Small businesses (fewer than 500 employees) are hard enough to run. Add the drama and emotion of family dynamics on top of it, and things can get messy fast — even to the point where other employees begin doubting the business.
I’ve seen some very real and very uncomfortable family business moves.
For instance, give your son or daughter a job in the business that they don’t truly want and aren’t qualified for, and that child will feel demoralized quickly (imposter syndrome, stress). Plus, other employees will question your fairness and rationality.
Or maybe you give your brother a job in the business to keep peace in the family but don’t give them a job description, key roles or reporting requirements. I have news for you: Peace is the exact opposite of what this will produce.
These examples sound really bad but are incredibly common.
The good news is that there is a simple tool for managing family business matters: the 3-Circle Model shown here. Created by Renato Tagiuri and John Davis at Harvard Business School (HBS) in 1978, the simplicity of this is powerful:
- Keep family in the family circle;
- Keep business in the business circle; and
- Keep ownership in the owner’s circle.
Many owners are constantly thinking about family and business. The secret sauce of this model is to also focus on the ownership circle.
- Every circle has its own Rules of Engagement. Ground rules should be clear: In “family,” you have a seat and a say if you were born, married, adopted or raised here. In business, consider the EOS® language “Right Person, Right Seat.” More examples: Thanksgiving is a family event; we don’t talk business. Fair in the family circle is equal. Fair in the business circle is market rates. Fair in the ownership circle is determined by the owner’s philosophy.
- Every circle has its own roles and responsibilities. We need a chair or leader in each circle. In the business circle that’s usually the CEO. The family circle may have a CEO, too: the chief emotional officer.
- Every circle has a goal. The goal of the family circle is harmony. The goal of the business circle is profit.
Put the 3-Circle model to use right now! Give it 10 minutes: First, draw and label the 3-Circle model on a blank page. Then, for each circle, notate:
- Rules of engagement, including what is fair
- Roles and responsibilities
- Goals
- Decisions
- Communicate with other members of the circles. Unsaid is unclear.
The 3-Circle model brings clarity and keeps the right functions, roles, goals and decisions where they are best handled for the greater good of both the family and the business.
Matt Hahne is a certified 3-Circle Solution Guide and Certified EOS® implementer working with local family businesses. He may be reached at (504) 250-3807 or matt.hahne@eosworldwide.com
