Family Resilience in the Time of Corona

The Covid-19 crisis is a time when you should gauge your family’s resilience—and build more of it. An enterprising family’s goal is to not just cope with adversity, but grow stronger as a result of it. Here are ways to achieve that.

The Covid-19 pandemic is a huge, disruptive event that is severely challenging every aspect of our societies, every level of our governments, and all sectors of our economies. This pandemic is a disorienting, strongly felt shock to our collective nervous system—a textbook case of a major crisis and setback. The health, societal, and economic upset from this disruption will rumble through the world for the rest of this year and into the next. The human, economic, and social costs of the pandemic are staggering, and the ultimate costs are only now being imagined. Some businesses will prosper during this period, but most will struggle, and no economy will be spared.


What will be the impact of the crisis on enterprising families?

There Are Two Possible Outcomes for a Family

Adversity and crisis can either lead a family and its enterprise into decline, or into renewal and regeneration. It can go either way.

If you are not resilient, a crisis or prolonged adversity can more likely divide family members, derail family functioning and decision making, create lasting divisions, and destroy value.

If you are resilient, adversity will more often bring family members together, be a wakeup call for things that need to change, motivate more attention to meaningful relationships and activities, bring innovation to systems, and lead to reinvention and value creation.



Causes of Family Derailment

It’s easy to understand how crisis situations or periods of prolonged adversity can cause families or other groups to have difficulties. Crisis situations like we are in now can easily produce these outcomes:

Family members can feel considerable anxiety about their circumstances.

Some anxiety is needed to respond well to problems but too much anxiety paralyzes us or makes us aggressive. Great anxiety usually leads to more emotionally-reactive and self-protective behavior, and it is often associated with a loss of confidence, hiding from problems, rushing and staying busy but not solving critical problems, and looking for magic bullets, while tending to see a narrower scope of options. If you see these behaviors, as a leader you need to calmly but directly address them: reassure group members that these behaviors are understandable but not helpful or acceptable, and refocus family members on solving specific problems together.

Family members can experience loss and, understandably, fear that they will experience more loss.

People are experiencing a range of losses in this crisis–the loss of loved ones, of course, being the most profound. But it is not the only one: financial losses, loss of employment and income, loss of opportunities, loss of social interaction, loss of normalcy, loss of predictability, loss of control. Losses during this adverse time can raise old issues to the surface that can no longer be ignored. (In good times, money has a way of concealing problems.)

Typically, there are new crisis issues to manage that we may not be familiar with or feel capable to handle.

The combination of old and new issues can lead family members to feel a loss of control, resulting in the tendency to blame others. This results in conflicts, instead of pulling together.

The Key Determinant is Resilience

The key determinant of decline or regeneration (besides external forces and luck) is the presence or not of resilience in a group.

Resilience is the capability of an individual or group to get through and recover well from prolonged adversity, important setbacks, or crises. Resilience is created by having adequate  resources, useful structures to support the family and make key decisions, and trusted leadership.

Think of resilience as a storehouse of these three types of ingredients:


  • material resources to help cope with loss and maintain stability
  • skills that are useful in a crisis or in a period of prolonged adversity (e.g. composure, courage, perseverance)
  • experience solving tough problems while keeping members of your group united
  • allies, advisors and friends who will help in a crisis
  • a strong sense of purpose, trust, and pride in our family
  • willpower and sense of hope to get through adversity, recover, and move forward again
  • unity of family members, especially under pressure and conditions of deprivation
  • family members who care for others, encourage them, and help them cope with loss


  • trusted leadership who can make wise, fair, tough decisions
  • a leader who focuses our attention on needed accomplishments and encourages collaboration and problem solving
  • a leader who conveys hope and purpose (why is it important to get through this)

Structures: Roles, Forums, Agreements, and Decision Processes

  • clear roles for who decides, who is consulted, and who is informed of key information
  • forums (like boards, family councils, owners’ councils) where groups can have important conversations and make key decisions
  • decision rules, principles, and processes that help build consensus and help us make tough decisions
  • ownership agreements and family policies that help maintain the stability of the group in hard times

>> I encourage you to do a quick assessment of the presence of each of these resilience ingredients in both your family and your family company.

Each of these resilience ingredients lowers anxiety in stressful times, encourages collaboration, and allows us to focus on important problems to be solved. Success through a crisis requires that these resilience ingredients work together to overcome hardship and achieve recovery.

Ideally, you should strengthen as many of these factors as you can before a crisis and be ready to re-energize any of these that weaken in adverse times. The weakest link in our arsenal (say, trust in other family members) can become overstressed and fray in hard times, then can stress other factors (like family unity and our material resources), which can further stress the system and eventually bring us down. System failures are usually the result of cascading and compounding smaller failures.

Resilience is Needed Today More than Ever

Around 2000, we entered a new age, which is ushering in more frequent and more volatile disruptions to industries, societies, companies, and families. It is common to describe today’s environment, borrowing from military parlance, as VUCA: Volatile, Uncertain, Complex, and Ambiguous.

