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Few in Singapore and globally plan to take over family business: EY study

National University of Singapore (NUS) graduates attending their National University of Singapore (NUS) Commencement ceremony.

FEW students from a family business background plan to take over their family firm and the number that do are falling, according to an EY study.

The study, carried out with the University of St Gallen Center for Family Business, surveyed the succession intentions of more than 34,000 next-generation family business members globally,

Just one in five (19.7 per cent) college students who are potential successors in family businesses are open to the prospect of one day taking over their family firm.

When asked when they would like to do this, only 3.5 per cent want to take over directly after graduating, while 4.9 per cent plan to do so five years later.

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.

In Singapore, only 3.8 per cent of survey participants intend to join the family business five years after their studies, lower than the global average. An even-lower proportion (1.1 per cent) are willing to do so right after graduation.

Goh Siow Hui, Tax and Private Client Services Partner at EY in Singapore, noted that the low level of succession interest here could be because succession planning has not been at the top of the agenda among family businesses in Singapore.

She added: "A clear plan in inculcating and articulating family values, formulating long-term goals and identifying successors may be lacking in many family businesses here. 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. Family businesses in Singapore should consider proper succession planning and integrate the next generation into the business early to better enable the successors to succeed in the business."

Globally, EY said family businesses face a challenge in convincing younger family members 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.

"Clearly, the succession career path is in competition with other career options, such as taking another job or starting a company. The healthier capital and job markets are, the stronger the competition is from elsewhere.

"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."