Illustration 6 TWO COMPLEMENTARY LOGICS
Three Circles Framework
The three circle Venn diagram is synonymous with family enterprising and, as a go-to model since the mid-1980s, has reached consensus as a paradigm in this space. Much has been written about the three circles model, and a quick Google™ search will return plenty of variations on it (I encourage you to do that search). But while there are many variations, the overall message remains the same: that there are three independent and interdependent circles in family enterprise, and these circles are in constant flux, which helps explain the complexities and challenges that those involved in enterprising families face.
Like many easy-to-digest frameworks, the simplicity of the three circles model masks its complexity. Indeed, few in my experience have taken the time to appreciate the richness and explanatory power of this framework. Allow me to share my interpretation. But “my” is a mischaracterization, because the way I view the world has been influenced by many, as I explained in the Acknowledgements.
As with other frameworks, to really appreciate the three circles you need to draw it. So, do that: actually, take a piece of paper and draw three equal-sized intersecting circles. Label the circles “family,” “owners,” and “managers.” The reason the third is labeled “managers” and not “business” is that the former keeps the level of analysis the same across circles; they are all people. This may seem pedantic, but it really is the best way to explain the interaction of these three systems. I will call them “systems” for ease of interpretation, though many purists would argue that they are not in fact systems. That conversation is beyond this book's scope.
So, now on the paper in front of you, there should be three circles denoting family, owners, and managers. The order of the labels doesn't matter. However, I have heard that the pioneers of this approach prefer to put the owners in the top circle because, in their words, “the ownership system overrules both the family and the managers system.” But that conversation, too, is a distraction. The owner and family labels are easy to understand. The manager label takes some getting used to. To repeat, the managers are people as opposed to businesses, which are not people, though obviously operated by people. Managers manage on behalf of the owners, some, but not all, of whom will be in management. This is the fundamental distinction.
Now let's look at each of the systems/circles individually. Concentrate first on the owner circle. As a truly committed continuity model generation member, the first thing you need to do is add the word “stewards” to the word “owners.” So you have a new label, “owners–stewards.” Straightaway you have shifted the focus to continuity. Do the same for the other two circles/systems, adding “stewards” to their labels. Your Venn diagram now looks different. The simple relabeling of the three circles to include the word “stewards” makes the model more in line with the concept of continuity.
Back to the ownership circle, or more correctly, the owners–stewards system. What needs to be understood here, as you appreciate the richness of this model, is that there is heterogeneity within the ownership–stewardship system: different owners interpret their role as owners, and the utility that they receive from being owners, differently. So, while it is easy to simply relabel the system “owners–stewards,” this won't necessarily be interpreted similarly by the increasing number of individuals in the ownership system.
What continuity modelers do to explain the complexity of ownership is to draw a continuum. So, include a continuum in the owners–stewards circle. The anchors of this continuum, and here we borrow from the complementary logics argument introduced earlier, are a dollar sign and a heart. Or, more specifically, you may prefer to describe these as economic utility and psychological utility. Regardless, understand that not all owners are the same, so they can be plotted along this continuum; importantly, where they are located will change over time. Also understand that this is not abnormal. This is normal. The beauty of approaching the three circles diagram with this granularity is that it shines a light on the systems both individually and collectively. By simply understanding that owners will not be the same, that they will have different needs and expectations, is enlightening. Some will be there primarily for the dividends; others will be there for the psychological and emotional attachment that they have to the family brand, to the clan, to the reputation. It will vary by degrees. But it will almost certainly vary.
The continuity model approach, as will be demonstrated throughout this book, is more expansive than many of the other approaches most readers will be familiar with. The idea explained above, of using the ownership system to include the concept of owners–stewards and broadening understanding of the utility gained by individual owners, is a good example of this expansiveness. Hopefully, this first example will prepare you to expand your horizons in other ways, such as appreciating the differences between continuity modeling and succession planning, as we'll discuss.
Before leaving the owners–stewards system, let's consider other ways to make use of this fundamental dimension of family enterprising. Continuity modelers are knowledgeable about, but not obsessed by, what it is that they actually own (as we'll discuss in Part II, which covers the development of the Continuity Canvas). Using the owners–stewards circle to illustrate, consider for this exercise what it is that you own: what you own collectively (with others), individually, in joint venture relationships, in partnerships, or in legal entities such as discretionary trusts. Any conversation on these topics would be housed in the owners–stewards circle. At this point, I'll assume that you appreciate more fully the richness of this first of three systems, more so than before you started this exercise. So, as not to overwhelm, let's move to the family circle, which you should now consider the family–stewards circle.
Like the other circles or systems in the model, this one is in flux. But this is the system that distinguishes business families or family enterprises from other entities. Other entities have to worry only about ownership and what it is that they are responsible to manage. Importantly, the family–stewards system evolves into a family of families. That simple framing is important. The best way to describe that, or depict it figuratively, is by including smaller circles within the larger one you've drawn. You now have something that resembles a simple polka dot image. If only the underlying dynamics were that simple!
In contrast, the family of families is susceptible to many unforeseen and challenging events. Indeed, the contemporary family itself is hard to describe. As someone once said about family offices, “If you've seen one family office you have seen one family office”; but the same can be said about families. They are all the same but different, and each family must learn to understand and manage what makes it different from others. This is a challenge, to be sure. But this is not the place to examine in detail and categorize carefully the diverse family makeups across society; rather, here we will flag that a focus on continuity will involve an understanding that the family in family enterprise represents a convoluted, ever-changing dynamic. For example, there are societal norm challenges in the Western world based on different views of marriage than those of the previous generation; the official recognition of same-sex marriages and partnerships has challenged the previously held definition of “family”. Add to that the reality that a considerable proportion of marriages end in divorce, yielding many more single-parent and hybrid families than in the past, and the idea of labeling the system as family–stewards seems admittedly simplistic and idealistic.
But ultimately that doesn't matter. What matters is that no matter what constellation of family makeups constitute the family–stewards system, the focus is on ensuring that there is unity of purpose. Fostering a commitment to engage meaningfully with one another for the purpose of increasing chances of continuity: that's the right message to send those who populate whatever form