The Chrysanthemum Throne-Japan's existing monarchy-is said to go as far back as the 6th century and the imperial succession has continued uninterrupted up to the present. This record of continuity is unsurpassed by any other existing monarchy, not only in neighboring Asian countries, but in the world. The political authority of the emperor may only be symbolic but its continued existence is a lesson on effective succession planning and without doubt is as relevant in running a business as it has been with respect to running the affairs of the nation.

Succession planning in modern business parlance refers to a process of determining critical roles within the company, identifying and assessing possible successors, and providing them with the appropriate skills and experience for present and future opportunities. Succession planning is important not just in terms of organizational development but also in terms of averting risks, particularly the risk of the company coping up or surviving in the event of loss or demise of any of the organization's key personnel.

Traditionally, most of this planning was focused on key management and leadership roles. Recently, however, succession planning has been steadily evolving to include not just an organization's most senior position, but also managers and team leaders at all levels.

According to Harvard Business School professor Joseph Bower (2007), most companies pay little attention to the issue of succession and end up hiring either an outsider who quickly gets mired in corporate politics, or an insider who knows the business but does not have the ability to lead. Bower insists that the best candidates for the top posts are not just insiders per se, but "insider outsiders" who know the company intimately but are outside the mainstream and, hence, capable of peripheral perspective.

Interestingly, in Japan, some of the most successful companies are also among the oldest. These are typically family businesses whose control and management have been handed down in succession for centuries. In a recent study, Yupana Wiwattanakantang of the Institute of Economic Research at Hitotsubashi University found that heir-managed family firms have been outperforming non-family firms in Japan. Non-family firms belonging to a keiretsu corporate group actually ranked lowest, both in terms of performance and firm value. The conclusion was in sharp contrast to the general tendency of family firms in other developed countries.

Japanese companies, in other words, even those that are traditionally family businesses, generally pass the torch to insiders even in the absence of competent heirs within the family. Through adoptions and marriages, these companies are able to overcome the problem of inter-generational transmission of managerial skills as well as mitigate the likelihood of conflict between managers and shareholders.

Of course, sometimes things do not always work as they should. Even the royal throne constantly has to contend with the possibility of the imperial tradition vanishing with the last male heir-notwithstanding the birth of Prince Hisahito.

Based from the preceding discussions, it is clear that succession planning is no longer an option but a MUST for companies (and empires) to perpetuate themselves and be rightfully called "built to last."

The real challenge then becomes one of execution and if you are really determined in doing this, start by throwing away some of our traditional beliefs with regards to the type of people we consider as potential leaders. As HR professionals, maybe it is time for us to rethink, review, challenge and update our own concepts of leadership and gear towards succession and workforce plans that attract, recruit, select, train and advance those individuals with the skills most aligned with current realities.

It may also be the time for us to provide better career tracks for younger employees to get early exposure, for women to occupy key leadership positions, for foreigners to be designated to positions of responsibility, and even to challenge the commonly held view that outsiders cannot perform as well as insiders.--JK

Download the white paper version of this Editorial .