Families are complicated, business is complicated and clearly the overlap of these two entities is VERY complex. In order to simply illustrate some of this complexity, those of us who work with families in business often talk about the ‘Three Circle Model’ which aims to illustrate the overlapping dimensions of ‘OWNERSHIP,’ ‘FAMILY,’ and ‘BUSINESS,’ which can help clarify how different stakeholders may perceive issues differently by virtue of where they are in the overall system.
While this simple model is very helpful for starting conversations and understanding, it is – as all models are – a simplification of reality. For instance, one dimension that is not captured in this model is the dimension of TIME and how each circle tends to grow and shift over time. A family of 5, with only two generations present is very different from a family at a third generation, that has grown to involve 18 adults. Similarly, when the business has sales of $10 million and 30 employees it is run differently and affects the family and ownership circles differently than when it has grown to $70 million in revenues and a workforce of over 100 people.
Another element that is not well captured in this standard model is the multi-directional influence that is present within circles and across circles. For example, while employee development is clearly a responsibility that is in the domain of the BUSINESS circle, when it comes to developing employees who may also be prospective owners – there may need to be some communication between all three of the circles to get that done in a way that works for all stakeholders (reflects values of family, needs of business and goals of sustained ownership). Similarly, while the owners are the ones who have to determine what their tolerance is for risk and their targets and goals for economic returns on their investment in the business – those who run the business day to day are the ones who need to provide information and feedback about what is feasible in that regard.
Clearly there is a lot of flow and movement between the circles, to say nothing of the variety of inputs and opinions that exist within any one circle. The challenge is that if you tried to capture all the complexity and moving parts in a model – the model would become so busy that it would be impossible to read or follow. My point is not to question the usefulness of these tools – but merely to remind us all that they are just that, TOOLS – a conversation starter, a simple model that is a framework by which we can start to talk about more complex issues and think through how to handle the fun and idiosyncratic ways in which this complexity gets expressed for real in any business.