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Developing The Family Business System Published: Sunday, September 7, 2003 By: Dr. Manuel Ángel Morales

The dynamics of lifecycle events cut across individual, family, and organizational development. Just as there is a parallel development of the individual within the context of a family setting, there is also a developmental progression within the family business itself. Identifying these intersecting developmental patterns in individuals, family, and business increases the complexity of approaches that can be used when assessing developmental opportunities of the family business.

It is essential to learn how this type of organization evolves over time to help it to move through the developmental transition stages, in a relatively predictable manner.

The Greeks saw the future as something that came upon them from the back, with the past receding away before their eyes. Thus, family businesses should leave their past as it recedes and prepare for the future as it comes up behind them. A critical dimension to consider deals with the interplay of risks, opportunities and tasks for each developmental stage and the importance of managing transitional dynamics when planning any intervention.

There is a wide variety of developmental models and approaches for understanding the stages of a family businesses. One of these perspectives points to four stages: (1) the wonder period – fill with excitement and energy; (2) the blunder period – as the company grows and risks are taken, missteps are inevitable; (3) the thunder period – characterized by strong growth; and, (4) the sunder period – companies either grow and diversify, are taken over, or go out fo business. This growth and development has to be coupled with three overlapping systems related to the interplay of family, business and ownership.

Our research and work experience clearly show that a huge challenge is how to creatively manage and develop the ownership configuration, influenced by lifecycle forces and family decisions. Thus, family businesses can be structured with six ownership configurations that result form lifecycle forces and family decisions: entrepreneurship (the first generation); owner-managed (first-generation); family partnership; sibling partnership (the second generation); cousin’s collaboration (third generation); family syndicate (later generation).

The interactions of the family, the business, the individuals, the ownership and the market environment enhance each other’s development, but at other times they undermine it. Being aware of these dimensions, including the necessity of managing this various perspectives, competing interests, and often out of sync stages is essential for supporting the development of this type of businesses.

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