Accelerating changes in technology along with increased globalization has reshaped how commerce is done. Industries are changing, maturing, and disappearing much more quickly. Society is experiencing shifts such as increased diversity, increasing transparency, greater digital connectedness, and more political disruptions and social tensions. Scientific breakthroughs are increasing human lifespan and changing former genetic limitations. Business families themselves are morphing, becoming more diverse, more geographically dispersed, more international, and more egalitarian. The Millennials are changing the ways in which we do business, care for the world, and lead our lives. Add to these factors that societies, companies, and families must cope with periodic, widespread disruption such as the tragic Covid-19 pandemic.

In these conditions, companies must innovate constantly, anticipate disruption, and consider wider diversification to stay alive. The families behind these companies must themselves be innovative, agile, and resilient.

Resilient families and companies that get through the Coronavirus crisis will need then to get ready for the next disruption, and the next, because further disruptions are coming. Companies have heard this admonition for at least a decade, and progressive companies now consider how they can become more resilient and hopefully disruption-proof. A good part of my work today is helping family companies, family offices, and their owning families become better prepared for this new age, including growing more resilient.

Why Family Resilience?

We definitely need to build the resilience of the enterprising families behind family companies and family offices. The family is the ultimate foundation for a family enterprise—even more fundamental than the family owners.


The ability of a family business to survive long-term depends greatly on the ability of the family to:

                  • stay united, decisive, and industrious
                  • make important directional decisions for its business(es) and assets
                  • produce enough family talent to contribute in key ways to the family enterprise (e.g. as owners, wealth creators, board members, governance members, and in other ways)
                  • support adequate reinvestment in the company.


If your family is not resilient, it will likely undermine the resilience of your ownership group and then your enterprise.

The good news is that a family and company that are able to successfully move through serious adversity will likely be better prepared for the next disruption. The family’s confidence, judgment, skills, unity, and pride will be strengthened and become embedded in its memory, giving the family or company a better chance to overcome the next setback it faces.


Help Your Family Develop Resilience

How resilient is your family? How does your family deal with prolonged adversity, setbacks or crisis? What are you doing to help your family learn from this period and grow in capability?

Your family’s goal should be not to just cope with the adversity it faces, but to grow stronger as a result of it. Your objective is that strengths come out of this struggle.

How do you achieve that? A family can build and reinforce resilience in good times and also during a crisis. In the midst of the current crisis, these actions will help:

  1. A family grows stronger as a unit by pulling together toward a common goal, supporting one another, and collaboratively problem-solving through hard times. Set previous disagreements aside. Don’t let them divide you in these times.
  2. Family leaders need to actively shepherd the family through this crisis: be open with the family about the challenges the family and its company face, give hope that both company and family will make it through this time, focus the family on specific concrete goals and actions, and stress the need for trust and collaboration.
  3. As much as you need strong performance during this time, emphasize the importance of behaving according to core family values. A family will be proud not just because it survived a crisis, but because it survived the crisis while keeping its values.
  4. Families need to know what, besides saving the family’s fortune, the family should try to accomplish in this crisis. Define what your family wants to protect and what its big goals are. Be open in this time to redefining how you achieve success as a family.
  5. Praise teamwork and support collaboration among family members. Challenge any attempts by some to achieve political advantage of the crisis for one faction or another in the family.
  6. Be a role model for future generations. An individual, a generation of the family, or the whole family can be a good role model for future generations regarding overcoming a crisis. Resilience is transmitted through the generations not only through successfully rebounding from adversity but also through role models. You learn from role models who acted bravely in crisis periods; they become memories that you will recall when you’re experiencing future challenges.

Resilience Builds on Itself

Getting through tough situations together as a family helps build the confidence, trust, pride, relationships, unity, and skills to face new challenges and rebound from the next crisis. Resilience builds on itself. It’s a virtuous cycle.


Resilience Assessment and Strengthener


      • How does your family deal with adversity?
      • Which of the family resilience ingredients are abundant in your family? How are you reinforcing them?
      • Which of the resilience ingredients are in short supply in your family? How can this crisis aggravate your weaknesses?


      • Which resilience ingredients can your family try to develop during the crisis?
      • How can you organize your family to pull together in this crisis?
      • How are family leaders guiding and focusing the family on getting through the crisis?
      • Which of your family’s core values are you demonstrating and reinforcing in your crisis response?
      • What are your family’s big goals to achieve in this crisis? Are you discussing these goals as a family?
      • How well is your family supporting and championing one another and collaborating constructively to solve problems?
      • Are you creating role models for future generations to learn how to navigate a crisis and rebound from it?
      • Is the senior generation in your family talking with the next generation about how they’re approaching the crisis and what it takes to get through a tough period?

With an appreciative nod to Gabriel García Márquez and his literary classic, Love in the Time of Cholera. García Márquez teaches us all the value of persistence and resilience.

What Makes a Family Business Last?

