Succession: the crucial factor in family-owned businesses

 

February 2002

Shamsir Jasani Grant Thornton and research partner, the Malaysian Institute of Management, today officially release the survey findings from their nationwide survey which was launched on 24 September last year.

Entitled “ The Family & The Business ”, this survey kicked off with more than 4000 questionnaires sent out to family-owned businesses throughout Malaysia. A total of 225 companies responded to the survey comprising 55% small, 35% medium and 10% large scale enterprises. Respondents were asked a variety of questions ranging from the start-up of their business, their concerns, involvement of family members to their initiatives on business developments. All respondents were assured of strict confidentiality and anonymity.

Owner-managed businesses employ half the world's workforce and generate more than half the world's GDP. Yet their needs, problems and prospects are often ignored.

According to Shamsir Jasani Grant Thornton's Managing Partner, Dato' N K Jasani, the Survey Report offers the much needed eye-opener on the present scenario of family businesses in Malaysia, and provides the platform to address the unique needs of these businesses.

“In order to meet the challenges of Vision 2020, there needs to be a change in management thinking and technological innovations if firms are to enhance their competitive edge,” said Datuk Khoo Eng Choo, Chairman of the Malaysian Institute of Management. He added that while the medium and large scale enterprises seemed to be aligning themselves to prepare for the onset of globalisation and technology advancement, the small scale enterprises appeared to be lagging behind in these important areas.

“The survey had unveiled some unexpected aspirations from business owners, which if left concealed, would damage the business in the long term. Owner-managed and family businesses tend to be driven by the qualities and skills of their principals which is their great strength. However, they also create challenging problems, as the aspirations of the owners may not always be in harmony with the needs of the business,” said Dato' Jasani.

The study showed that the majority of Malaysian family run businesses are small scale enterprises employing below 52 staff, and are still very much managed by the founder with activities focused on manufacturing, retailing or construction. It is also interesting to note that most of these businesses were started by people having 6 ½ years or more of work experience, indicating that family businesses were commenced by people with appropriate experience. Being relatively young and in the growth of industrial development, there is much potential for growth for these businesses.

Dato' Jasani stated, “The study also identified three key areas of concerns for business owners, which were succession, funding and professional management.”

Irrespective of the size of the business, most of them felt that there should only be one management successor although they were relatively mixed over whether the successor should be chosen from the family. There is also a general concern about losing control if the business owners were to involve outsiders to finance growth, especially among the small scale enterprises. In order to stay competitive, most respondents were of the opinion that professional advisers would understand the uniqueness of their business and could advise them in decision-making.

MIM in participating in this survey will play a key role on issues that are important to the development of management in Malaysia. As the national management organization, it is among MIM's prime roles to undertake continuous research which contributes to management development and nation building.

The findings are important to Malaysia, especially in today's challenging economic and investment climate. Family businesses provide stable employment and good efficient use of Malaysia's resources, as well as providing the solid National foundation in the context of bad loans and retrenchments arising from large PLCs or MNCs.

This survey which aims to address the classic and contemporary issues faced by family businesses in Malaysia, is part of a Grant Thornton unique service product called PRIMA (People and Relationship Issues in ManAgement). Similar surveys have been conducted around the world by member firms of Grant Thornton International. To date, more than 30 countries have been involved with this academic research into family businesses which underpins the PRIMA. Singapore and Vietnam have just started on this survey and will be completing it by March 2002. Meanwhile, Hong Kong will be releasing their findings next month in February.

In concluding, Dato' Jasani mentioned that, “we have set up an Advisory Panel to offer strategic advice and assistance to the various Chambers of Commerce, other trade associations as well as Government Agencies, such as CGC, MIDA, MATRADE and SMIDEC.”