A survey by the Malta Chamber earlier this year found that over 64 per cent of local family businesses do not have a written succession plan, and many lack a strategic plan altogether. These figures are distressing, and even more so, few family businesses would have chosen to act on these findings a year down the line.

Family businesses are the backbone of economies worldwide, driving prosperity and fostering a sense of legacy. In Malta, where over 90 per cent of businesses are family-owned, they encounter multifaceted challenges, and without proper planning, unforeseen obstacles could compromise their sustainability.

A grim reality is that the majority of family businesses struggle to survive beyond the founder’s generation. As they expand, complexities arise, leading to power struggles and ego trips, which blur the lines between familial roles and organizational responsibilities.

Succession planning is vital to mitigate such risks, but it often receives inadequate attention. The lack of competent family leadership or the dominance of family ownership can lead to internal conflicts and mismanagement, jeopardizing the firm’s longevity.

Prof. Carlo Salvato, Professor of Business Strategy at Bocconi University’s Department of Management and Technology in Italy, states that “businesses are linear, but entrepreneurship is cyclical.” According to him, families set themselves up for longstanding success when they favor an entrepreneurial spirit over the preservation of a single company or product, especially in rapidly changing business environments.

I would go a step further: for Maltese family business longevity, the entrepreneurial spirit needs to be fostered from within their fold. Contrary to popular belief, family business members are not born with the absolute right to lead a business.

Family education is vital in running a successful family-owned business. It involves preparing and developing the next generation of family members to lead the business in the future. Families need to identify those members who display the strongest leadership styles and invest in nurturing their entrepreneurial spirit through proper early education, training, and mentoring.

Understanding family business dynamics will cultivate a culture of professionalism that prepares them for future leadership roles.

Succession planning is vital to mitigate such risks, but it often receives inadequate attention

The transition of power, however, remains a delicate matter, often fraught with challenges because when all the formalities and official handovers are over, the new successors may still find themselves overshadowed by their predecessors, who are often reluctant to let go.

Succession planning must therefore be coupled with proactive education initiatives that foster a culture of preparedness and adaptability. Initiating such education efforts early on is critical. Effective leadership, grounded in clear policies and a distinction between ownership and management, is essential when facing succession complexities. During such crucial transitions, family businesses must strike a delicate balance between tradition and innovation.

Successors also need to learn and embrace the company’s vision, mission, and values which help preserve the family business legacy, strengthen relationships and foster innovation, collaboration, and excellence. This creates a common line of communication that nurtures a sense of belonging and resolves conflicts more easily.

My personal experience

A success story in succession and family education is Express Group, now moving into its third generation of leadership. Its shareholders have recognized that a functional board of directors with non-family members brings a wealth of advantages.

Unfortunately, many other family businesses have yet to embrace this fact.

According to another recent survey by the Malta Chamber, only 31 per cent of family-owned businesses have independent non-executive directors who are not family members.

In my role as Express Group’s CEO, I help avert conflicts, confusion, and resentment among family members, ensuring the smooth operation and growth of the business. This is where the role of a CEO becomes crucial, and in the case of a non-family CEO like myself, also more delicate.

Leading a family business puts us at the helm of a company and a family’s legacy, whose longevity depends on the ability to embrace change, cultivate talent, and foster a legacy of resilience. When succession planning and early education are prioritized, family businesses can transcend initial hurdles with confidence and ensure their legacy is handed over in even stronger shape to the next generation.

This article first appeared in the Corporate Times.