Originally appeared in Harvard Business Review


The performance edge family businesses have over their non-family business counterparts has been explained by their dogged pursuit of operational excellence. Family firms tend to take a long-term view of investments and relationships, stay in ownership control to do things their way, focus on persistent improvement and innovation, develop loyal stakeholder relationships, build key talent in select individuals, carry lower debt, and build greater financial stability. This approach to running a business reflects an Operator’s Mindset. It is informed by specialized knowledge passed down from generation to generation. This mindset is deeply embedded in the cultures of most family companies and business families: If you want to be important in the company and family, you have to be good at operations.

Cultivating an Operator’s Mindset has largely paid off because most industries and business models have, until recently, evolved slowly, making operations quality central to success. But dramatic shifts do happen and, when they do, family companies that can’t think beyond the Operator’s Mindset often fall behind.

Family companies that have persisted over generations despite changing conditions strive for operational excellence, but not exclusively. They also are skilled at migrating to new value-creating activities and at leaving activities and practices that destroy value. They don’t become stuck in traditional businesses or outmoded practices. Some, after exhausting growth opportunities in their core business, diversified into different industries. Some experienced their industry maturing and consolidating around them and decided either to stay and acquire competitors or sell their outflanked business and redeploy assets. Some have parried the disruption of technology or regulation. Such adaptations are profoundly informative.

What distinguishes these long-term adapters is their strong Owner’s Mindset among the owners and in their top boards. An Owner’s Mindset recognizes the importance of operational excellence, but insists on being in activities that create value (financial, social, relational, and reputational) according to the key values of the owners.


Read the full article in Harvard Business Review

Looking into the Future of Business Families


Davis leads you on a personal and professional voyage back to the 1970s to pay special homage to the groundbreaking work of his late mentor, Renato Tagiuri, who pioneered the field of family business with frameworks that included their notable Three-Circle Model of the Family Business System.

Davis then pivots to the future and offers a modern roadmap for business families to transform themselves to conquer the next economy. FBN invites you to partake in the new paradigm of business families leading the sustainable change required to address the great challenges of our time.

Looking into the Future of Business Families overflows with poignant lessons and forward-looking tools for multigenerational families, researchers, professional advisors, and the entire ecosystem of the family enterprise field.

The book launched at FBN’s 30th Global Summit in October 2019 in commemoration of FBN’s 30th anniversary. The book will be widely released in Q1 2020.

WEBINAR: Millennial Mindsets in the Family Enterprise


February 4, 2020

Featuring Professor John Davis of MIT Executive Education

Family enterprises face big challenges in order to survive and thrive in our era of rapid technological and market disruption. Having to adopt to new business models, and accept changing customer loyalties, they must also address changing attitudes and aspirations within the family itself, as the Millennial generation takes the reins of the family business.

The Millennial generation (Gen Y) is, arguably, the most researched generation in history. The subgroup of Millennials from business families has not been well understood until Professor John Davis’ recent study of business family Millennials from more than 40 countries.

Following his highly popular 2019 webinar, IEDP welcomes back renowned academic and shaper of the family enterprise field, MIT Sloan Professor John Davis, to share his latest research findings about Millennials’ interests and aspirations for their lives, careers, financial wealth, and their family business.



View more information


Help Families Future-Proof Their Businesses, by Mitzi Perdue, February 26, 2019

Professor John Davis is one of the world’s leading authorities on family enterprises. How would he advise business families and their advisors to prepare for a world of ever-more-rapid technological change?

Davis has advised multi-generational family enterprises in more than 65 countries. His professional training includes management, psychology and economics. He’s also spent decades teaching at the Harvard Business School and currently leads the family enterprise programs at the MIT Sloan School of Management.

Mitzi Perdue: What are the skills family enterprises should be nurturing now to thrive in the future?

John Davis: The workforce of the future will look quite different than it does today. Not only are existing jobs being threatened, but new jobs will emerge that don’t exist today. A combination of reskilling and upskilling is going to be important in order for talent to keep pace with innovation.

While there are many more skills required than these, below are four important categories that will be increasingly needed in the next economy:

  1. Digital/technology competencies will be a key need. One source said that of the jobs created in the United States in the last 10 years, two-thirds were digital-related jobs. Talent will need to be able to work with existing and emerging technologies across industries.
  2. Interpersonal skills will be increasingly sought after as these aren’t as authentically conveyed by machines. Examples of the interpersonal skills that will be in increasing demand are: caring, empathy, listening, reading a room, teaming/collaborating, ability to influence and a global citizenship mindset.
  3. The ability to create will be essential. These skills include creativity, experimentation, failing and learning, innovation, entrepreneurship, foresight, envisioning, intuition and design.
  4. Talent will need to be flexible in this next economy, prioritizing one’s ongoing growth and development. Rigidity will be detrimental. These skills include the ability to be curious, problem-solve, change, adapt, pivot, be resilient and agile, actively learn and reskill yourself.

MP: You recently moved to MIT after 21 years at the Harvard Business School. Comment?

