Family businesses are special since they run at the junction of three linked circles: family, ownership, and business. The dynamics inside family businesses are best understood using this Three-Circle Model. Every circle stands for a separate system:
Family: Emotional ties, values, relationships, and traditions.
Ownership: Decision-making power, control, and fair allocation of resources.
Company: Financial performance, strategy, management, and operations.
Agents and Systems:
Various agents have important functions inside these circles. Family members might be active owners, passive stockholders, or non-involved relatives. Employees could be outside experts, trustworthy non-family bosses, or family members. Often juggling between conserving history and encouraging development, resource stewards like the family patriarch or matriarch have great power.
Forms of Family Businesses
Owner-Managed: One family member decides everything important.
Sibling Partnership: Several family members share leadership and ownership.
Ownership is distributed throughout a bigger family, so official governance systems are needed.
Emotional Tapestries and Societies
Family companies are woven with emotional tapestries—a mix of devotion, expectations, tensions, and shared history. Particularly when personal ties influence professional choices, this emotional component may either empower or create tension.
Mapping using Genograms:
A genogram is a graphic tool for tracking family relationships and corporate function assignments. It shows how family connections cross with corporate responsibilities, hence pointing out possible areas of conflict or cooperation.
Contradictions and Difficulties:
Family-run companies sometimes deal with contradictions like:
Tradition vs. Innovation: Preserving family values while responding to market developments.
Family Loyalty vs. Professional Merit: Striking nepotism and meritocracy.
Emotional Attachment vs. Rational Decision-Making: Negotiating human emotions in corporate strategy.
References:
Gersick, K.E., Davis, J.A., McCollom Hampton, M., & Lansberg, I. (1997). Generation to Generation: Life Cycles of the Family Business. Harvard Business Press.
Carlock, R.S., & Ward, J.L. (2010). When Family Businesses are Best: The Parallel Planning Process for Family Harmony and Business Success. Palgrave Macmillan.