus-
tries, functions and talent to advise select clients —
ranging from major multinationals to emerging compa-
nies to nonprofit organizations — and address their
leadership requirements. Through 53 offices in 29 coun-
tries and a broad range of practice groups, Spencer
Stuart consultants focus on senior-level executive
search, board director appointments, succession plan-
ning and in-depth senior executive management assess-
ments. For more information on Spencer Stuart, please
visit www.spencerstuart.com.
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