MON 21ST MAY 2018


Bringing the family business community together

The 6 Practices Of Successful Families In Business

20th July 2015 Robert Holton, Vice President, Private Client Group, Cleary Gull

By re-positioning the family enterprise as a source for values, rather than simply a source of wealth, we explore a practical framework for families to pursue the success of their family, their firm, and their future.

In order to succeed in business, both academic research and professional experience suggest families may be well served by focusing on three complementary areas – the family itself, their firm, and their collective future.

Finding and maintaining balance in those areas may become even more critical moving forward, as founder- or family-run businesses are on pace to grow from 15% of the world’s large enterprises in 2010 to nearly 40% by 2025.

In this piece, we attempt to provide a framework of six practices shared by many successful families involved in business, with working definitions of each practice. We also share examples of how families have achieved success on a given issue, and the potential consequences of failing to address a given area. While each of these practices may be necessary for success, they should not be viewed as sufficient on their own, because market conditions, family dynamics, and other outside issues can interfere. While these practices represent a few of the foundational issues faced by families seeking success, we recognize there are many other factors which can also have a significant impact.

The proposed framework presented here is intended to inspire conversation and cooperation, rather than being rigid or restrictive.


External focus
Internal expertise


Family: Unity

Extensive research on organizational culture has been devoted to investigating high performing teams, which produce greater results than the sum of their members might suggest.

Applying similar techniques to create a highly effective family unit suggests the need for the same focus on unity, the cohesion of the group. The practice of unity is demonstrated by the extent to which a family has an identifiable and intentional family culture, family values, and a cohesive family story. This is not to suggest all family members have the same story, but they can all be parts of a related story. Musically, this would mean not all members are playing the same melody; rather they all are playing a part of the same symphony. This is the sense of “togetherness” a family exhibits, involving a willingness to sacrifice for one another, support one another, and challenge one another to become better.

Families often are instructed to address internal communication issues, but before a family can work on how they communicate, they need to work on why they care – this is what the practice of unity addresses.

Unity in this application is based on the strength of individual relationships and a clear sense of familial interactions. Built over years of common striving, the cohesiveness of the family flows from the ability of all members to engage one another respectfully, listen to one another intently, and care for one another deeply.

Cohesiveness can be built over family dinners, family vacations, and quiet conversations. It can be built in telling stories and sharing experiences. Research on highly effective teams being conducted at the MIT Media Lab3 indicates a number of signals of effective communication, which we can adapt for family interactions.

Signs of Effective Family Communication

  • Everyone in the family talks and listens in roughly equal measure, keeping contributions short and sweet. No one member dominates due to familial or organizational role.
  • Family members face one another.  Effective communication is demonstrated by energetic conversations and gestures.
  • Family members connect directly with one another—not just with the “head” of the family.
  • Family members carry on constructive conversations beyond formal family meetings.
  • Family members periodically take a break, go exploring outside the family, and bring information back

Adapted from: Alex “Sandy” Pentland, “The New Science of Building Great Teams”, Harvard Business Review

In addition to paying attention to how communication occurs, attention must be paid to what is being communicated by action. In this way, unity is about what children see their parents and grandparents do, more than what they are told they should do. A unifying history can be communicated by the stories shared, the actions undertaken, and even the objects of our lives.

Most families face challenges at some point. Early childhood and adolescent interactions can have positive or negative implications, and damage done can be repaired, though some issues may require professional help. Dean R. Fowler, Ph.D., who explores the psychological dynamics behind families involved in business in his book Love, Power and Money, notes that families can “develop rigid and unbreakable patterns that force them to repeat the same communication failures time and again.” When such patterns exist, he suggests it is critically important to involve an outside professional facilitator to improve communication technique before tackling critical issues.

Absence of unity in the family typically is exhibited in one of three related ways. When genuine respect and trust are lost, families with forceful leaders might function out of obligation. In the same circumstances, a family with a more vocal next generation might be consumed by opposition. If there are years of built up mistrust and disrespect, families ultimately devolve into apathy.

