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The world is changing and so is the winning formula for long lasting family business success. To thrive in today’s world, Singapore family businesses require a change of mindset, a rethinking of priorities and behaviours, including heightened investment in the digital tools needed for continued economic resilience and more importantly, a new definition of legacy.
Our 10th PwC Global Family Business Survey unearthed the current thinking and future outlook of 2801 family business leaders across 87 territories, of which 80 were from Singapore, representing a diverse mix of businesses and industries. Our findings show it’s no longer enough for family businesses to piggyback on values and legacy to propel the business forward.
Singapore’s family businesses of tomorrow must embrace a new approach, one that is based on accelerated digital transformation, professional family governance and an impending prioritisation of sustainability goals. Indeed, they have been ‘giving back’ to society, but for them to make a positive impact today and ensure a legacy for future generations, alignment of profits with purpose is key. Family business leaders must demonstrate their environmental, social and corporate governance (ESG) credentials with concrete actions. It’s a business imperative today.
For family businesses, the time to act is now.
“The survey results this year aren’t very different from the findings in the previous years. Perhaps that’s worth noting, as it does indicate that family businesses aren’t thinking much differently despite the world of business being set upside down by the pandemic. It’s time for sustainability transformation to take centre stage, even as local family businesses keep their focus on diversification, expansion and digitalisation.”
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Family Business Survey 2021 Launch
Explore key Singapore findings
Ambitious growth expectations for 2022, despite slower growth compared to global counterparts in 2020
Singapore family businesses have seen a mixed performance over the last financial year (pre-Covid-19), with 49% experiencing growth and 21% seeing reduction in sales. This is slightly less positive than the scene globally and in Asia Pacific where the majority of family businesses experienced higher growth (Exhibit 1). More than half the Singapore family businesses (56%) expect reduction in sales due to COVID-19, compared to 48% in APAC and 46% globally.
Exhibit 1: Pre-COVID-19 growth, impact of the pandemic on sales
However, Singapore’s future growth aims are ambitious compared to their global and Asia Pacific counterparts, with 90% expecting growth to surge in 2022 (Exhibit 2). The outlook for 2021 is albeit cautious as 64% of Singapore family businesses expect to see growth, much in line with family businesses in Asia Pacific and worldwide.
Singapore family businesses will need to demonstrate added resilience as they chart their recovery and stay on course to meet their growth targets. Those that will rethink, reconfigure and re-start with new business models aligned with new world dynamics, will be in an optimal position to seize the new opportunities when the global economy reopens.
Exhibit 2: Growth ambitions for 2021 and 2022
Diversification, expansion, digitisation top priorities, while sustainability remains at the bottom end of the list
Top priorities facing Singapore family businesses over the next two years are expanding into new markets/client segments, rethinking/changing/adapting the business model, improving digital capabilities, introducing new products/services and increasing use of new technologies (Exhibit 3). The priorities of the local family business leaders resonate with business priorities of their counterparts in Asia Pacific and beyond. However, issues related to sustainability remain at the bottom of the priority list of Singapore family businesses (25%) as well as those in the Asia Pacific region (30%). This is considerably lower compared to Europe (47%) and the UK (54%).
The Government has recently announced Singapore Green Plan 2030, to work towards a low-carbon economy. Businesses, big or small and across industries, must align and start incorporating ESG into their business strategy. The time to embark on the ESG transformation journey is now, and Singapore family businesses must ensure they are not left behind.
Exhibit 3: Key priorities over the next two years
Less than a third of Singapore family businesses feel they have strong digital capabilities, although most are positive about clarity of roles, strength of leadership and feel they embrace rather than resist change
Despite digital being on the business agenda in recent years, Singapore family businesses have made slow progress as only 29% say their digital capabilities are strong, which is comparatively lower to Asia Pacific (33%) and globally (38%). Only 16% of these local family businesses say their digital journey is complete (Exhibit 4).
Exhibit 4: Summary of digital capabilities and priorities
This is despite their adaptability and agility consciousness, as the majority of them believe they have strong leadership teams (56%), clear and flat governance structure (54%), with clear roles and responsibilities for those involved in running the business (Exhibit 5). Most Singapore family businesses are yet to have the digital tools and capabilities required for a rapidly changing world. Key reasons could be the high costs of implementation, inadequate internal digital infrastructure and the skills shortage. Our 2019 NextGen Survey found that younger family members see technology as one of the three most important drivers of change, and 97% of local NextGens felt this was the area where they could add value in developing a strategy fit for the digital age. But more is yet to be done.
