Amid record C-suite turnover and increased mobility of top talent, India Inc is grappling with succession woes. Despite pressure from boards and investors to strategise beyond the CEO level, extending to CXO-2 and business heads, most corporates are unable to build a pipeline of leaders.

Experts warn of imminent disruption to business continuity unless addressed institutionally, attributing the risk to multifaceted business challenges.

So, is India Inc merely checking the boxes when it comes to succession planning?

Data from Deloitte shared exclusively with ET shows that the process works at just one of four organisations, although seven out of 10 do have a framework in place for succession planning.

“While succession planning is witnessed as an established process across organisations (72%), merely (having) its presence doesn’t often translate into effective outcomes,” said Neelesh Gupta, director, Deloitte India. “Our analysis indicates that only 27% of the companies surveyed out of about 160 say it is effective. Progressive organisations are pivoting to coaching, immersions and job rotations as effective talent development levers.”

About 29% of companies said that candidates chosen for the CEO position through succession planning are successful while 32% said that the process works for CXO-1 level candidates. Still, at the CXO level, only 18% of companies found succession planning effective.

Measuring the implementation of succession planning, the survey showed that only 4% of organisations rate it as highly effective, while 7% found it very effective, 14% moderately effective and 14% somewhat effective.

Succession Planning a Continuous Process
As many as 61% of the firms surveyed said succession planning is not effective.

The survey covered companies in the manufacturing, services and life sciences sectors. The success rate was defined on the basis of the retention rate of promoted employees, performance evaluation, and feedback from stakeholders involved in the succession process.

Though some large, traditional groups test a number of candidates with exposure across multiple businesses and geographies, many other Indian firms aren’t as exacting about it.

“Succession planning boils down to the culture of an organisation and the quality of internal grooming,” said Marico chairman Harsh Mariwala. “There should be job rotation for grooming talent and exposure of talent to multiple profit centres to be able to judge their leadership skills in challenging roles and situations.”

Biocon chairperson Kiran Mazumdar Shaw said most boards are seriously addressing succession planning along with managements.

“However, I do believe there has to be a fine balance in succession planning, factoring in aspiration,” Shaw said. “It is imperative to have depth of leadership to fill a gap. Don’t make a succession ladder so aspirational that it becomes disappointing later when the top leadership cannot make way for the next line of talent at the right time.”

Also, succession planning needs to be a continuous process.

“The biggest challenge with succession planning in India is we link it to an event — be it retirement or an upcoming planned exit of a senior professional unlike in the developed countries such as the US where it is an institutionalised process,” said Monica Agrawal, Asia Pacific and India lead, CEO succession and board services, Korn Ferry. “The planning process should start right when a new CEO/CXO joins a role, not when the person is about to exit. Importantly, succession planning needs to be owned by the boards not the management and then only success is possible.”

Top company officials and board members pointed to a dearth of good talent at the top and as a result the need to build both an internal pipeline as well as a list of potential candidates from outside.

That needs bosses to be open to the advantages of succession planning.

“Succession is not easy since most people feel they are indispensable,” said Thermax chairperson Meher Pudumjee. “Succession means that you need to feel someone is as good as you to perform the role, which is not always the case. To plan succession requires one to think of their next move within an organisation or outside; they need to be emotionally ready to ‘let go’ their position.”

RR Nair, CEO coach and HR expert, said: “Long-term succession planning needs greater attention. Early identification of potential and exposing them to crucible roles and experiences to prepare them before choosing the right fit – both needs to be strengthened.”