SINGAPORE - If you are running a family business in Singapore, good luck trying to get your children to join you.
A survey by Ernst & Young (EY), carried out with the University of St Gallen Centre for Family Business, found that only 3.8 per cent of Singapore students who are potential successors in family businesses would join the company five years after their studies. An even lower proportion - 1.1 per cent - would be willing to do so right after graduation.
This is worse than the global average of 4.9 per cent and 3.5 per cent respectively.
Ms Goh Siow Hui, a tax and private client services partner at EY in Singapore, said that the low level of succession interest among next-generation family members could be linked to the possibility that succession planning has not been at the top of the agenda among family businesses here.
She added: "Further, most family businesses in Singapore are fairly young and into their second or third generation only. The presence of the founder figure who still controls the business may influence the next generation's desire to join the family business."
The sucession challenge is getting tougher for family businesses not just in Singapore, but globally.
The EY study, Coming home or breaking free? (2015), looked into the succession intentions of more than 34,000 next-generation family business members globally.
It found that succession intentions have fallen by as much as 30 per cent when compared with like-for-like figures in a comparable survey that took place in 2011.
Survey participants in Mexico (11.5 per cent), Belgium (8.9 per cent) and Slovenia (8.5 per cent) have the strongest intention of joining the family business five years after their studies, with those in the US (1.2 per cent), Israel (2.4 per cent) and Denmark (2.5 per cent) the least likely to follow in their parents' footsteps.
Said Mr Peter Englisch, global leader of the EY Family Business Center of Excellence: "Family businesses face a challenge in convincing younger members of the family that their long-term futures lie within their businesses. Not only is there competition from the wider jobs market, with young people keen to explore their options in today's fast-moving economy, but many also feel that they need to prove themselves outside of the family firm first. In many ways, this is a healthy attitude.
"The challenge for family businesses is how to harness the next generation's ambitions to break free to benefit the family firm in the longer term. While fewer next-generation members intend to become successors, those that do may be more motivated and better prepared."
Gender also seems to play a part, the survey found. Globally, female potential successors are less likely to want to take over the family firm than their male counterparts - 4.3 per cent of women want to take over the family business five years after graduation, compared to 5.7 per cent of men.
The size of a family business is another factor that appears to affect succession intentions - the bigger, the better. Only 5.2 per cent of next-generation members wanting to take over at firm with two to five full-time staff, rising to 16.3 per cent for family firms with more than 100 full-time staff.
The study also identifies a number of potential drivers of succession intentions. As GDP increases, succession intentions decrease, although it appears that as countries reach a certain GDP level they rise again.
Dr Philipp Sieger, assistant professor at the University of St. Gallen, added: "In less developed countries, taking over the parental firm is often the only viable career option. As countries become wealthier, the career alternatives become more numerous and attractive. In this way, only successors who are interested and capable should enter the family firm in countries where they have career alternatives. In such settings, it makes even less sense to pressurise children into the family business."
The report also found that succession intentions were higher in cultures that cherish pride in one's organisation and family, prioritise job and economic security, and have a culture that strongly respects power and authority.