Any or all of these might be present in a family lacking cohesion. And these issues also can be addressed and corrected, particularly with the assistance of a family counselor or organizational psychologist. Failure to address issues of cohesion can lead to ineffective decision-making and significant wasted emotional energy as members of the family manage one another, rather than managing the family enterprise.

Family: Separation 

A complementary practice to building family unity is effectively managing the separation of roles in the family and in the firm. This effort involves effective communication around business roles and issues by specifically addressing how they are separate from family roles and issues. The creation of a family council has been shown to assist in addressing comprehensive family issues, while remaining expressly distinct from the firm’s advisory board.6 As an example, separation is present when a family can materially disagree about a direction for the firm, yet still come together joyfully over family holidays.

Separation as a practice may be achieved by intentionally designing a formal family council, or more informally having family meetings to address familial issues. These can be effective forums for the expression of ideas and emotions important to family members. In contrast, these forums may not be ideal for the discussion of financial topics related to firm performance. Financial issues related to the firm might be addressed more effectively within the firm governance structures, rather than a family council.

Creating a forum specifically designed for expressing family values and loyalties may lessen the incentive to express those issues within the firm. As an example, job security may not be a necessary expression of family loyalty. By explicitly separating firm roles from family roles, a family member’s value is not defined solely by the contribution to the firm. Rather, each family member’s foremost contribution is to the family unit, which may allow for a far greater appreciation for a more diverse set of personalities and talents within the family.

Effective governance has been shown to be a key operating principle to ensure a balance of unity and separation for the family and the firm. John Davis, a senior lecturer at Harvard who has investigated these structures for many years, captures this idea with three overlapping circles.  He suggests the outcomes of good governance are three-fold:

1.Clarify roles, rights, and responsibilities for all members of the family and the firm.

2.Encourage family members, firm employees, and firm owners to act responsibly.

3.Define and control appropriate family inclusion in business discussions.

Failure to exercise separation may lead to three detrimental impacts on the family and on the firm.

First, lack of separation may create confusion both in the family and in the firm. Non-family members of the firm may not have clarity on appropriate reactions and, as a result, tailor or even manipulate communication significantly.

Second, when clear separation does not exist, there may be a greater risk of conflation; work identities and family identities may become emotionally merged. As an example of the implications in such a setting, failure to promote a child might be seen as the emotional equivalent of rejection. This leads to a number of less than ideal decision-making processes for the leader, the child, and involved non-family members.

This non-ideal decision-making process in turn may lead to the third issue - inefficiency within the firm. The lack of decision-making clarity for non-family members can lead to discouragement, and ultimately, their departure.

Firm: External Focus

Successful families often are highly effective at engaging and leveraging external resources for achieving family and firm goals. On a firm level, this can be demonstrated by actively listening to outside expertise from clients, vendors, or other professionals. On a family level, this is shown by actively soliciting advice from family members and professionals on handling issues of family governance, generational transitions, and other family matters.

Successful families are open and externally focused, responsive to the world around them, and proactive about positioning the family and the firm for future success.

The concept of openness to outside input has been studied at length at the MIT Human Dynamics Laboratory, and they characterize effective decision making by the term “social exploration”, finding the best decisions are not necessarily the result of finding the best people or the best ideas; rather it is the diversity of opinions that matters:

“Explorers winnow down the ideas they’ve gathered by bouncing them off other people to see which ones resonate. Generally, those ideas are micro strategies—examples of actions that might be taken, circumstances conducive to the action, and possible outcomes. Then, by assembling a great set of micro strategies, social explorers make good decisions.”

For the firm, examples of external focus include active solicitation of feedback from vendors and clients, born out of a genuine curiosity about how clients perceive and want to interact with the firm. Engaging vendors in conversations about trends, partnerships, and succeeding together, rather than treating them as competition for limited dollars, may also lead to more successful outcomes. Building an effective advisory board for the firm may help leverage outside talent for issues as diverse as market knowledge, corporate finance, operational expertise, and strategic planning.

