Indian firms lack proper succession plan: survey


New Delhi : Most members of India's globally recognised corporate community are not properly equipped with a sound succession plan that has a serious impact on a company's market valuations, says a new survey.

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Very few Indian companies have been able to effectively implement a succession plan for its important and strategic positions, said a survey conducted by the Associated Chambers of Commerce and Industry of India (Assocham).

Leadership forms an important part in creating a certain image about the company even as it highlights the company's goodwill by building an efficient brand valuation, the survey said.

A whopping 92 percent of those surveyed opined that companies which put in place a proper succession plan enjoys a better rapport in the market.

The survey, conducted on over 275 leading management consultants, corporates, academicians and professionals, also rated Indian companies four on a scale of 10 in terms of long-term planning and grooming of the successor to the head of a firm.

"Leadership performs an instrumental role in laying down the long-term foundation and imparts strength to the organisation," Assocham president Venugopal Dhoot said in a statement Tuesday.

"As a good corporate governance practice the board of directors and management should set up a clearly defined succession policy defining the number two and three positions in an enterprise, even among the family-owned and run businesses," he added.

A proper succession plan leads to good corporate governance that creates an internal guideline for the management of the organisation, its board of directors, shareholders, investors, employees, consumers and suppliers to follow.

The long-term competitiveness and efficiency level of a firm could get adversely affected due to lack of a succession plan, according to 83 percent of the survey respondents.

Without a proper hierarchical set-up, the performance of a company and the entire team gets adversely affected giving rise to large-scale attrition.

While family-run businesses, a common phenomenon in India, take care of the succession plan internally, a few recent incidents of family spates have made this all the more important.