THE lack of succession planning is a large problem facing family-run businesses here, according to a new report by CPA Australia and KPMG.
About two-thirds of the 41 Singapore family businesses surveyed did not have immediate plans to introduce such a strategy, to pass down ownership of the business.
The study also found that 56 per cent of family firms did not intend to hand over control of their businesses in the immediate future.
Many founders are not willing to let go of the companies they had painstakingly built up, said the organisers of the study.
"Founders often want to remain working in the business for as long as they are able to," said Mr Owi Kek Hean, deputy managing partner and head of enterprise at KPMG.
"This becomes a challenge for successors or business owners as they are unable to fully take control of the business."
Many businesses do not have formal succession plans, with the would-be successor getting trained only when he is in the job, noted Mr Melvin Yong, general manager at CPA Australia in Singapore.
He said that successors should be groomed early, as this helps to ensure the younger generation has time to learn, with more senior family members still being around to guide the process.
The study also asked family-run companies about the important characteristics a successor should have. More than half of the companies surveyed said that it was very important for a successor to exhibit entrepreneurial flair, while 80 per cent said that innovation was a priority for their businesses.
Some 56 per cent said that family values have a significant impact on the way the business is operated. But there is often no structured way of communicating or transferring these values, with 60 per cent believing that the values naturally permeate through the business.
The vast majority of firms said that financial performance was a key measure of accountability for the family business. Some 95 per cent of the firms said that the board chairman comes from within the family, while all of the companies said their chief executive officer or managing director position is held by a family member.
Almost half of the companies said their management structure is optimal, with another 29 per cent saying that only minor tweaks are required.
Family businesses feel that one of their main strengths is their resilience.
About 60 per cent of those surveyed said that the family business model has helped them survive economic downturns.
Family businesses also said that the model allows them to be nimble and to have the flexibility to evolve to meet the changing needs of customers.
About 25 per cent said their ability to win business and retain customers is a key strength.
"Family members often have a greater sense of ownership in the company than outsiders," said Mr Owi. "When times are hard, family members are less likely to 'jump ship' and are more willing to rally around and work for the good of the company."