Succession planning is largely absent in Indian companies as about one in three firms either has no such programme in place or has one that's not effective, KPMG said.
According to a KPMG survey, even after giving it increased importance, several organisations still take a myopic view of managing talent, which may hinder their competitiveness and agility.
Respondents ranked an insufficient pipeline of future leaders and a lack of depth of internal candidates for critical roles as the top risks, according to the KPMG report titled, Time for a More Holistic Approach to Talent Risk. About 28 per cent of the firms said they had no succession planning in place or that their existing process was not at all effective.
"Talent management is not a new avenue for organisations. It has always been an integral part of organisations. It was somewhat startling to see that organisations adopt a narrow, limited approach to talent management," KPMG India's Head of People & Change Nishchae Suri said.
Human resource experts say succession planning at Indian companies remains mostly poor and is more difficult as a large number of them are family-owned or family-run enterprises.
There is a need to develop succession planning as a constant rather than a reactive process, they say.
At professionally managed companies abroad, succession planning is done carefully, while in Indian promoter-driven companies, it is almost a given that the successor would be a family member, experts feel.
Family-run businesses in India are most likely to hire a "number two" person to help their family-nominated CEO.
The KPMG report said the difficulty in retaining key people and recruiting top talent remained a critical issue for most talent managers as 76 per cent of the respondents identified this area as a medium to high-risk group.
Suri said that "it is well-known that effective performance reviews can help top and poor performers alike by providing constructive feedback and aligning their goals to those of the business."
KPMG said employees in India are expected to get an average 11 per cent hike in salaries in 2014 as companies deal with challenges like attracting and retaining critical talent.