JD: I moved to the faculty at MIT because of its focus on the future. MIT is way ahead of other schools’ understanding of what’s happening and changing in our world. In many ways, the MIT ecosystem—with its many labs—is creating the Fourth Industrial Revolution that we’re all preparing for.
My work at MIT focuses on helping family enterprises prepare for the ways in which the future will impact them—and there are many. There are forces affecting businesses, families, ownership, investing, philanthropy, governance, talent and virtually every aspect of a family enterprise. Technology is only one force we hear about a lot, but there are others that I’m paying close attention to and helping families prepare for.

Join John Davis at MIT’s Future Family Enterprise program to position your company and family for success amid a fast-changing business landscape

Date: May 3–8, 2020 │ Format: In-class study with action-planning │ Location: MIT Campus, Cambridge, MA

MP: And these are?

JD:  In addition to technology, I am watching social and demographic changes, the rise of the Millennial generation, globalization trends, industry disruptions, environmental shifts, political movements, the actions of governments, and other forces. These are opening up opportunities for families, giving rise to some challenges, and revealing the need to adapt, which is not so easy.

Family enterprises are inherently wired for stable or gradually changing environments, because gradual change is more compatible with family culture. Most enterprising families aren’t wired to flex with substantial change, fast change or disruptive change (although some do this admirably). Family companies generally do well with managing economic cycles, but industry disruptions, which happen more frequently than economic cycles, can have more profound impacts on a company or industry, and family companies need to build new practices for the new business world. Enterprising families need to:

  • Learn a new formula for success that will allow them to endure in the next economy.
  • Continue to manage the evergreen issues facing family companies (such as succession planning and family relationships).

JD: I’ve launched two programs at MIT in 2019 (Future Family Enterprise, May 5-10, and Founder to Family, July 22-26) to help families at specific stages in the life cycle learn to succeed in new ways with new mindsets. I invite families who want to learn about these experiences to be in touch with me at [email protected].

MP: There’s a quote attributed to Darwin but that’s probably a paraphrase: “It is not the strongest that survives, but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.” For family enterprise members and for those who advise them, your work can influence their survival. On behalf of the readers of Trusts & Estates Magazine, thank you.

Mitzi Perdue is a professional public speaker and author of the book, HOW TO MAKE YOUR FAMILY BUSINESS LAST a Treasury of Checklists, Templates, Resources, and Tips. Visit her website,


Join John Davis at MIT’s Founder to Family program to organize your family business to move beyond the founder-centric stage and build a bridge to the second generation

Date: November 9–13, 2020 | Format: In-class study with action planning | Location: MIT Campus, Cambridge, MA


Originally appeared here.


Nobody Does It Better: How family companies quietly outperform other companies (even in today’s disruptive environment)

IEDP, October 25, 2019

MIT Sloan Executive Education faculty member John Davis, a pioneer in the study of family companies and the director of MIT Sloan’s portfolio of Family Enterprise Programs, is bemused by the sudden interest of corporations in ‘long termism’. “We see non-family, publicly-traded companies suddenly ‘discovering’ long-termism— as if they really discovered it. I’m glad they’re thinking about it; let’s see if they make a genuine effort and really do it,” he says.

Davis remains skeptical—and for good reason. He knows long-termism well, and he knows it works. He teaches the practices, planning, and mindsets to do it successfully to classrooms of business families at MIT. For more than 40 years, across 70 countries, Davis has studied, taught, and advised family-owned companies on how to survive in business for generations. What amuses him about Wall Street’s recent appeal for long-termism is that they define “long-term” in many cases as three years. Meanwhile, Davis works on 25-year, 50-year, and 100-year plans with multigenerational families, and was recently asked by a founder to develop a plan for his family enterprise to last 500 years (20 generations).

Family companies, Davis believes, favor the decisions and behaviors that matter to long-term, sustainable performance “more naturally and more inherently than non-family companies.”

Join John Davis at MIT’s Future Family Enterprise program to position your company and family for success amid a fast-changing business landscape

Date: May 3–8, 2020 │ Format: In-class study with action-planning │ Location: MIT Campus, Cambridge, MA

Long-term thinking has always been at the heart of successful family companies. “And not only long-term thinking, but also planning, investing, partnering, relationship-building, and community-building for the long-term,” Davis explains. A long-term perspective “comes more naturally inside a company that is owned by a family, because their time horizon is intrinsically longer. They plan for their descendants to own this business or this land (or the wealth generated by its sale) for generations. There is an attitude of legacy and stewardship as a way of being in families, which permeates into the culture of the company.”

Another inherent quality of a family that penetrates the family company is the stability of ownership, “which says that what we’re in this for the long haul – it’s not a speculative venture – and if you come to work for us, or if you’re one of our customers or suppliers, we’re sticking this out.” This is reflective of their fierce loyalty, which “family companies tend to nurture more than non-family companies.” Davis cites.

