Malta’s family business leaders are too focused on the day-to-day running and operations of their businesses, not dedicating enough time to formulate succession plans, a study from The Malta Chamber of Commerce, Enterprise and Industry has found.

The findings from the Family Business Survey, conducted in February 2024 by EMCS Advisory in collaboration with The Malta Chamber, were presented on Thursday (today). The study was based on a sample of 160 local family businesses, selected through a number of criteria, including size, the economic sector they are involved in, as well as maturity – in what family generation they are in – to have a balanced sample. The results were compared to the findings of a previous edition of the study, conducted between November and December 2022, which had a relatively smaller sample size (115).

Legally, family businesses are defined as those businesses which have the majority ownership from two or more family members who are also actively involved in the running of the business. In addition to this, there are also other types of businesses, namely those set up as sole traders, which do not fall under the legal definition, but may still be classed as family businesses.

Family businesses are a crucial part of Malta’s economy, accounting for around 70 per cent of all businesses in the country. They serve as the lifeblood of Malta’s business community, representing the values of entrepreneurship that span generations.

However, it has repeatedly been emphasised that family businesses need to up their game when it comes to corporate governance and strategic planning.

In fact, just 67 per cent (107 out of 160) of respondents said that their family business has a functioning Board of Directors that regularly meets to discuss the present performance and future direction of the firm. This is significantly lower than the 83 per cent that said yes in the 2022 survey.

Interestingly, 69 per cent of the 107 family businesses which said yes to having a Board of Directors, remarked that they do not have non-family members as independent Non-Executive Directors.

The importance of having Non-Executive Directors has been highlighted in the past, with business advisors stating that such additions can give a different perspective and challenge the day-to-day running of the business.

The study also noted that 32 per cent of family businesses have a written strategic plan, while 53 per cent said that they do not, but have recognised the need to develop one. The remaining 16 per cent stated that they do not need it. The findings from this survey are relatively in line with those of the 2022 one.

Furthermore, just 57 respondents (36 per cent of total) said that they have a written succession plan. Out of those 57, 11 said that the succession plan is not being implemented and the next generation is not being exposed to and trained on matters linked to the family business, with some postponing the task and others saying that the coming generation is not interested in the running of the business.

Those without a written succession plan said that they are too busy and need to find the time to do so, constantly putting it off. Some stated that the plan is known but not written, while others strikingly affirmed that the Directors are primarily focused on generating sales and dealing with day-to-day operations.

As a matter of fact, the study found that 86 per cent of matters family business owners, leaders or managers are occupied with during the day are operational, with only 14 per cent dedicated to tasks concerned with strategy.

In terms of decision making, the study highlighted that decisions within family businesses are not normally taken based on research and data, but rather after discussions between the people involved, giving everyone’s point of view some weight.

For policies, the results were relatively even when family businesses were asked whether they have a policy related to dividend distribution, yet there was a stark difference between the number of family businesses which have a family employment policy in place, with 66 per cent stating that they do not. A family employment policy outlines the firm’s approach to hiring family members, in a bid to ensure that there is no favouritism.

At one point in the survey, respondents were asked to rank the priorities for their family business, with the need to improve financial performance coming on top. This represents a stark change from the 2022 survey, when financial improvement was ranked third. In 2024, this was followed by the need to retain the present labour force, together with investment in new technologies to automate processes and increase efficiency, which came in second and third, respectively. The need to be more environmentally friendly in operations dropped from seventh to ninth, signifying how when things get challenging for family businesses, environmental goals tend to go further down the pecking order.

Unfortunately, the need to improve corporate governance and have independent Non-Executive Directors was very low in the list, coming in at 14th.

Additionally, the study also analysed the difference in results of those family businesses which have Non-Executive Directors with those which do not. It was noted that those which do have Non-Executive Directors were more likely to have a written strategic plan and succession plan, while decisions were more often taken based on research and data analysis.

Commenting on the findings, Silvan Mifsud, Chairperson of The Malta Chamber’s Family Business Committee and Director – Advisory Services at EMCS, remarked that governance is “ultimately the basis for everything.”

“If family businesses don’t have good corporate governance, they are putting their long-term future at risk,” he stated.

Main Image:

Silvan Mifsud, Chairperson of The Malta Chamber’s Family Business Committee and Director – Advisory Services at EMCS

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Written By

Fabrizio Tabone

Fabrizio has a passion for the economy and technology, especially when it comes to innovation. Aside from this, he also has a passion for football and movies, and so you will often find him either with a ball to his feet or at the cinema checking out the latest releases.