Malta's Family Businesses Struggle with Governance and Succession Planning Amid Economic Contributions

A recent study by EMCS has highlighted significant challenges faced by family businesses in Malta, despite their substantial contributions to the nation's GDP and employment. The study, which surveyed 160 family businesses, revealed critical gaps in corporate governance, decision-making, and succession planning.

One of the most striking findings is that 33% of these businesses lack a functioning board of directors. This absence of formal governance structures can hinder strategic decision-making and long-term planning. Furthermore, 64% of the surveyed businesses rely on intuition over data-driven decisions, which can lead to inconsistent and potentially risky business practices.

The study also found that only a third of the businesses have a written strategic plan, while half acknowledge the need for one but have yet to develop it. This lack of formal planning can impede growth and adaptation in a competitive market. Additionally, only one-third of the businesses have a succession plan in place, and many face challenges in implementing these plans.

Family businesses are crucial to Malta's economy, and their struggles with governance and succession planning can have far-reaching consequences for the country's GDP and employment. If left unaddressed, these issues can lead to instability and stagnation in the business sector, ultimately affecting the overall economic well-being of Malta.

Operational concerns dominate the priorities of 86% of family businesses, often overshadowing strategic issues. This focus on day-to-day operations can detract from long-term planning and sustainability. There is also a notable deficiency in employee training, particularly in technical and interpersonal skills, which are crucial for maintaining a competitive edge and ensuring effective management.

The integration of family members into business roles is often informal, with most family businesses lacking a formal employment policy for family members. This practice can lead to inconsistencies and potential conflicts within the business structure. Training for family business owners and directors in leadership skills specific to family enterprises is also critically needed.

Looking ahead to rest of the 2024, improving financial performance has become the top priority for many family businesses, marking a notable shift from previous years. This change in focus underscores the urgent need for better governance and strategic planning to ensure these businesses can sustain and grow their contributions to Malta’s economy.

The findings of this study highlight the critical areas where Malta’s family businesses need support and guidance. Addressing these gaps in corporate governance, decision-making, and succession planning is essential for their long-term sustainability and success.

Key Takeaways

• 33% of Malta's family businesses lack a functioning board of directors.
• 64% of businesses rely on intuition over data-driven decisions.
• Only 1/3 of businesses have a written strategic plan and succession plan.
• 86% of family businesses prioritize operational concerns over strategic issues.
• Improving financial performance is the top priority for family businesses in 2024.