Family companies also tend to develop financial stability, with stronger balance sheets and less debt. This makes them more resilient to economic downturns, avoiding the frantic efforts many non-family companies make to boost their suddenly shaky bottom lines. Davis’ work at MIT now focuses on how family enterprises can survive today’s disruptive, fast-changing environment, which requires some different skills than outlasting economic cycles.

The qualities described above that are inherent to family companies help explain one of the business world’s best-kept secrets: on average, family companies, whether public or private, whether small or large, consistently outperform their non-family counterparts. As established by the research, the difference in profitability, growth, or any other kind of return is significant, he says. “We’re not saying that all family companies perform better than all non-family companies,” Davis notes, “but on average, they do.”

Most industry leaders are family companies. The majority of publicly listed companies are family controlled. While the famous three-generation rule – which states that many family companies don’t survive past the third generation after founding – may have some validity (Davis has researched this), the fact is that even fewer non-family companies ever last three generations.

Reluctance to Let Go—in Several ways

Of course, family companies have their challenges as well. One of the main vulnerabilities of family companies is their reluctance to “let go.” As Davis explains, “Family companies hold onto people who aren’t working out well way too long, they hold onto investment bets that aren’t working well too long, they hang onto products or business lines that aren’t working well too long, and sometimes the senior generation hangs on to leadership too long. Families tend to be excessively loyal, stubborn, and they get attached. That doesn’t work very well in today’s economy.”

Join John Davis at MIT’s Founder to Family program to organize your family business to move beyond the founder-centric stage and build a bridge to the second generation

Date: November 9–13, 2020 | Format: In-class study with action planning | Location: MIT Campus, Cambridge, MA

The irony is that by remaining loyal to original products or to the original business rather than experimenting and scanning the horizon for new growth opportunities, the younger generation of a business family forgets the spirit that inspired the company’s founding in the first place. The driving ambition of the company’s founder was “to create something new that people will value,” says Davis; building a company was only the means to that end. Later generations, however, get attached to the means and forget the ends. As Davis urges his family company students and clients, “We need to migrate to new, good opportunities, and not fixate on the means of production.”

The challenge is that families have a passion for the family business, which is both a strength and a vulnerability. “It’s hard to create anything of great value if you’re not passionate about it,” Davis says, “but passion for a business also results in attachment to it.” Davis, who is also a trained psychologist, notes that success in life often depends on the quality of our attachments but also on our ability for detachment. Successful parenting, for example, requires balancing attachment, and, as children grow older, detachment.

At the family company level, achieving this balancing is a part of the culture that is set in motion by the owners, and then filters into the board and organization, says Davis. “How do you balance attaching and being passionate about something, but also moving away from it at the right time and letting go of things that don’t work any longer?” According to Davis, this skill is an essential part of the modern success formula for family enterprises in today’s turbulent environment. Most family owners don’t know how to do it well; they congregate in Davis’ classes to learn how.

Never Forget the Values

The best family companies know when to pivot and divest, but they also work hard to ensure that such moves are achieved in a positive and humane manner. “When a family business shuts down an operation in a community and people’s lives are affected, you are judged rightfully about how you treat the people who helped you over so many years,” says Davis.

“Good families and good family companies make the right moves in the interest of long-term value building, but they do it with the right values,” he says. “They treat people with dignity, they help them find new jobs, they help the community, maybe repurpose their old factory in some way. They honor contribution and loyalty–and their roots.”

Such timeless values will ensure that no matter how volatile, chaotic, and uncertain the world around them, the best family companies will continue to quietly outperform their noisier, short-term focused, non-family competitors.

Learn more about MIT Executive Education’s portfolio of family business programs here


Originally appeared here.


What to Watch When Planning a Family Enterprise Succession


Ideas that Matter MIT Sloan, 2019

What to Watch When Planning a Family Enterprise Succession

Walmart, Comcast, Nordstrom, BMW, Ikea, Zara, Lego, Samsung — all multibillion-dollar empires, all family companies. These companies testify to the power of the family business model, in which ownership is controlled by a single-family and two or more family members significantly influence the direction of the business through management or governance roles, ownership rights, or family relationships. Most of the world’s businesses, in fact — including many of the largest ones, even among those that are publicly traded — are family companies.

While family companies can be superior performers and leaders in innovation, all forms of enterprise have their weaknesses. One vulnerability of family companies concerns the transition of ownership and leadership between generations. Most of these transitions are not managed well enough and too many end in failure for the company and family. This is especially true of the transition between the founder and next generation, but this vulnerability persists in any generation of family control.

All this is according to John Davis, a senior lecturer in the MIT Sloan Executive Education family enterprise programs. Davis has spent four decades studying, teaching, and advising family-owned enterprises on how to sustain their success over the long term, including the pivotal transition of leadership from the senior generation to the next. Davis offers key guidelines for family businesses that are facing a shift between generations. While each generational transition presents distinctive challenges, these four management principles apply universally.


Maintain momentum

Momentum, or forward movement of a business or family, “is an underappreciated force that we need to be very respectful of,” Davis said. “If you kill, stall out, or even significantly reduce the momentum in a system, it’s hard to make it up.” Families need to steadily grow their financial assets, develop talent for the whole enterprise, and maintain group unity to stay ahead of company, family office, and family-related challenges.

