Leadership succession planning is a priority of family businesses in Southeast Asia because of its perceived importance in attracting investment, says a new report from the Economist Intelligence Unit.
The report, sponsored by Labuan International Business and Financial Centre, is based on a survey of executives in the region.
The survey finds that 67% of family businesses already have succession plans in place.
Two-thirds of survey respondents agree that customers and investors have more trust in a family-owned business with a succession plan than in a business that lacks one. Seventy-one percent of family business leaders say it is easier to attract investment with a succession plan in place.
Discussion to form succession plans often takes place in informal settings, such as family council meetings.
Despite the majority of family businesses saying they currently have a leadership succession plan, only around half of executives expect the ownership structure of their companies to remain the same in a decade compared to nearly three quarters in five years, the report says.
“Family businesses are the backbone of Southeast Asia’s economy," says Kevin Plumberg, the editor of the report. "It’s a sign of their maturity that they are making leadership succession planning a part of their long-term business strategies. However, they need to establish stronger formal governance structures to help ensure continuity beyond the next generation.”