The most important concept that underpins the foundation of family business governance is known as the “three-circle model”. Introduced by Renato Tagiuri and John Davis at Harvard Business School in 1978, the three-circle model today serves as the primary organizing framework for all family businesses.
The three-circle model defines three distinct yet overlapping areas of a family business - specifically: family, business, and ownership. It highlights how the intersection of these three areas produce specific dynamics within a family business and its governance.
Each of the three circles of any family business has its own main form of governance; these are the family council (family), management team (business), and board of directors (ownership). The overlapping portions of the circles refer to how combinations of family, business, and ownership (or even all three) can and will intersect in a family business.
For this reason, there will be overlap between the members of the family council, management team, and board of directors. As such, all play important roles in elevating a family business’s standard of governance.
The three-circle model helps to align family business governance with needs. Through this model, important governance mechanisms and practices to be used to achieve major targets and goals can be implemented.
It can also be used to determine potential business risks, devise succession plans, and refine role distribution, among other governance-related functions.
By using the three-circle model as our foundation, we at Evoque Advisory will help raise the standards of your family business and thus set your business up for much success today and in the future.
Please contact us at enquiry@evoqueadvisory.com to request a consultation or address any other relevant matter.