For the family, external focus involves effectively leveraging the trusted advisors to the family, including attorneys, investment specialists, accountants, and all related professionals. These trusted advisors can be effective when working collectively on the issues and opportunities for the family, requiring coordination and transparency. Successful families often find those professionals they can trust and then open up fully to share vital information that can help them to achieve results. The right advisors tend to embrace the opportunity to work collaboratively to achieve the family goals rather than competitively against one another.8

In contrast, internal fixation for a firm or for the family often is born from a heightened sense of risk, leading to misplaced effort to “protect” the firm or the family from outside impacts. This may be exhibited by closed communication, with restricted amounts of information shared very selectively. Vendors may be treated as competitors and advisors pitted against one another to ensure “unbiased” advice.

This most often leads to almost an “echo chamber” effect – the only information consistently reaching the family or the family leaders may be the whispered reflection of their own fears, reinforcing the perception of risk. “Tight social groups often experience echo chambers, since their members tend to share information, and there may be social pressure to hold the same opinions.”

This effect can be exacerbated in families operating businesses with a significant legacy, especially when the effort to hold on to greatness actually leads to decline. Many of the symptoms of such a decline involve issues around communication:

Symptoms of an Organization in Decline

  • Reliance on the way things have been
  • Carrying on
  • Insulated perspective
  • Historical focus
  • “We’re good enough” attitude
  • Maintaining
  • Closed, defended corporate culture

Daniel Schroeder Ph.D., “Staying Great: Encouraging Organizational Renewal”, copyright 2009, Organization Development Consultants, Inc., used with permission

The echo chamber effect can happen in any cloistered group, but the impact on families in business can lead to a tragic irony – the effort to preserve the family from outside risks leads to an internal fixation, which may make the family far more vulnerable to those risks. This is like driving a car where the driver, for fear of hitting anything, boards up all the windows. Families are very unlikely to succeed without timely and accurate input, and open communication may be the most effective and efficient method to gain such information.

Firm: Internal Expertise 

Research suggests the most effective and longest-lasting family operated businesses are able to develop their internal resources to maximize effectiveness, exhibit best-in-class operational systems and are led by highly professional management, regardless of family affiliation. We can capture this idea in the term “Professionalization”. Professionalization of the firm may help to ensure the strength of internal management, which assists in regulating the family influence and often can lead to a healthy dynamic between firm and family goals. 

Professionalization may take many forms. For our purposes, we will focus on just two related approaches - family members gaining outside experience and bringing outside experts into the firm. Significant anecdotal evidence suggests that requiring family members to gain experience and a set of skills outside the family firm can generate new perspectives and enhance the family’s exposure to current management practices. When such experience is gained with an industry leader, or a firm with best-in-class management, there may be significant additional advantages. 

Effective firms often broaden their pool of talent by considering non-family members as well. These complementary efforts again may help bring into balance the goals of the family and the firm. A recent McKinsey report on enduring family businesses captured the challenge this way:

“Family businesses, like their nonfamily peers, face the challenge of attracting and retaining world-class talent to the board and to key executive positions. In this respect, they have a handicap because nonfamily executives might fear that family members make important decisions informally and that a glass ceiling limits the career opportunities of outsiders. Still, family businesses often emphasize caring and loyalty, which some talented people may see as values above and beyond what nonfamily corporations offer."

When a firm fails to professionalize, management approaches may demonstrate parochialism or territorialism. Parochialism values a very limited set of goals, rather than seeing the broader context. The phrase “a Mom and Pop firm” when used with negative implications captures this limited view of the firm. Parochialism can be characterized as an intentionally limited viewpoint.

