Who's the (Chinese) Boss?

Why China-based companies aren’t happy with their succession planning; a new Korn Ferry report.

There have been countless books, news articles and seminars highlighting the differences between Chinese companies and businesses elsewhere. Among the common differences highlighted: Chinese bosses are more paternal, and Chinese firms rely much more on middlemen.

But it turns out that China’s firms share one major trait with their corporate cousins in other parts of the world: they don’t feel very confident when it’s time to find new leaders. In a new Korn Ferry study of Chinese companies, only one-third of corporate executives surveyed said they were satisfied with their firm’s succession management practices, the same level of satisfaction—or lack thereof—as companies worldwide. The idea of creating a succession management strategy is still relatively new to many Chinese firms but “younger generations, increasingly exposed to Western corporate values, are resisting the traditional bequeathing of the helm to family or close insiders,” says Jeffrey Lin, a principal consultant at Korn Ferry.

Lin co-authored a new report “Succession Management in China,” with Senior Client Partner Joyce Gong and Senior Director of Research Guangrong Dai. They surveyed executives from 94 Chinese firms, 78 percent were multi-national firms and 91 percent had 500 employees or more. State-owned enterprises had even lower levels of satisfaction than multi-national firms, more than half said they were dissatisfied with their succession plans. Even executives that were satisfied with succession management said their companies needed help accelerating talent development. Indeed, only 15 percent of Chinese firm executives said they believed their firms had ready talent at every level.

Much like firms globally, Chinese firms were not happy with their heavy reliance on external hiring and failing to consider lower levels of the leadership pipeline. Often succession planning issues arise only when a current leader departs or plans to depart, Lin says. Indeed, “high turnover” was the main reason driving succession management plans in China (it’s the No. 5 reason globally).

Lin says that firms could may become more satisfied with their succession planning if they started measuring employee potential in a more holistic matter. For instance, rather than focusing primarily on an employee’s performance, firms could start looking at employee traits. Determining whether an employee is learning agile, or able to adapt and thrive in a complex environment, could make it easier for firms to not identify future leaders internally. 

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