The Family Business Institute utilizes a unique family business management success model consisting of four distinct family business dynamics:  (see graphic below)

1. Family and Interpersonal
2. Management and Operations
3. Wealth and Ownership
4. Balance

Family and Interpersonal

The base of the family business triangle is the business family system, interpersonal relations between family members, and interpersonal relations between members of the business family team. While many people think of businesses as machines that crank out products or services, the fact is that they are populated not by machines but by people. Those people must communicate, lead, follow, be motivated, and handle victory, defeat, daily challenges, and family business management effectively. Dealing with the "soft" issues of family and interpersonal relations is usually the most delicate and overlooked area of need in a closely held business. 

Management and Operations

The second side of the triangle is the day-to-day family business management and operations of the enterprise. Family business management and operations consist of the chain of authority, well-defined roles and responsibilities, the administrative functions of the business, delivery of business products and services, marketing and sales, customer service, information technologies, etc.

Wealth and Ownership

The third side of the family business triangle is the wealth and ownership dimension. This closely held business dynamic deals with money and power. In founding generations, the owner and manager are generally the same person; however, in subsequent generations family business management may consist of one group of people while ownership consists of a different group. Just as managers have defined roles and responsibilities, owners do too, but because closely held enterprises generally fail to make a clear distinction between ownership responsibilities and family business management responsibilities, conflict and confusion are the results.

Family businesses are also troubled by uncertainty over their estate and wealth distribution planning. While most financial services professionals are perfectly capable of developing estate and tax avoidance strategies, the strategies are usually not in concert with the business family’s long-term goals and wishes. Effective estate plans must take into account family members’ needs for security, relative fairness between employee and non-employee shareholders, and the potentially damaging effects of wealth on the individuals in the group over time.

Balance

The fourth dimension of the family business triangle is BALANCE. Because the family enterprise has such a strong gravitational pull for the families who populate it, they often find their lives out of balance. The business or customers demand 80-hour work weeks, and family communication, health, spirituality, and other areas suffer because of the requirements of the enterprise. In fact, it’s the rule rather than the exception that at some point in the lifespan of the family company, the business gradually drains the life out of the family rather than adding to and enhancing the quality of their lives.

The work of The Family Business Institute in closely held companies can be likened to the field of medicine. If a client is not in distress, FBI provides “preventive medicine” to avoid future problems and maximize good family health. If a client is in crisis or has one looming, FBI provides “emergency room medicine” to help resolve the immediate problems, nurse the family or family owned business back to health, and create a foundation for good future health. Stated more succinctly, it is the job of the Institute to make sure the family business triangle is equilateral and has excellent balance.

Copyright © 2006, The Family Business Institute, Inc.