Academic journal article Academy of Entrepreneurship Journal

The Impact of Personal Culture on Sophisticated Succession Planning by Owner-Managers of SMEs in Malaysia

Academic journal article Academy of Entrepreneurship Journal

The Impact of Personal Culture on Sophisticated Succession Planning by Owner-Managers of SMEs in Malaysia

Article excerpt

INTRODUCTION

With baby boomers coming to an age of retirement and shortage of younger employees stepping up in replacement, business succession planning is vital in cultivating capable management executives who are going to implement strategies and achieve corporation objectives (Huang, 2001). At times of unexpected death or resignation of executives, succession management serves as crucial part of human resources strategy; assuring suitable leaders are ready for appointment. Thus, only with good succession planning can firms ensure long-term business survival (Caudron, 1996). Although the importance of succession planning has been repeatedly expressed, many organizations still do not take business succession planning seriously. A survey done by Caudron reveals surprisingly that only 22% of 502 respondents agreed to the statement "My organization has a welldeveloped management succession system" (Kur and Bunning, 2002). The scenario is identical in Malaysia. For Malaysian organizations, many focus entirely on hiring and training workforce and neglect succession planning (Fatt, 2004).

On the other hand, individual culture of leaders plays an important role in determining the complexity of a succession planning system of an organization. Ironically, individual culture is rarely investigated in the area of business succession planning. Thus, this leads to the question of does individual cultures have impact on the sophistication of succession planning program in Malaysia SMEs? This study attempts to determine the individual cultures of SMEs, as well as to measure the degree of sophistication of succession planning system employed by SMEs in Malaysia. For this research, only small and medium enterprises (SMEs) in Malaysia are taken into consideration. Classification of an SME in this research follows (Saleh & Ndubisi, 2006): organizations with full time employees not exceeding 150 or annual sales turnover not exceeding RM 25m.

LITERATURE REVIEW

Succession Planning Program

In general, scholars consent that a sophisticated succession system should include these critical elements; a statement of strategic vision (Huang, 2001); a planning database (Pattan, 1986); honest and open communication channel (Shulman, 1991); supportive management staff (Nahorney, 1992); systematic approach in identifying potential succession candidates (McElwain, 1991); rewarding managers for promoting best employees (McElwain, 1991); and participation, feedback and action (Getty, 1993).

Nonetheless, the degree of sophistication of succession planning system varies across business firms (Huang, 2001). Researchers in the past have come out with different items of succession planning systems. It has also been argued that firms in varying sectors will have distinctive succession plan differing in size (Barry and Jacobs, 2006). While studies of succession planning system have been conducted, none have examined the relationship between sophistication of succession system and individual culture. Some areas investigated with succession planning program include human resource outcomes (Huang, 2001; Anonymous, 2002) and organizational performance (Friedman, 1986).

In an empirical study, Sahl (1987) divided succession planning program into 5 stages on the basis of skill or sophistication involved. Friedman (1986) in the other hand characterized succession system into 7 elements. Metz (1998) redesigned and re-modelled the succession planning systems and summarized the key items as shown in Table 1.

Huang (2001) investigated the relationship between sophistication of succession programs and human resource outcomes of Taiwan firms. The 10 items used by Huang (2001) in measuring the sophistication of succession system is adopted in this study.

Individual Culture

There are various theories used in defining individual culture including Rokeach Value Survey, Allport and Vernon's (1931) Study of Values, McClelland (1991) Personal Value Questionnaire, Kilmann's insight test (Bilsky & Jehn, 2002) and Schwartz (1994) individual value structure theory. …

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