FAMILY DYNAMICS / GOVERNANCE

Talking Business with Tom Garrity: Where Does the Family Fit in a Family Business?

September 10, 2026

Over the past several months, I’ve written about succession, the next generation, family patterns, shared purpose, and raising children of character and independence.

There’s a common thread running through all of them. A family business isn’t simply a business that happens to be owned by a family. It’s a system. And if you spend all your time building the business while assuming the family will take care of itself, eventually that system gets out of balance.

That’s where a lot of good family businesses get into trouble.

More than 40 years ago, Renato Tagiuri and John Davis at Harvard Business School developed what has become one of the most useful ways of understanding family enterprise: the Three-Circle Model.

TAGIURI AND DAVIS, HBS, 1982

Every person in a family enterprise occupies one or more of those circles. Dad might be a family member, owner and CEO. A spouse hears all the stories, but neither works in the business nor is an owner. A daughter may work in the business but not yet own stock. A son may be an owner but pursue a career somewhere else. A non-family executive may have significant responsibility for the business but no ownership and, obviously, isn’t coming to Thanksgiving dinner.

Each sees the enterprise from a different seat. That matters because what makes sense from one circle may look very different from another.

The business may want to reinvest profits. Owners may want distributions. Family members may want jobs for the next generation. Management may want the most qualified person in every position. None of those perspectives is necessarily wrong. The problem starts when families pretend the differences don’t exist.

Most successful business owners understand that companies require investment. They invest in people, equipment, technology, strategy, leadership, innovation and culture. They hold meetings. They develop plans. They measure results. Nobody running a $50 million company says, “We really haven’t worked on the business in 15 years, but everyone seems to get along, so I think we’re good.”

Yet families sometimes operate exactly that way. They assume family relationships will remain strong because everyone loves each other. Love matters. But love isn’t a governance system. And Thanksgiving dinner isn’t a family meeting.

Strong business families work on being a strong family with the same intentionality they bring to building a successful company.

They build resilience so setbacks don’t pull them apart. They work toward alignment without expecting everyone to agree on everything. They develop emotional intelligence — the ability to recognize their own reactions and understand the perspectives of others. They learn to communicate, especially when the conversation is uncomfortable. They define a shared purpose and identify the values they want to carry forward. They develop leadership and reinforce a work ethic in each generation. They encourage innovation rather than requiring the next generation to simply preserve what the previous generation built.

And they spend time together, all in the spirit of unity. Family unity is the critical ingredient. By unity, I mean that the family agrees about why it is in business in the first place and how the family will participate and treat all stakeholders. Unity doesn’t mean the family is always on the same page on every issue or holding hands every day. Unity means the family will be able to disagree on some issues and debate others. Maybe not like each other at times. But unity keeps the family committed to the bigger picture and the means to get there.

Not every gathering needs an agenda, a facilitator and a PowerPoint deck. Sometimes fishing, traveling, cooking together or sitting around a fire does more for family cohesion than another meeting ever could. Relationships need deposits before you can make withdrawals.

The goal isn’t family harmony at all costs. Healthy families disagree. In fact, avoiding disagreement can be more dangerous than having it. I’ve seen families remain “nice” to each other for years while resentment quietly compounds in the background.

Eventually somebody sends the email. You know the email.

Strong families develop the capacity to disagree without damaging the relationship. They can talk about compensation, performance, ownership, dividends, leadership and succession without turning a business disagreement into a referendum on who Dad loved most. This ability doesn’t magically appear when the founder turns 70. It has to be developed.

There’s another reason this matters. A healthy family can create competitive advantages that other businesses have difficulty replicating. Patient capital. Long-term thinking. Deep relationships. Loyalty. Reputation. Shared history. The willingness to sacrifice short-term returns for a longer-term opportunity.

But those advantages only exist when the family itself is functioning well. An unhealthy family can turn those same characteristics into liabilities: loyalty becomes entitlement, history becomes baggage, long-term ownership becomes resistance to change and family closeness becomes an excuse to avoid accountability.

The difference isn’t the family name on the building. It’s the health of the family behind it.

For generations, business families have been told to professionalize the business. This is good advice. Build a capable management team. Create accountability. Develop strategy. Establish a board. Prepare future leaders.

But there’s another half of the equation. Professionalize the family’s relationship with the enterprise. Create forums for communication. Teach younger generations what ownership means. Talk about values, expectations and purpose. Spend time together. Address conflict BEFORE it becomes a crisis. Help family members become strong individuals who can contribute to something larger than themselves.

Because a family business is never just a business. It is a business, an ownership group and a family — operating simultaneously.

You can build an extraordinary company and still lose the family. And eventually, losing the family may mean losing the business too. The families that endure understand something simple: You have to build both.

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