Real results. Simple tools.

Join me for the Family Business Office Hour

The Three-Circle Model of the Family Business System

Wow. That is its full name. Most people call it the 3 Circle Model. It was created at Harvard in 1978 by Renato Tagiuri and John Davis and revolutionized how researchers think of family businesses. Unfortunately that thinking hasn’t oozed out to the rest of us…yet.

Each of the circles in a healthy family business have a defined leader, succession plan, set of priorities, definition of what is fair, decisions they make, and meetings.

Check out the info below to learn more about how to use the 3 Circle Model in your family business.

  • Leaders

    In a healthy family business the business has a strong leader who gets to run the business without interference from the family.

    The family needs a strong leader and so does ownership. Each of the leaders should know what they are accountable for.

  • Priorities

    In a healthy family business each of the three circles has their own priorities that they use only for their circle. They do not expect the other circles to make decisions based on their own. For example, a lot of families place a high priority on harmony. That is not always the same for the business circle (which is often to make a profit).

  • Definition of Fair

    Healthy family businesses have a different definition of fair for each circle. Most family’s define fair as equal. That is not and should not be what it is for the business circle. Ideally, all people in the business have a job they are qualified for, that is needed in the business and people are paid market rate for that work.

  • Decisions

    Healthy family businesses let the family make family decisions, the business make business decisions and the owners make owner decisions. Families and owners shouldn’t be deciding who works in the business and the business shouldn’t be deciding where every family vacation is for example.

  • Meetings

    Healthy family businesses have regular meetings for each of the three circles. Family members attend family meetings, owners (or future owners) attend ownership meetings and there are business meetings at each level of the business. Be careful about this - unfortunately, a lot of people call ownership meetings family meetings and end up causing trouble with that.

  • Ready to learn more

    Join me for the Family Business Office Hour.