Succession planning and management practices among private sector firms in Malaysia

Abstract

Purpose Succession planning is an important strategic management tool that helps to sustain organizational growth and competitive advantage. A planned succession reduces uncertainties and avoids business disruptions when there is a departure of key talents or leadership in the organization. This study aims to empirically investigate the adoption of succession planning program among private sector firms in Malaysia and explores its practices and approach. Specifically, the study intends to examine the significant relationships between succession planning characteristics, demographic/control variables and organizational outcomes. Design/Methodology/Approach Managing Directors/CEOs and HR professionals of 108 private sector firms from a crosssection of manufacturing and services sectors have participated in the survey, which contributed to a response rate of 26.1%. The framework of succession planning characteristics and organizational outcomes are adopted from the work of Rioux & Bernthal (1999). Findings The findings show that on average firms in Malaysia employ an effective succession planning system. A formal succession planning is practised in 56.5% of the firms which are mostly large firms. Company growth and desire to improve business results are two main reasons why succession planning is important for private sector firms in Malaysia. The results of the study indicate that no significant difference is found between succession planning characteristics and demographic variables. The Pearson’s correlation and regression analysis also show that succession planning characteristics are significant in determining the organizational outcomes. The hypothesis that there is a significant relationship between succession planning characteristics and demographic variables are only partially supported. Similarly, it is only partially supported to the claim that, there is a significant relationship between organizational outcomes and demographic variables. Practical Implications The present study offers an empirical finding on practices and approach of succession planning and its impact on organizational outcomes in the context of Malaysia. Originality / Value Overall, the present study adds value to existing literature by examining the influence of demographic/control variables in determining the relationship between the succession planning characteristics and organizational outcomes.