KUALA LUMPUR: Business owners are encouraged to initiate early discussions with potential successors, including non-family members, to ensure effective legacy and succession planning.
Many Malaysian businesses, particularly family-owned ones, face challenges in separating family dynamics from business decisions, especially in ownership and management, according to Maybank Trustees Bhd chief executive officer Nor Fazlina Mohd Ghouse.
This can lead to unclear communication, unresolved conflicts, and a lack of objectivity during the succession process, she said.
Additionally, a lack of proper planning and communication with potential successors can leave businesses vulnerable to disruptions and even collapse.
Nor Fazlina highlighted that having a documented succession plan helps avoid confusion and disagreements during the handover period.
While it may not completely eliminate conflict, its purpose is to provide a framework for effectively managing and resolving issues, ensuring a smooth transition for the business and estate, she told Business Times.
She also emphasised that early planning allows business owners to identify potential successors, groom them for leadership roles, and ensure a smooth transfer of knowledge.
It provides time to address any financial or legal issues that may arise during the transition.
According to her, there is no one-size-fits-all solution for legacy planning, whether for family-owned businesses or small and medium enterprises (SMEs).
She advised business owners to have frank discussions with their children or key personnel before making any estate plans.
"For example, if it's a family-owned business, the questions to consider include: Will there be any children who will take over management roles? Are there rivalries between children that may lead to deadlock? If one child is to take over management, should others be compensated with other assets? Is it more appropriate for non-family members to continue the management of the business? Do the next generation want to take over the business?
"If it's a partnership, they would want to know what happens if one partner is incapacitated or passes away. Would you want your partner's family members in the business? These are key questions, and if all parties are on board this should ensure a smooth transition of the business, whether it is to the next generation or to a third party through a sale," she noted.
Nor Fazlina also noted that SMEs should focus on identifying and nurturing talent within the company or attracting external candidates, as they may not have a ready pool of potential successors within the family.
She said that securing funding for a smooth handover might be a bigger challenge for SMEs compared to larger family-owned businesses.
Nevertheless, SMEs can identify and develop high-potential employees by offering training and mentorship programs, and they can also consider performance-based incentives to retain key talent, Nor Fazlina said.