Succession planning appears to be a big challenge for family businesses in Singapore – but if next-gens are to take over the company, founders want them to focus on entrepreneurialism and innovation.
That’s according to a study by KPMG and CPA Australia, which found that only half of its survey respondents had a succession plan for the chief executive. “Often, the owner remains in the business throughout his lifetime,” said the report, which surveyed 41 family-owned groups in Singapore.
The majority of the firms also did not have a family constitution in place, while 66% of the senior family stakeholders had not made wills to pass on their shares.
But when transferring the business, 54% of respondents said it was very important that successors “exhibit entrepreneurial flair”, while another 17% considered it critical. Eight in 10 respondents also said successors should be innovative; almost 70% of founders credited the company's ongoing success to innovation.
The respondents, the majority of who ran companies with sales of more than 20 million Singapore dollars (€13 million), also considered resolving family conflicts and maintaining control over the business essential.
Some of the main causes of discord among the family, said the study, were competence of family members (19%), deciding on future strategies (16%) and lack of communication (14%).
But despite family heads identifying reasons for disagreements, a third of the respondents had no formal process in place to resolve conflicts. A quarter said they would approach the board of directors while 11% reckoned they would employ formal performance appraisals.
Only 5% said they’d involve third parties to solve family issues. This was in line with a recent CampdenFB poll, which found the majority of family-owned groups shun outside help, such as bringing in psychologists, when resolving problems.
Regarding performance during the economic downturn, almost 45% of the respondents credited the company’s resilience to family ownership. Twenty-seven percent were neutral.
“When times are hard, family members are more willing to rally around and make sacrifices for the good of the company. This could be connected to the desire of family members to grow the business,” said the study.
Nine in 10 of the families surveyed considered good governance structures important for the success of the firm. While close to half reckoned their current structure was adequate, a third said some changes might be needed.
The companies surveyed were involved in sectors such as consumer goods, services, property and engineering. More than half had been in business for 21 years or more, with about 25% operating for 10 years or fewer.
Around 99% of all companies in Singapore are small and medium enterprises, accounting for more than half of the country’s GDP.