Two Family Pillars
I grew up in a family business. It was neither a big family nor a big business. My father and my uncle ran it, and (unfortunately) my grandmother owned it lock, stock and barrel. To many people, and understandably so, issues relating to family governance and family business succession seem abstract and obscure when there is no particular family business being discussed. It’s the family particulars that make things interesting.
I’ve never had that problem because I experienced all the particulars when I was growing up. Later in life, when I encountered the notions of family governance and family business succession planning, there was nothing abstract or obscure about them. It was all very real and concrete to me.
Those thoughts come to mind as I read a new article, The Two Pillars of Governance in Family Enterprises: A straightforward understanding of complex systems, by Jim Grubman and Dennis Jaffe, appearing in the Family Firm Institute’s FFI Practitioner. It’s a long title but a very concise and insightful paper. (By the way, Jim and Dennis are thought leaders associated with the UHNW Institute. Both are faculty members of the Institute and Jim heads the Institute’s content and curriculum committee.)
Cliches to this effect abound, but it’s nonetheless generally true that families, family businesses (and family offices) are sui generis. You see one and you have not seen them all. You’ve just seen one. Thus counselors providing guidance to families and family businesses often start with a blank slate, and draw pictures. “So what have we got here,” they ask, “and how can we make some sense out of it?” Every situation is treated as a one-off. Not so fast, say Jim and Dennis.
Not denying the limitless variety, they posit nonetheless that success is found in families that can establish two separate but closely yoked pillars of governance for 1) the family itself, and 2) for the family business. The business part and the family part cannot exist successfully unless somehow conjoined–but not too conjoined. Having them both wrapped up in one package is not a good idea. Wrapping them in two entirely separate packages won’t work well either. Remember, twin pillars closely yoked.
The paper offers a sophisticated template for understanding the relationship between family and family business. It explains how things work and why they work, and what happens when the family business neglects the family. “Without effective governance to organize their experience and connection as an extended family, many prosperous family enterprises standing on only one shaky leg will eventually fall,” the authors say. Kudos to Jim and Dennis for a fine piece of work here.
What happened to my family’s business? I don’t think my grandmother would have had much time for notions like family governance or family business succession planning, had she encountered them. Siblings and cousins (me included) left for greener or less complicated pastures. A severe industry recession crippled the company. My grandmother died, still 100% owner, and the business was soon liquidated to pay off bank loans and her estate taxes.
How wonderful it might have been for my family to have got some advice from Jim Grubman and Dennis Jaffe.