If your family owns and runs a business, then succession planning should already be an integral part of business planning for you.
Any long-term strategy concerning the growth of a family business in Malta must consider the relationship between the current and the new generations throughout the years, and plan ahead to ensure the smooth sharing and transition of responsibilities.
But for many family-owned companies in Malta succession planning still happens under chaotic and stressful conditions; it often follows, or otherwise results in, major upheaval in the family dynamics.
A few families do weather the storm and emerge stronger than before, armed with a smart succession plan for future generations; for others, the pressure irrevocably damages family ties and brings to an untimely end their forefathers’ vision of a thriving business.
75% of family businesses in Malta don’t plan properly for succession
Family companies have been referred to as the “business of relationships” because any family brings with it a mix of emotions which either strengthen the company or cause a rift. This is especially true when touchy subjects like nepotism and inheritance enter the equation, as is often the case with business succession.
Family businesses typically value stability and instil in the company long-held principles and beliefs, which tie in to both the family members’ attitudes as well as their business approach. When a younger generation enters the company with progressive ideas and renewed vigour for experimentation, their enthusiasm for change is generally greeted with reluctance from the incumbents.
Ideally, planning for family business succession should happen at the start of the business, or at least a few years before the current leadership plans on resigning to allow for a proper succession.
90% of family-owned companies don’t survive past the third generation
The primary reason behind the ‘curse’ of the third generation is a proposed loss of interest in what was conceived two generations ago; the dreams of an incumbent might not be shared by the generations to follow. It is for this reason that most companies fail at a greater percentage after each passing generation.
To ensure a proper succession plan, it is vital to have a clear understanding of the history of the company, its present values and intentions, as well as an outlined strategy for the future. The dynamics of the family are also important in formulating a plan that has the business’ best interests at its core.
‘Implicit knowledge’ is the family business’s biggest asset
Instead of embracing change and all the opportunities it could bring with it, companies that have had the same leadership for a number of years usually fear the changes that younger successors might introduce.
Good succession planning requires a careful balancing act between satisfying the concerns of the family members controlling the business and the generation that will succeed it. A succession plan should focus on what binds generations together — as professionals, not only family — rather than be perceived as a tool that divides them.
Professionally speaking, it is the process of imparting tacit industry knowledge and know-how between incumbents and their successors that serves as the neutral “glue” that binds them. This transfer of knowledge across generations within the family business is an important component in the succession of a firm, and to guarantee both continuity and competitiveness.
Strategic succession planning is key to family harmony and company growth
Succession planning is one of the most important aspects in the life cycle of a family business to secure its existence for years to come. Therefore, the intention behind strategic succession planning is primarily to help family-owned companies ensure sustained and profitable growth for the benefit of the members involved.
Regardless of the technological and economic changes a family-run business undergoes throughout the years, it remains a family affair, hence the goals and challenges will always remain highly dependent on both family relationships and business dynamics.
A wealth of options for Maltese family businesses thinking about succession planning
Anyone can easily find and read case studies and reports online about succession planning and its outcomes, including the experiences of family-owned companies in Malta.
Many of these resources are available on the websites of government agencies and legal or financial service providers, but before you open a dozen new tabs on your browser and pore over articles, blogs and newsletters published over the years, just ask yourself:
Does this particular example or general model reflect our family’s experience?
Since the quote “Happy families are all alike; every unhappy family is unhappy in its own way” applies equally to family businesses, then chances are what you find online will probably match with your experience, but imperfectly. A succession planning specialist will help bridge the gap between what you read in theory and what happens in practice on the shop floor, office or factory.
ZED Consultancy offers you a fresh pair of eyes that show you where and how to start your succession planning process, as well as equip your family with the tools and knowledge it needs to see it through. Drop us a line and let’s talk about your company’s future.