Territorialism can be characterized as selfishly limited viewpoint. A commonly seen example of territorialism is a set of siblings operating semi-autonomously from one another and from the overall firm. One area may fail to upgrade to modern practices, as an example, because that area “belongs” to one of the siblings. A spirit of “You run your department and I’ll run mine” clearly is detrimental to the whole. There are very successful examples of siblings dividing the firm and conquering their markets, but this more likely occurs when siblings exhibit the other positive attributes discussed above. In contrast, rigid territorialism often can lead to unnecessary competition for internal resources, and ultimately, may lead to vulnerability from external competitors. 

Future: Development

James Hughes, the author of the well-respected book Family Wealth – Keeping It in the Family, maintains there is no greater resource for the family than the power of the next generation.

A generational focus may help align family resources to ensure generational development, continuity of the family, and opportunity to exponentially achieve success. Such a focus can be illustrated by the simple question: What is the purpose of an apple tree? “To grow apples” would be an obvious answer. “To grow more apple trees” may be a more complete answer.

As an analogy, the focus on growing new trees represents a shift from a single source with limited output (one apple tree) to multiple sources with diverse output (the orchard). Applying this analogy to a family involved in business, viewing the family-operated firm solely as a source of wealth is an “apple tree” viewpoint.  Viewing the firm as a teaching experience for a set of values, which can lead to future successes inside and outside of the firm, is an “orchard” viewpoint.

Analogies alone do not change behaviours and may have limited practical application; however, this approach may help conceptualize the more nebulous term “generational focus”. This construct has the potential to both honour the current generation of founders or leaders of the firm and embolden the next generation to grow this firm, or another firm, to new levels.

Examples of practices which indicate a generational focus include discussions around career development, especially development outside the firm. Many successful firms require any family member to gain significant outside experience before being considered for any executive position in the family-controlled business. These requirements support efforts around separation of business and family roles.  

Families with a generational focus often spawn multiple businesses, rather than focusing on one business effort. Recent research on this issue has shown successful families move from focusing on the longevity of one business, to more of a family entrepreneurial orientation focused on the entire family enterprise and all aspects of family wealth.

Generational focus also involves an active effort to educate the next generation, both in formal educational settings and in less formal experiences such as career path choices or conversations. A generational focus may allow for ideas such as divestment from one business and investment in another, when the concept of “the family business” is replaced by separate notions of the family and the business.

Many discussions arise in our practice, and those similar to ours, from a misplaced focus around generational transitions. Too often, returning to our analogy, the focus seems to be on how to pass apples to the next generation and ensure the next generation eats them properly. An example may be highly rigid trust documents, which demonstrate a general spirit of “telling” the next generation how to grow. Such an approach can be characterized by the language of scarcity; assuming a competition for a limited set of resources. Such conversations often include excessive use of words such as “protection”, “preservation”, “budget”, “spending limits”, “risk”, “failure”, and “loss”.

Successful families often exhibit far more openness, instead beginning with a philosophy of abundance; assuming an unlimited potential for discovery of new resources. These more constructive conversations revolve around investing in the future, seeking learning opportunities, and embracing trial and error as a growing process. In the language of the apple tree analogy, the conversations are more about how we tend the orchard to ensure ongoing viability, rather than on how we preserve the apples.

Future: Innovation

The importance of innovation at the firm level may be a truism of modern business. Leveraging the family members’ involvement in the firm to develop a focus on innovation can be a tremendous opportunity when executed effectively. Entrepreneurially oriented families by definition embrace change and cultivate new approaches. This may mean new approaches to the existing firm, but it also may mean new products or entirely new businesses. The family value of entrepreneurship is passed from generation to generation through the dynamic interaction of the family and the firm.

The single most powerful family value we can pass from one generation to the next is the capacity to create a more positive future.

An entrepreneurial orientation is present in an environment where questions are actively encouraged, communication is open and clear, resources are effectively deployed to develop new ideas, and failure is embraced as a means to improve. Historic and current examples of innovative firms supply a template for creating such a focus for the successful family.

Thomas Edison’s Menlo Park and the modern campus of Google reinforce the type of dynamic, responsive environments that generate and reward collective achievement.

