Taiwanese businesses struggling with succession planning

Author: Jens Kastner | Date: 28 Sep 2016

HR departments must plan ahead to make sure they have a CEO-in-waiting, say experts

The most pressing issue for Taiwanese HR leaders is arguably the failure of the island’s enterprises to craft timely leadership succession plans.
 
There are the headline-grabbing stories such as that of Morris Chang, 85, founder of the world’s largest semiconductor maker, Taiwan Semiconductor Manufacturing Company Ltd (TSMC). He is still working as chairman and returned as CEO in 2009 after having temporarily passed on the position.
 
There are also countless tales of SMEs that are struggling to replace their founders near or beyond retirement age. It does not help that estate distribution and succession planning have always been opaque affairs in traditional Chinese societies, including Taiwan.
 
“A typical successful Taiwanese enterprise started in the 1970s, manufactures electronics and is family run, with the founder now being over 70,” said Liu Chun-nan, a Taipei-based HR business partner at the London-based multinational pharmaceutical and biopharmaceutical company AstraZeneca, and a specialist in succession planning.
 
“While western companies have typically experienced several leadership transitions, for many Taiwanese companies it is now the first time.”
 
Liu added that for the founder’s first successor, the likelihood of failure is “very high.” This, according to Liu, is partly due to the phenomenon that talent usually starts leaking quickly once the founder has left, and partly due to power struggles that may materialise after their departure.
 
“It cannot be easy for the new CEO if there are many stakeholders constantly undermining his or her own strategies,” Liu added.
 
Sylvia Lin, public relations manager of Taiwan’s 1111.com online job bank, said succession planning is a much trickier issue in Taiwan than it is in South Korea or Japan, for example. In Japan, the electronics manufacturing boom took off right after the Second World War, meaning Japanese companies have typically already experienced several leadership transitions. And many successful South Korean manufacturers started as government entities, meaning there had been no founder-figure in the first place.
 
“What makes succession planning additionally precarious in Taiwan is that it offers comparatively low wages for executives,” Lin said. “So talent is not only turned off by the constant meddling of the founders and their clans, but also by pay cheques being smaller than in China, Korea or Singapore.”
 
According to AstraZeneca’s Liu, the first step in a succession planning programme is to instil a sense of urgency in the current corporate leadership. This is followed by the identification of important positions within the company for which a succession plan should be developed and then finding potential successors for those positions.
 
“And after identifying the talent, the challenge is to keep contact until the position becomes vacant,” Liu said.
 
Besides TSMC, there is a long list of Taiwanese companies that have experienced prominent succession planning issues. These include computer-makers Acer and Quanta Computer; conglomerates such as Formosa Plastics Group and The Evergreen Group; Apple-assembler Hon Hai Precision Industry Co and Far Eastern Textile Group, among others.