Maintaining momentum must include preparing for and willfully making a transition from one generation of ownership, governance, and leadership to the next. Steady progress towards the goal of a successful handoff is a far better strategy than ignoring preparation and taking your chances at the end of a generation. Davis likened this to handing off a baton in a relay race: Both generations need to be running at the same speed for a smooth pass.

You need to pass the baton when the next generation is ready to lead — not when you’re ready to leave.

This analogy nicely captures the importance of timing. Transition from one generation to the next too soon and you will likely stumble. Delay the transition too long, and the next generation may be detached from and uninterested in the work. Growth can stagnate. Morale and unity can crash. According to Davis, the right timing hinges on one central consideration: “You need to pass the baton when the next generation is ready to lead — not when the senior generation is ready to leave,” Davis said. “And that’s an understandably tough principle to expect the senior generation to champion.”

No company head or leader of any enterprise organization, especially a founder with a deep personal investment in the company or family office, wants to leave “the game” that they are good at and enjoy playing, Davis said. To facilitate timely transitions, leaders need to plan for their next chapter of life and families need to identify valued roles for elder family members.


Question the ‘theory of one’

“A generation transition involves a passing of ultimate responsibility for all of the major activities of the family,” Davis said. “This almost always involves passing the leadership of the family company, but families have more interests than just the family company.” Consider philanthropy, the family office, the management of the family’s outside assets, and the leadership of the family itself. At the end of the process, you want a capable and committed next generation successfully leading the family’s key activities.

Many families believe all of these activities can and should be led by one person — the “theory of one.”

“Sometimes this approach works, but it has consequences: It not only saddles one person with wide responsibilities, but often means some family activities will get little attention, and that only business leadership will be valued,” Davis said. “There are better ways for a family to get things done and maintain unity.”

Smart transitions are about having a team of family members (and non-family managers where appropriate) ready to take on different positions and responsibilities in the future.


Prepare the business (and other family organizations) for the transition

Maintaining momentum also means that companies need to be prepared to support and flex with the changes the next generation brings. “That means preparing for new investments in new business opportunities, reconsidering standard management practices, strengthening the company’s balance sheet, adapting the culture of the company, transitioning key customer relationships, and so on,” Davis said. “You want the next team to hit the ground running.”

The new generation of leaders will hopefully want to pursue some different strategic goals and, likely, will manage with a different style. The senior generation and the organization must integrate and facilitate these changes while maintaining important corporate values — without starting a tug of war between entrenched practices and the new vision. “It’s typical for the senior leaders to see some change as threatening, rather than exciting, and for next gens to feel held back,” Davis said. “But transitions go better when the next generation shows appreciation for the accomplishments of the senior generation, and the senior generation appreciates the need to change in healthy ways.”


Build a new ownership team

In a generational transition, ownership is generally passed from a smaller to a larger group of people and a new group of owners must support the business and other activities of the family. According to Davis, ownership should be treated like a job — a strategic tool — but most families spend little time considering who deserves to be an owner and how ownership should be structured. “Families are generally on autopilot regarding the ownership transition,” he said.

Instead, the two generations need to have transparent conversations about how ownership will be exercised, divided, and transitioned. What is the job description for family owners or beneficiaries? Should shares be passed over a 20-year period starting when the next generation of owners is in their 30s? Should ownership be given to individuals based on specific conditions, such as being an employee? What kind of shareholder agreement will best serve the next generation? The right kind of ownership formula will provide a more stable foundation for the business organization and build unity among the succeeding generation. The next generation of owners must not only be well-prepared individually to perform as owners but need to be trained and motivated to coordinate like a team.

Of particular concern are situations where ownership is only passed, or even revealed, when the senior generation dies. “This is dangerous,” Davis said, “and not simply because of estate taxation. When ownership comes all at once, at an emotional time, the next generation is unpracticed as an ownership team.”

Originally appeared here.


PODCAST: Disruption with Professor John Davis


The Family Business Podcast
December 7, 2018


In this episode, John Davis discusses Disruption and Innovation, and how they are changing the lives of family enterprises and the families that own them. He explores ways that family enterprises are in motion, and how they must adapt to today’s accelerated pace of change. After all, disruption provides an opportunity to pivot and embrace experimentation. He offers family owners—in the senior generation and next generation—useful advice for responding to disruption and partnering together through this new global disorder.



You may also be interested in John Davis’ article The Owners’ Mindset in the Age of Disruption 

Three-Circle Model: Building Unity in the Family Business System

Cambridge Family Enterprise Group
October 9, 2018


Professor John Davis, co-creator of the Three-Circle Model of the Family Business System, describes how the model can be used to help build unity in the family business system.  He discusses the three ingredients required to sustain family success:  GROWTH of Family Assets; Family and Organization UNITY; and Family and Non-Family TALENT.


