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The Three-Circle Model of the Family Business System

Monday, July 11, 2016 - 05:50

THE Three-Circle Model of the Family Business System was developed at Harvard Business School by professors Renato Tagiuri and John A Davis in the 1970s. It describes and explains the family business system at a single point in time. This makes it easier to understand the important characteristics of the business, family and ownership group and how these groups interact to influence the performance of the business and the family. It has become the dominant paradigm for understanding family business systems worldwide.

This framework clarifies, in graphic terms, the three interdependent and overlapping groups - family, business and owners - that comprise the family business system. As a result of the overlap of these groups, there are seven interest groups, each with its own legitimate viewpoints, goals and dynamics. According to Prof Davis, the views of each sector must be respected and integrated in order to set direction for the family business system. The long-term success of family business systems depends on the functioning and mutual support of each of these groups.

Says Prof Davis: "It is durable because it is simple, has immediate face validity and captures enough complexity in family business systems to help researchers, academics, managers and families think more clearly about the strengths and challenges of these systems."