Family businesses in Asia have been traditionally associated with simply handing over the reins to the next generation to continue the business, but this outlook seems to be changing.
Two in every three (66%) family businesses in Malaysia now have a succession plan in place, a list that is topped by Indonesia’s family businesses at 78%, finds new research conducted by the EIU on behalf of Malaysia’s Labuan IBFC.
The study also includes family businesses from Thailand, the Philippines, and Singapore – which fare at 74%, 60%, and 58% respectively in planning for succession – leading to a regional average of 67% across Southeast Asia.
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Across the five countries, three in every four respondents (74%) stated leadership succession as an essential part of their company’s long-term growth strategy. But a similar 71% also said that it will be easier for them to attract investment if they have a succession plan in place.
Despite the advantages of a planned succession, family business owners admitted that “having to choose between possible successors “was a tremendous source of stress and anxiety for them (58%), second only to “relinquishing decision making responsibilities to external advisors (59%).”
In fact, one in five family businesses is yet to seek external advice, be it on succession planning, tax liabilities, or any other matter.
“This is likely due to a combination of low awareness, denial and the cultural sensitivities in talking about death. No one wants to appear to be wishing the worst upon their parents or grandparents,” explained the report.
Perhaps owing to that, family councils were found to be the most popular form of governance body, with Indonesian firms leading at 74, and Malaysian family businesses pegged at 54%.
“It’s a sign of their maturity that Southeast Asia’s family businesses are making leadership succession planning a part of their long-term business strategies,” said Kevin Plumberg, the report’s editor. “However, they need to establish stronger formal governance structures to help ensure continuity beyond the next generation.”
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