Three-Circle Model: What Would the Late Renato Tagiuri Think About the 40th Anniversary


Cambridge Family Enterprise Group
October 9, 2018


Professor John Davis, co-creator of the Three-Circle Model of the Family Business System, describes what the Late Renato Tagiuri would think about the 40th anniversary.   “My colleague and friend, Renato Tagiuri, would be delighted and probably a bit surprised, at least amused, that this little conceptual tool that he and I created out of necessity to understand family business systems has been so successful for so long.”


PODCAST: The Three Circle Model – 40 years on


The Family Business Podcast
July 20, 2018


In this episode, John Davis has a rich discussion with host, Russ Haworth, on the occasion of the 40-year anniversary of the Three-Circle Model of the Family Business System. He describes how the Model can be used by families and their advisors, and reflects back on how he created the Model in 1978 with Professor Renato Tagiuri at Harvard Business School. The conversation expands to delve into some future trends that John Davis sees on the horizon for family businesses.




You may also be interested in John Davis’ article How the Three Circles Changed the Way We Understand Family Business

The Future of the Three-Circle Model: A conversation between Pramodita Sharma and John Davis

FFI | Practitioner – June 13, 2018

This article, first published on June 13, 2018 in the Family Firm Institute online journal
FFI Practitioner is reprinted with permission. ©Family Firm Institute

This week’s FFI Practitioner concludes our two-part series commemorating the 40th anniversary of the influential Three-Circle Model. Thank you to FFI Fellows, Pramodita Sharma and John Davis for sharing their insightful conversation about the future of the model, research, and the field.   Read the Full Article >

Pramodita Sharma (PS): As I walked into my office for our interview, I ran into one of our Sustainable Innovation MBA students. They are reading my book Entrepreneurs in Every Generation, so I asked: “How’s my course going for your class?” And she said – “Honestly, you know what? I love the three-circle model. It applies everywhere, in every course.”

Her comment made me think perhaps we should use the three-circle model in our PhD programs, because if you think about the theories we refer to, e.g., agency theory, resource-based theory, we can go back to the three circle regions and say, OK, where does a theory like agency theory fall in the three circles? What issues of the three-circle model are we trying to address with it? The three-circle model is the starting place to understand these systems. I really believe the model’s impact is only now beginning to show. When I put the three-circle model on the board, people can use it to think in a theoretical way, as well as locate themselves in the model as practitioners.

In my case, teaching, for example, most of the variants that you’re trying to capture in a case and to get people to talk about having to do with the seven regions in the three circles. It’s not as if it’s all we talk about, but after people have used the three-circle model in traditional ways, they try to use it to explore other issues. For instance, the implications of wealth in the business, or in the family, or both. It seems like there is no question that we’re talking about another dimension. Can you, or did you ever, imagine positioning a wealth circle?

John Davis (JD): First, it’s gratifying to hear that your students and you think the three-circle model is useful theoretically and managerially. That never fails to buoy me. I agree that the model is a foundation for understanding the family business system. Other theories like agency theory can be understood in the context of the three-circle model. Unfortunately, and not to get distracted here, but it’s disappointing that some reviewers for journal articles I have submitted recently see “no relevance” for the three-circle model. Seriously? While you, a highly respected researcher and theoretician, are deeply understanding of family business system issues and appreciative of the power of those three little circles, other academics in the field are not.

But I am the first to recognize that the three-circle model is not designed to answer all important questions in our field. No framework can. Take the interesting topic of family wealth. While every family owner of a family business is a wealth holder, a family’s wealth includes assets outside the family business, and some family members could be a holder of some family wealth and not an owner of the family business. Believe me, I have played with adding a fourth wealth circle and couldn’t make it work conceptually. The same conceptual limitation in the model is there to distinguish family members that are engaged in social impact activities. The three-circle model can’t cleanly handle the distinction in general. But you can still make notations about a particular family’s three-circle map to indicate particular groupings of interests.

PS: I’ve always wondered if we could get away from two dimensions. If we could see some things in three dimensions that would be different or more powerful than what we currently seem capable of. In 2011, I was asked to speak on governance of a family and its enterprise at a conference in Taiwan. That’s the first time I used a three-sphere model as opposed to the three circles. I had all these different kinds of flowers and said, well, this is your family. These different flowers, some of them fading, others are in full bloom, and some are buds, etc., represent all the kinds of people in the family. Similarly, I used fish in a pond for another circle, and drops in an ocean for the third. So, we have the three circles and we have the seven regions, but even within the regions there are differences.

I think that more dimensions could offer some insights that we can’t appreciate now. I have drawn three spheres too but couldn’t get to new understandings through a three-dimensional representation. I think it would be cool to see a hologram where you could peer into the regions of each sphere and ask questions. Maybe we would appreciate the interconnections of the three systems better than we can today. I think there’s a richness in the model that we haven’t explored yet.

I’m so looking forward to getting to that stage in our thinking and practice! Where do you see us going? And where would you like us to slow down and take a moment to reflect on where we’ve been?

