While family businesses in Singapore are optimistic about growth and are keen to keep the business in the family, few have a robust succession plan in place, unlike their global counterparts, according to a survey released yesterday.
About 89 per cent of Singapore family businesses surveyed expect to grow in the next two years, compared with 84 per cent in both the Asia-Pacific and globally, says the Global Family Business Survey 2018 by professional services firm PwC.
They are involving members of the next generation at higher rates in their leadership teams (63 per cent versus 48 per cent in the region and 43 per cent globally) and senior executive roles (53 per cent versus 38 per cent in the region and 36 per cent globally).
But they fall short when it comes to succession and mid-term planning. Only 8 per cent have a robust, formalised and communicated succession plan in place, compared with 12 per cent in the Asia-Pacific and 15 per cent globally; and 34 per cent have a costed, formalised and documented mid-term plan, versus 43 per cent in the Asia-Pacific and 49 per cent globally.
"The biggest challenge standing in the way of family businesses thriving in Singapore today and into the future is the lack of formalised processes in areas of mid-term strategic planning," said Mr Ng Siew Quan, Asia-Pacific and Singapore entrepreneurial and private business leader at PwC.
"This is also tied to their strategic competencies including mitigating risk and challenges, digitalisation and innovation, and succession planning. The disconnect is quite concerning, but it also sends a clear signal to family businesses in Singapore on what can be concretely done to mitigate these risks."
The survey also found that the top three challenges family businesses face are the need to constantly innovate, the economic environment and international competition, highlighting the open nature of Singapore's economy as an added dimension of complexity for businesses here.
In comparison, the top three challenges cited globally are the need to constantly innovate, accessing the right skills and capabilities, and digitalisation.
Strong family values and aspirational purpose are identified as inherent advantages over non-family businesses, which could help secure profitable, long-term legacies, but only a third of Singapore family businesses have articulated their values in written form, PwC said. Globally, 53 per cent of family businesses reporting double-digit annual growth are able to point to a codified set of values.
"The message is clear: adopting an active stance towards family business values generates practices that pay off in real terms," said Mr Ng. "A commitment to a clearly defined set of values can act as an 'inner compass' for a family business."
The survey covered family companies in 53 territories with sales turnover of more than US$5 million (S$6.9 million). It was based on interviews with senior executives in nearly 3,000 companies between April and August this year.