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Taking over your family’s business might seem like an easy job option to most, however, almost a third of Singapore’s family businesses are either planning to sell or float their business due to succession problems.
Exactly how bad is the succession problem in Singapore and why don’t Singaporeans want to take over their family business?
According to a study by EY, with the University of St Gallen Center for Family Business, only 1.1% of Singaporeans intend to take over the family business directly after graduating, while slightly more (3.8%) intend to join after 5 years of graduating.
Goh Siow Hui, tax and private client services partner at EY in Singapore noted that low succession interest could be linked to the possibility that succession planning has not been at the top of the agenda among family businesses in the island nation.
“A clear plan in inculcating and articulating family values, formulating long-term goals and identifying successors may be lacking in many family businesses here,” she explained.
“Further, most family businesses in Singapore are fairly young and into their second or third generation only.”
Additionally, the presence of the ‘founder figure’ still controlling the business may influence the next generation’s desire to join the family business.
Mirroring the situation in Singapore, globally, only 3.5% of potential successors want to take over the family business directly after graduating, while 4.9% would do so five years later.
With only 19.7% of successors open to take over the business, succession intentions have fallen by as much as 30% when compared to figures from a similar survey from 2011.
Peter Englisch, global leader, EY Family Business Center of Excellence said: “While fewer next-generation members intend to become successors, those that do may be more motivated and better prepared.”
Thomas Zellweger, chair of family business at the University of St. Gallen added: “Clearly, the succession career path is in competition with other career options, such as taking another job or starting a company.”
ALSO READ: What HR can learn from family businesses
Going by gender, male (5.7%) potential successors are more likely to want to take over five years after graduation compared to their female counterparts (4.3%).
The size of a family business also affects succession intentions.
Only 5.2% of the next-generation want to take over a firm with two to five full-time staff, while 16.3% want to do so for firms with more than 100 full-time staff.
The study also found that a country’s GDP, inheritance or gift taxes and culture also affects succession interest.
As GDP increases, succession intentions decrease, increasing again after reaching a certain GDP level while the higher the inheritance or gift taxes, the lower the succession intentions.
Succession intentions were found to be higher in cultures that cherish pride in one’s organisation and family, prioritise job and economic security, and strongly respects power and authority.