The Three Circle Model of family business was developed in the 1970s.
Its three interlocking circles represent the family, the business, and ownership.
Some people in the system are just one – like a non-family member who is employed in the business.
Some are all three – like a matriarch who works in and is an owner of the business.
The model highlights how in family business, we wear multiple ‘hats’.
Being aware of which hat drives decisions we make, and the conflicts of interest that can occur makes this a very useful model.
But the ownership circle itself is more complex than you might think.
Ownership in family business is unlike regular ownership.
Consider: I can go buy some Apple shares through an online broker, and in an instant, I am an owner of Apple.
Vanguard, Blackrock, Berkshire Hathaway, … and lil’ old me.
Sure, my vote at the shareholder meeting isn’t worth much.
But I’m a legitimate owner, for as many shares as I choose to buy.
I don’t need any training or preparation to become an Apple owner.
And tomorrow, when I’ve had enough, I can sell them just as quickly.
Ownership in family business is fundamentally different.
A better word to describe it is ‘stewardship’: the business came before you, and hopefully will ensure beyond you, and right now you are an owner.
It’s a family asset that is meant to be held for a long time.
You don’t get in on a whim or leave on a whim.
Being a ‘good’ owner or steward is a skill to be learned.
Hence the status of ‘future owner’.
You aren’t right now, but you will be. That is certain.
As such, you look at the asset differently, no matter whether you work there.
You need to understand its value to the family – both financially and otherwise.
The stories of the family and the business (and you may be part of those stories).
With all this comes responsibility – even if you don’t end up also being a director.
This is the preparation needed to become an owner.
But right now, you are not an owner.
You have no say.
You are not at the table.
BUT … you care about the business and know that you will ultimately be an owner.
Given you will be an owner, decisions the current owners make will impact you.
So you have a vested interest in some decisions about the business.
You’re in limbo.
Ready and capable … but not quite there.
It can be frustrating.
What does this mean for the current owners?
They should be aware of the cohort of future owners.
Their decisions can have a big impact on them.
To paraphrase the Hermes family slogan, the business is ‘borrowed’ from its future owners.
Perhaps they should be at the table sooner rather than later?
Conversation Starters:
How are you preparing future owners in your family?
What does this status mean to them?
How is their opinion about the business important?
What voice should they have and when?
Further reading:
Communication During a Family Business Transition
How To Go From Family Business To Business Family
First, define your ‘family-owned business’
The future of the family business: Four strategies for a successful transition
TRANSITIONING FROM A FAMILY BUSINESS TO A FAMILY BRAND
Here’s How Generational Differences Play A Role in Family Business Succession
Engaging the young in family business culture
Taking Control: The Ultimate Guide For Family Business
An Open Letter to the Family Business Stewards
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Right now, you are not an owner, but at some time in the future you will be.
This is the Schrodinger’s Cat of family business ownership.
The Three Circle Model of family business was developed in the 1970s.
Its three interlocking circles represent the family, the business, and ownership.
Some people in the system are just one – like a non-family member who is employed in the business.
Some are all three – like a matriarch who works in and is an owner of the business.
The model highlights how in family business, we wear multiple ‘hats’.
Being aware of which hat drives decisions we make, and the conflicts of interest that can occur makes this a very useful model.
But the ownership circle itself is more complex than you might think.
Ownership in family business is unlike regular ownership.
Consider: I can go buy some Apple shares through an online broker, and in an instant, I am an owner of Apple.
Vanguard, Blackrock, Berkshire Hathaway, … and lil’ old me.
Sure, my vote at the shareholder meeting isn’t worth much.
But I’m a legitimate owner, for as many shares as I choose to buy.
I don’t need any training or preparation to become an Apple owner.
And tomorrow, when I’ve had enough, I can sell them just as quickly.
Ownership in family business is fundamentally different.
A better word to describe it is ‘stewardship’: the business came before you, and hopefully will ensure beyond you, and right now you are an owner.
It’s a family asset that is meant to be held for a long time.
You don’t get in on a whim or leave on a whim.
Being a ‘good’ owner or steward is a skill to be learned.
Hence the status of ‘future owner’.
You aren’t right now, but you will be. That is certain.
As such, you look at the asset differently, no matter whether you work there.
You need to understand its value to the family – both financially and otherwise.
The stories of the family and the business (and you may be part of those stories).
With all this comes responsibility – even if you don’t end up also being a director.
This is the preparation needed to become an owner.
But right now, you are not an owner.
You have no say.
You are not at the table.
BUT … you care about the business and know that you will ultimately be an owner.
Given you will be an owner, decisions the current owners make will impact you.
So you have a vested interest in some decisions about the business.
You’re in limbo.
Ready and capable … but not quite there.
It can be frustrating.
What does this mean for the current owners?
They should be aware of the cohort of future owners.
Their decisions can have a big impact on them.
To paraphrase the Hermes family slogan, the business is ‘borrowed’ from its future owners.
Perhaps they should be at the table sooner rather than later?
Conversation Starters:
How are you preparing future owners in your family?
What does this status mean to them?
How is their opinion about the business important?
What voice should they have and when?
Further reading:
Communication During a Family Business Transition
How To Go From Family Business To Business Family
First, define your ‘family-owned business’
The future of the family business: Four strategies for a successful transition
TRANSITIONING FROM A FAMILY BUSINESS TO A FAMILY BRAND
Here’s How Generational Differences Play A Role in Family Business Succession
Engaging the young in family business culture
Taking Control: The Ultimate Guide For Family Business
An Open Letter to the Family Business Stewards