Exhibit 5: Agility and adaptability of Singapore family businesses
Levels of trust, transparency and communication are felt to be quite high among Singapore family businesses, although just half of them see family alignment in company direction and just about a quarter have documented a succession plan
Just under three fifth of Singapore family businesses feel they have a clear sense of company and/or family values and these values have helped a clear majority during the COVID-19 pandemic. Only 40% have their values and company mission articulated in written form and only 26% have documented a succession plan (Exhibit 6).
The very relationships that make a family business strong can also hold it back. It’s a difficult subject for many, but introducing a more professionalised approach to governance takes emotion out of the equation and correlates with business success.
Exhibit 6: Cohesion and trust
Only a third of Singapore family businesses have a developed and communicated sustainability strategy, although nearly half of them see an opportunity for family businesses to lead the way in sustainable business practices
Most Singapore family businesses engage in some form of social responsibility activities, largely in terms of contributions to the local community or traditional forms of philanthropy. However, only a third have developed a sustainability strategy even as half of them see an opportunity to lead the way in sustainable business practices (Exhibit 7).
The sustainability agenda is yet to gather steam among local family businesses. One reason is that family businesses are still away from investor pressure on putting ESG at the heart of their long term plans for commercial success.
Exhibit 7: 'Giving back' to society, but ESG agenda lagging
It's time to act, now
Our Family Business Survey 2021 report mirrors PwC’s 24th Annual Global CEO Survey findings which revealed a rebound in CEOs’ confidence in global economic growth as well as their own company’s revenue prospects. Singapore respondents in both surveys are seen prioritising investments in digitisation and expansion, but notably to a lesser extent, in climate change.
The overall survey findings are positive, yet it's like a wakeup call for most Singapore family businesses. Their financial resilience may make them well-placed to succeed in the near term, but they must readjust strategies and transform business models to power their post-pandemic recovery and growth in the longer term. Embracing emerging technologies and tighter family governance are key imperatives. Moreover, they must revisit their purpose and chart out concrete action plans to deliver on measurable non-financial impact.
Key considerations for Singapore family businesses
Professionalise your family governance structure
A decade ago, having a family governance structure was a differentiating factor, today it's a business need. A professional governance structure and a clear process for conflict resolution, preferably involving an independent party removes emotional and personal bias, a common stumbling block for business families. Moreover, a written and articulated document comprising the family business’ values helps boost clear communications and transitions. Nearly half (43%) of the family businesses here have no form of governance policy in place and thus, should look towards prioritising efforts on.
Allow external help to mediate conflict when required
Conflict and differences of opinion are inevitable within family businesses, especially when dealing with sensitive issues. But the emotions involved in family discussions can be difficult to resolve internally. While over 80% of Singapore family businesses admit that family conflicts do occur within the business, most of them typically handle and discuss those within the family without using third parties or resolution mechanisms, which may explain why levels of conflict remain high. There are benefits of involving a neutral, outside perspective, where an independent and objective view from a trusted advisor will help in mediating conflict within the family.
Transform digital capabilities by involving NextGen
For many years, our survey has shown that there is more talk about digitalisation than action. Family businesses are aware of the importance for digitalisation but implementation and transformation have been slow. The pandemic revealed that those that had already embarked on their digital journey were better placed during the crisis. The 34% local respondents who are not making digitalisation a priority will stand to face significant challenges in protecting their legacy.
NextGen members are the biggest motivating force for digitalisation. Our global 2019 NextGen Survey revealed younger family members saw technology as one of the three most important drivers of change for the business, and 97% of local NextGens felt this was the area in which they could add value, and push forefront a strategy fit for the digital age.
Prioritise and deliver on ESG
Family businesses need to look beyond philanthropy and embed ESG into their operating models and learn how to measure as well as communicate their ESG agenda to a wider stakeholder group. In addition, having a diverse board, with independent input could act as a good proxy and challenge thinking around sustainability.
The pressure is increasing for all businesses to contribute to a better environment and society. As such, ESG has transformed from a nice feature for a company to have, to an imperative for business success. Local family businesses must start aligning with the Government’s recently announced Singapore Green Plan 2030.
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Contact us
Ng Siew Quan
Asia Pacific Leader, Entrepreneurial and Private Business, PwC Singapore
Tel: +65 9726 9880
