Profits before legacy for family businesses in Singapore: survey

Singapore

FOR family-run businesses in Singapore, profits come before legacy.

A new report by KPMG and CPA Australia on Singapore family businesses found that 93 per cent of business founders surveyed said continued profitability was more important than preserving their legacy.

This comes then, as nearly all business owners polled showed struggles with succession. Most family businesses in Singapore falter at first transition; only 13 per cent make it into the third generation.

Chiu Wu Hong, head of enterprise at KPMG in Singapore said: "Informal governance structures that may have worked well for the founders of the business may not meet the needs and interests of a new generation.

"With limited external influence, there could be questions about whether family businesses are allowing for rigour in their governance and whether they are overlooking the added value of non-family members."

More than 100 successful Singapore family businesses were surveyed by KPMG over the past year. KPMG and CPA Australia then conducted interviews with 20 local business leaders.

There was no discernible trend in the decision to keep it within the family or to cede management control to non-family businesses.

Among survey respondents, 46 per cent cited professionalising the business as a pressing issue. However, just over 40 per cent also said that retaining family control was of utmost importance.

What counted was that business owners interviewed were more open than founders to let non-family members run the business. The signal is that these business owners prioritised business sustainability over family control.

Almost all founders interviewed recognised that succession planning needed to be undertaken professionally. Many were in favour of a formal learning process for successors, to give them a holistic understanding of the business sooner, and so enable them to make a difference to the company's performance earlier.

Just over half the respondents cited the challenge of attracting and retaining talent as the most important issue. Melvin Yong, Singapore country head in CPA Australia, said: "It is critical for founders of the business to develop leaders who will run the business, not just inherit it.

"Instead of just identifying successors, family business owners could empower them to make independent decisions, provide challenging assignments and increasing responsibilities while incrementally letting go of control to focus more on mentoring."

Defining ownership and managing conflict were also among the priorities cited by family businesses. Many second- and third-generation family businesses still struggle with regulated ownership issues, such as the trading of shares both inside and outside the family.