Families may be uniquely suited to cultivate this spirit of being part of an effort larger than the individual members. Significant research into this unique aspect of successful family businesses still remains to be done, but the concept of family entrepreneurial orientation does suggest that firms operated by families who actively embrace this approach may significantly increase their opportunities for success.

Families, like firms, can be subject to calcification, made rigid by adherence to outmoded approaches and outdated thinking. Firms tend to lose their footing in the market when they become too large or too slow to respond to a changing market, or become overly protective of a fading market position. These environments often are characterized by efforts at marginal improvement, dominated by a philosophy of scarcity. Returning to our apple analogy, the self-limiting mindset may reflect the following line of thought – “We sell Red Delicious apples. The Red Delicious apple market is exactly this size. We need to beat our competitors to get a percentage more of the Red Delicious apple market.”

Such an approach fails to prompt critical questions. For example: What other produce might be grown and sold from existing infrastructure? How are markets dynamically changing due to outside forces? How are market players revolutionizing the industry through innovation? Successful families ask critical questions like these, not only of their firm, but of themselves as individuals and as members of the family. 

Recent research on innovation in the sciences has suggested one particularly effective model – intergenerational innovation.  In a study of more than 60 years of science journals, the number of transformative new ideas was greatest when a scientist in the first decade of his or her career proposed a novel idea while working in a team setting with a final editing author who was in the later years of his or her career.

Such a model may suggest similar success in a family setting. Rather than a model of succession planning, which can be defined as one generation departing as the next generation arrives in a leadership role, more transformative ideas may be generated by a model of continuity planning. This approach suggests multiple generations collaborate in the process, with the older generation nurturing innovation in the rising generation, while also providing valuable experiential insight. In this model, the generations work as “co-authors” to the family success.

Ultimately, successful families are not defined by a business, and the financial success of the business is only one part of a dynamic whole. These families are forward-looking, and in contrast to the earlier example of an organization in decline, they are in the midst of constant renewal:

Evidence of Renewal in an Organization

  • Pursuit of dynamic organizational systems
  • Reawakened and revitalized
  • Willingness to take risks
  • Change-friendly mindset
  • Process improvement orientation
  • Rekindled entrepreneurial spirit
  • Open, flexible corporate culture

Daniel Schroeder Ph.D., “Staying Great: Encouraging Organizational Renewal”, copyright 2009, Organization Development Consultants, Inc., used with permission



Unity and separation balanced within the family, external focus and internal expertise pursued within the firm, and generational development and innovation embraced for the future are six practices of successful families.  A family can achieve great success in business without addressing these areas, but such success may be short-lived or achieved at the expense of family well-being. The over-worn cliché, “shirtsleeves to shirtsleeves in three generations” may be the result of just such a failure.  Any organization seeking long-term success must be focused on the health and well-being of the individuals as well as that of the relationships between those individuals. Our families can be cultivated and managed with concepts similar to managing many top performing teams. The collective achievement of such a group has the potential to far outshine the possible accomplishment of any one individual. The real accomplishment of family success may very well be the power to build a brighter future for all involved.


About the Author - Mr. Holton is responsible for client relationship development and client service in Cleary Gull’s Wealth Management Group. He advises individuals, closely held business owners and organizations on effective and risk-sensitive financial management of their assets. As a focused advisor to his clients, he understands the unique complexities inherent in wealth management, business ownership and succession planning issues.

Prior to joining Cleary Gull, he was Vice President of La Bri Group of First Allied Securities with a specialization in alternative investments. Mr. Holton previously was Vice President – Sales and Marketing and equity owner of a specialty recruiting firm in Milwaukee.

He earned his Bachelor of Arts degree from the University of Minnesota – Twin Cities and his Master of Business Administration from Marquette University. He also earned the Certified Wealth Strategist® designation from The Cannon Financial Institute.

Mr. Holton is currently a board member for The Center for Teaching Entrepreneurship. He is also a member of the Milwaukee Estate Planning Forum, as well as the Society of Financial Service Professionals.




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