Join the family firm? Only 1 in 5 grads say yes

JUST one in five college students globally are interested in taking over the family firm, says a study that has examined the succession intentions of more than 34,000 members of next-generation family businesses.

The EY study, carried out by the University of St Gallen Center for Family Business in Switzerland, found that 19.7 per cent of respondents are open to the prospect of taking over their family firm.

Of that proportion, 3.5 per cent want to take over directly after graduating; 4.9 per cent plan to do so five years later.

The figures have fallen by 30 per cent from a comparable survey done in 2011, the study noted.

Thomas Zellweger, chair of family business at the university, said it was clear that other career options - taking up other jobs or starting one's own company - were clearly in competition with succeeding kin in the family's business.

" The healthier capital and job markets are, the stronger the competition is from elsewhere," he said.

But both he and Peter Englisch, global leader of the EY Family Business Center of Excellence, agree that this dark cloud is not necessarily without a silver lining.

Mr Englisch said: "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."

The figures in Singapore aren't any higher; if anything, they are lower: Only 3.8 per cent of those surveyed said they would join the family business five years after their studies; an even lower proportion (1.1 per cent) said they would do so right after graduation.

Goh Siow Hui, tax and private client services partner at EY in Singapore, attributed this to the fact that succession planning has not figured at the top of the agenda among family businesses in Singapore.

"Most family businesses in Singapore are fairly young and only into their second or third generation. The presence of the founder figure, who still controls the business, may influence the next generation's desire to join the family business."

Overall, survey participants with the strongest intention of joining the family business five years after their studies came from Mexico (11.5 per cent), Belgium (8.9 per cent) and Slovenia (8.5 per cent).

Those least likely to want to follow in their parents' footsteps were from the US (1.2 per cent), Israel (2.4 per cent) and Denmark (2.5 per cent).

Globally, women were less likely to want to take over the family firm than men: 4.3 per cent of women want to do so five years after graduation, compared to 5.7 per cent of men. It would appear that smaller family firms have a tougher time carrying on. Only 5.2 per cent of next-generation members want to take over a firm with two to five full-time staff, but the figure rises to 16.3 per cent for firms with more than 100 full-time staff.

The study also identifies a number of potential drivers of succession intentions. As a country's gross domestic product (GDP) increases, succession intentions go down; however, it appears that as countries reach a certain GDP level, they rise again.

Succession intentions are lower where inheritance or gift taxes are high; succession intentions are higher in cultures that cherish pride in the family and in one's organisation, respect power and authority and prioritise job and economic security.