CIRCULAR SIMPLICITY PAUL ANDREWS
Here we explore the back story to three circles that changed the course of family business consulting forever. Professors Renato Tagiuri and John Davis created the Three-Circle Model of the Family Business System at Harvard Business School back in 1978 and it has become the defining framework across the world ever since. Simplicity is probably why it has stood the test of time but it remains as relevant today as it did when it was created. All family business systems can be explained with the use of the three circles and it has helped shape many conversations between families. The system also led to the widely accepted definition of family companies as follows:
“A family company is one whose ownership is controlled by a single family and where two or more family members significantly influence the direction and policies of the business, through their management positions, ownership rights, or family roles.� Tagiuri & Davis
So why is the model so important? Essentially, the three circle model identifies three independent but overlapping groups, the business, the family and the ownership, and helping to define the roles that individuals hold within the family business. As a practical tool for families and advisers alike it enables people to create a picture of where individuals sit within the context of the family business, and to help identify where there are overlaps and potentially conflicting roles too. There are seven different groups within the model and each will have their own needs/wants from the family business. It can be used to highlight differences and enable conversations to be had and frameworks to be introduced to manage relationships and prevent areas of conflict arising. In fact, the longevity of the family business often depends on the introduction of suitable frameworks and structures to enable the harmonious interaction of all involved.
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