Three Circle Model
Table of Content
No. Details Page
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1.0 Introduction 1.1 Definition of Family Business…………………….………. 2 1.2 Three Circles Model……………………………….………. 2
2.0 Key players in the family business……………….……….. 3
3.0 Potential conflicts (current and future)……………………. 4 4.0 Suggestions and solutions…………………………………. 5
5.0 Conclusion………………………………………………...…. 6
6.0 References……………………...……………………………. 7
1.0 Introduction
1.1 Definition of Family Business There are various definitions of family business and different authors would construct different elements in their chosen definition. Family business should be a business in which one or more members of a family to have significant ownership interest. Out of the numerous definitions I have read, I found the one stated by Poza to be relatively appropriate. It says,
“A company is considered a family business when the dominant decisions in the business are controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family.” (Poza, 2007)
1.2 Three Circles Model
The three circles model was originated by John Davis and Morris Tagiuri in 1980s (Hoover & Hoover, 1999). The model is made up of three interlocking and intermingling domains, namely family, business and ownership. It depicts how these three domains overlap. The diagramme below shows the three circles model.
FAMILY
BUSINESS
OWNERSHIP
1
2
3
4
5
6
7
There are several multiple and overlapping relationships in this model. Everyone involved in a family business falls within one of the seven sectors created by the three circles. For category 1 to 3, these are individuals who have only one connection with the business – they are family members, owners or they are employees of the business. Category 4 comprises family members who work in the business but who do not own shares. As for
No. Details Page
-------------------------------------------------
1.0 Introduction 1.1 Definition of Family Business…………………….………. 2 1.2 Three Circles Model……………………………….………. 2
2.0 Key players in the family business……………….……….. 3
3.0 Potential conflicts (current and future)……………………. 4 4.0 Suggestions and solutions…………………………………. 5
5.0 Conclusion………………………………………………...…. 6
6.0 References……………………...……………………………. 7
1.0 Introduction
1.1 Definition of Family Business There are various definitions of family business and different authors would construct different elements in their chosen definition. Family business should be a business in which one or more members of a family to have significant ownership interest. Out of the numerous definitions I have read, I found the one stated by Poza to be relatively appropriate. It says,
“A company is considered a family business when the dominant decisions in the business are controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family.” (Poza, 2007)
1.2 Three Circles Model
The three circles model was originated by John Davis and Morris Tagiuri in 1980s (Hoover & Hoover, 1999). The model is made up of three interlocking and intermingling domains, namely family, business and ownership. It depicts how these three domains overlap. The diagramme below shows the three circles model.
FAMILY
BUSINESS
OWNERSHIP
1
2
3
4
5
6
7
There are several multiple and overlapping relationships in this model. Everyone involved in a family business falls within one of the seven sectors created by the three circles. For category 1 to 3, these are individuals who have only one connection with the business – they are family members, owners or they are employees of the business. Category 4 comprises family members who work in the business but who do not own shares. As for
References: Gersick K. E., Davis J. A., Hampton M. M. and Lansberg I. (1997). Generation to Generation: Life Cycles of the Family Business. United States of America: Owner Managed Business Institute. pp. 4-7, 29-34, 57-61, 103-109. Hoover E. A. and Hoover C. L. (1999). Getting Along in Family Business. London: Routledge. pp. 41-60, 185-191 . Leach P. (2007). Family Business Dynamics. In: Leach, P. and Perry, S. Family Businesses: The Essentials. London: Profile Books Ltd. pp. 19-49. Neubauer F. and Lank A. G. (1998). The Family Business: Its Governance for Sustainability. London: Macmillan Press Ltd. pp. 3-21. Poza E.J. (2010). Family Business. 3rd ed. Canada: South-Western Cengage Learning. pp. 4-25. Vermont Family Business Initiative. (2011). Revisiting the Family Business 3-Circle Model. Available: http://fambiz2point0.wordpress.com/2011/01/31/revisiting-the-family-business-3-circle-model/. Last accessed 17th Feb 2011.