Japanese companies lack successors for their leaders, exposing businesses to closure risks
More organisations in Japan are operating without a designated successor in the event that their leader departs, according to a new report, highlighting the gaps in succession planning in the country's workplaces.
Data from the Tokyo Shōkō Research revealed that 62% of companies in Japan don't have a successor to take over operations, up by 0.45 percentage points from the previous year, Nippon reported.
This leaves fewer than half of leaders with a successor in place, most of whom (64%) are planning to pass down the business to a son, daughter, or another family member, according to the report.
Lack of company successors
The absence of successors is most prominent in six sectors, including information and communications, services, retail, construction, wholesaling, and real estate.
Over 80% of company heads in their 40s and below don't have a successor in place, according to the report, which it attributed to most of them either founding or taking over the company relatively recently.
But even among senior company leaders, the report revealed that many of those in their 60s (49%), as well as those in their 70s (32%) and 80s (25%), don't have a successor.
Risks of having no successors
The lack of successors in Japan's organisations leaves them at risk of closure when the business leader leaves, according to the research.
"Since several years are required to hand over a company smoothly to a successor, businesses end up having to close down when an elderly company representative has no available successor," the report read, as quoted by Nippon.
The findings come amid constant turnover in company leadership globally, according to findings from the Russell Reynolds Associates (RRA).
In the Asia-Pacific region, there have been 59 CEO departures since the beginning of the year, with Japan accounting for 48% of this turnover.
According to the RRA report, internal CEO appointments are driving organisational movements in APAC, with 97% of newly hired CEOs this year being first-timers.
"As the CEO role continues to evolve amid unprecedented market dynamics and stakeholder expectations, APAC organisations are strengthening internal leadership pipelines and embracing first-time CEOs," said Euan Kenworthy, who leads RRA Southeast Asia operations.
Kenworthy said organisations need to proactively identify and develop their high-potential talent if they want internal succession to be successful.
"Boards and sitting CEOs play a crucial role in mentoring successors and fostering a supportive environment that balances continuity with fresh perspectives, enabling sustainable transformation in today's complex business landscape," he added.
