The Three-Circle Model of the Family Business System was developed at Harvard Business School by Renato Tagiuri and John Davis in the 1970s.
It quickly became, and continues to be, the central organizing framework for understanding family business systems, used by families, consultants and academics worldwide.
This framework clarifies, in simple terms, the three interdependent and overlapping groups that comprise the family business system: family, business and ownership. As a result of this overlap, there are seven interest groups present, each with its own legitimate perspectives, goals and dynamics. The long-term success of family business systems depends on the functioning and mutual support of each of these groups.
John Davis reflects on the significance of the Three-Circle Model:
“Its durability is because it is simple, has immediate face validity and captures enough complexity in family business systems to help researchers, academics, manager and families think more clearly about the strengths and challenges of these systems.
Before the Three-Circle Model. When the family business field first started, the few thinkers about family business were focused almost entirely on the business itself. Before too long, there was an understanding that family dynamics were influential in the business, and vice versa, so researchers thought about two circles: family and business. People were already starting to think about a system, where what happens in the family influences the business, and vice versa.
However, they ignored the importance of ownership factors. The addition of the third circle (Ownership) allowed much more attention to other issues that couldn’t be explained by the first two circles. Linking the family, business and ownership circles fully defined what a family business system is, which is the interaction of all three of these subsystems.”