Fewer than a fifth of family businesses in Malta have both a strategic plan and a written succession plan, according to a family business survey conducted by the Malta Chamber of Commerce, Enterprise and industry between November and December 2022.
The survey yielded intriguing results about the status of family businesses in Malta, and what their priorities were. It is estimated that family businesses make up around 75 per cent of all businesses in Malta, and are therefore a key segment in the local business landscape. Indeed, safeguarding the sustainability and health of family businesses in Malta is regarded as essential for maintaining the health of the local economy.
The Malta Chamber’s survey results show that there is a distinct difference in priorities between businesses that did have a board, strategy plan and succession plan, relative to those which did not.
A functioning board of directors seems fairly widespread among family businesses. 83 per cent of those surveyed claimed to have a board which met regularly to discuss the direction of the family business and its performance. Those which did have a board were more likely to take decisions on an ad hoc basis through informal discussions.
The top priorities of family businesses with a board were to have: regular and timely financial performance reporting, workforce retention, and enhancing organizational structure. On the other hand, family businesses without a board placed higher emphasis on workforce retention, followed by improved financial performance, and advancing digital capabilities.
Some of the surveyed family businesses only had a single director who took all decisions unanimously, or else if multiple shareholders were present, then the one with the most shares called the shots.
When the Malta Chamber asked whether family businesses had a regularly reviewed strategy plan, it turned out that only a third of them did. Meanwhile, while half of the family businesses admitted they didn’t have one but acknowledge that they needed one.
Beyond strategy plans, what may be most surprising is that 65 per cent of family businesses had no written plan as to who will take over the business after the current owners. One of the most frequent reasons was due to either the current shareholders or their potential successors being too young. Other reasons were that it was already decided verbally or was still under discussion.
However, in some instances, there was a lack of any succession planning and in other, the next generation had already declined their involvement, potentially leading to uncertainty in the future of the family business.
The overall data revealed useful trends which family businesses may want to take note of.
One of the clearest trends was that businesses with a board were more likely to have a strategy plan, and businesses with a strategy plan were more likely to have a succession plan. This trend was visible by a significant margin.
Yet, in the end, only around 16 per cent of family businesses fulfil all three, i.e. have a board of directors, strategy plan and succession plan.
While they are in the minority, they could have a competitive advantage in the long-term.
It was made clear that businesses with a board of directors were more focused on regular performance reporting and improving organisational structure, indicating the capability of adapting and rethinking their business model.
According to the Malta Chamber’s findings, family businesses which did have a strategic plan were more likely to focus on reskilling their workforce, and the same is said for family businesses with a succession plan. Having a succession plan also meant that those businesses were already prioritising the involvement of the next generation of leaders to inherit operations.
Thus, it seems that family businesses with a board of directors, strategic plans, and succession plans are more resilient to changing business conditions and are less affected by the ongoing shortage of workers compared to family businesses without those qualities.
In the long-term, the data implies that businesses without a board or written plans in place may face difficulties in staying competitive as time goes on, as their main focus will be on immediate needs such as filling vacancies, instead of ensuring long-term competitiveness and training their future leaders.
Featured Image: Marisa Xuereb via The Malta Chamber
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