Operating roles not guaranteed for Malaysian next-gens

More than a third of Malaysian family businesses plan to install non-family managers when passing ownership to the next generation, new research has revealed.

The PwC survey of 50 Malaysian family businesses found that families were increasingly opting to give key operating roles to non-family executives as they thought individuals should be appointed on merit.

The survey reported that only 16% of respondents had formal succession plans in place. This tallied closely with global results where 80% of family businesses admitted they did not have a robust plan in place. A further 18% were looking to sell and exit their businesses altogether.

Staff recruitment was said to be the key challenge in the short and long term, with a respective 60% and 58% of Malaysian respondents claiming the issue was of primary concern. More than two-fifths (44%) think that retention of key staff will be a primary concern over the next five years.

Tan Sri Dato' Chua, founder of Malaysian financial company CMY Capital, shared his succession experience as part of the survey: “The key is for the patriarch to identify a successor who possesses the characteristics and qualifications fit to assume the leadership position within a family business.

“With the successor identified, the patriarch must set out a clear succession plan when he is still around and is able to manage an organised transition.”

The family business founder said that an organised shareholding structure is crucial to ensuring that the identified successor is able to maintain control and expand the family business.

He added that the successor should be given the majority equity interest while other family members are assigned to supporting or non-active executive roles, with or without voting rights.

Other results from the survey suggest that 64% of Malaysian family businesses recorded growth in sales over the last year, with 18% expecting to grow quickly and aggressively by 2020.

The survey findings, which were released last week, formed part of a larger global report released by PwC last September.