Family-owned businesses come in all shapes and sizes and are involved in various economic activities. Malta has many small and micro enterprises that employ tens of thousands of workers and provide income for many families.

Research in various countries confirms that it is an exceptional family business that survives and thrives over two generations. So, what is keeping the family business from being resilient over time?

A survey by the Family Business Committee of the Malta Chamber has confirmed the hurdles that could threaten the long-term success of family businesses. The most critical weakness is that, according to the survey, most local family businesses do not have a written succession plan.

Contrary to some popular misconceptions, this is not because of a lack of expert management advice or finance availability to plan for a smooth succession from one generation to the next.

Management and ownership succession in the family business carries with it the continuous challenge of deciding whether management and ownership should continue in the family. Succession, in whichever form, is inevitable. Wise business leaders address this often emotionally challenging question before it becomes a full-blown crisis.

When family business ownership is passed on by inheritance, it is usually not the taxation issues that threaten the business. Heirs are often actively involved in leading the business, heirs are employed in non-leadership positions, and other heirs are passive owners.

The objectives of these different stakeholders may differ and prevent the business from operating successfully for any length of time.

Of course, family businesses face the same challenges as non-family businesses. These include profitability, response to competition, adoption and adaptation to new technologies, the relationship between management and employees, and the generation of returns to stakeholders.

But family-owned businesses have their own challenges that are unique. These cultural challenges must be addressed effectively. A family business engulfed in a civil war among stakeholders will not survive for long.

The chamber survey also revealed that while 83 per cent of the businesses surveyed have a functioning board of directors, 67 per cent do not have a written strategic plan that is regularly reviewed. Managing employees, enhancing competitive advantage, growing the business, and making a return on turnover are challenges in any industry.

For many businesses, having a laid-back culture is positive. Still, many family businesses’ informal structure and culture can equate to a lack of documentation, policies and defined strategies and goals. These hurdles could threaten many businesses competing with well-managed rivals who follow good management practices.

But the most difficult cultural issue that family businesses must address is the culture of entitlement that often afflicts some family members who may expect to be provided jobs, regardless of their competence. Other family members may even expect to be paid a salary without providing useful service to the business. Only an effective leader can work to diminish the culture of entitlement in favour of operating the family business as an arms-length enterprise.

An effective way for a family business to build resilience in the future is to develop and maintain contacts with other successful business leaders and professional advisers. Effective leaders of successful family businesses identify the emotional and cultural components that are hard-wired in their enterprise and take them into account when making business decisions for the long-term prosperity of their entity.