JD: It’s very impressive to me to see all the good thinkers and researchers who have discovered this field and are writing about it and having useful things to say. Right behind me in my office is my collection of FBR. Often, I find myself pulling out a specific year and looking to see what was written then. We’ve come a long way since 1984. I want researchers to understand the family business system to gauge how their particular research fits into the broad issues of the three-circle model. That takes extra effort on the part of researchers but I hope they do it. Research will be more useful if that happens.

Read the Full Article >

Celebrating the 40th Anniversary of the Three-Circle Model: An interview with John Davis

FFI | Practitioner – June 6, 2018

This article, first published on June 6, 2018 in the Family Firm Institute online journal
FFI Practitioner is reprinted with permission. ©Family Firm Institute.

To celebrate the 40th anniversary of the legendary Three-Circle Model, FFI Practitioner is excited to share two editions about the model during the month of June. For the first edition, we’d like to thank Pramodita Sharma for her interview about the inception and impact of the model on the field with one of its two creators, John Davis.

Read the Full Article >

Pramodita Sharma (PS):  What was the original idea behind the model? Has it been misused?

John Davis (JD)Well, remember that this framework came out very early in our interviewing of people who worked in family businesses. Most of them were family business leaders, many were founders, a few were later generation family member-employees. We needed a conceptual “place to put people” we were interviewing. We wanted to understand individuals’ viewpoints, their roles, their confusion about some topics, why certain decisions were difficult for them, and why they were dwelling on certain issues. Ultimately, we were trying to understand why individuals in these businesses (we didn’t call it a system yet) saw the world the way they did and what issues were important to them. The need to organize the information we were gathering and what we were learning led us to the three circles: the business, obviously; the family, naturally; but then, eventually, also the ownership group. Without accounting for the ownership group and perspective, we couldn’t bucket all the comments and data adequately. But with three circles, we could organize the information we were gathering and we thought, wow, the three-circle framework seems to be enough.

And it started as a framework. Frameworks are largely for bucketing information. Later, we saw that the three circles and the interaction of the three circles had great explanatory power, and we called it a model. A comprehensive, predictive theory of action and reaction in the family business system hasn’t been accomplished, and maybe won’t be developed given the many intervening variables that can affect the outcomes of certain changes in any circle.

The original intent of the three-circle model was to locate individuals in the system, identify their various interests, and observe how individual and group interests and behaviors interacted. The three circles can also indicate thematically, for example, that the goals of the three groups can overlap and still be distinct. The clarity and simplicity of the model allowed people in the field to explore many topics. It has guided our thinking in this field in fundamental ways. That’s all we needed in the beginning, and it has held up well, I would say.

When you build a framework or a model, you hope it helps you understand a lot, but soon enough you see that it doesn’t do everything. Advisers don’t have a clear place in the model. Governance structures, for example, with their adviser members, don’t fit perfectly in the geometry of the three circles. That said, non-purists can still add a board of director’s symbol in the overlap of business and ownership groups, and readers can see where it belongs in terms of its responsibilities.

As for examples of misuse, I can’t go that far. Some people thought highly enough of the three-circle model that in the early days they claimed it as their invention. But that’s different than misuse. Some have found the original three-circle model frustrating because it doesn’t do what they want it to do—like have clear categories for advisers or governance groups. I would add that the three-circle model doesn’t adequately diagram the situation of a multi-family business. But attempts to build a substitute model, with the necessary complexity to account for other memberships, haven’t been received well because they are either conceptually flawed or very complex and hard to use. I haven’t seen a workable (clear and relatively uncomplicated) four-circle model although it’s been tried.

I wouldn’t call these a misuse of the model, but it’s not how we initially thought of it. Sometimes to make a point, people will move the circles around, separate a couple of the circles, make circles of different size, etc. That’s a different use of three circles and it’s fine if it gets you someplace in your thinking and explanations. In general, I think people have used the model in ways that have been useful.

PS: Can you share the spirit of the conversations and thought processes you went through when this model was created? What was it like working with Ron Taguiri?

JD:  Well, I was a doctoral student at the time and Renato Tagiuri, who was an extraordinary conceptualizer and a wonderful mentor, would send me to do interviews with his executive students who worked in family companies. I’d ask the subjects very basic questions, listen, record, and make notes on what I was hearing (I still have tape recordings of a lot of these interviews, by the way).
Renato and I would go through a standard process: “So, what did you learn?” “Well, so and so has this complicated issue with his brother and these are his worries.” I would make lists and Renato, who loved to sketch, would be drawing stick-figure diagrams and circles. (I was attuned to diagraming situations because of my earlier training as an economist. I always preferred graphical analyses to mathematical formulas.) We started out thinking in terms of a family and business system but my interviews (and lists) showed that ownership concerns were very present. “In this case it’s not just about family and business problems. He (the interviewee) has inheritance concerns and is also talking about ownership.” Renato added a third circle for ownership to the two-circle Venn we were drawing on, and he said, “Does that help?” And I said, “Yeah, that helps.”

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