Family businesses are among the world's most enduring and ubiquitous economic and social institutions. They are the foundation of social relations and communities; as humans evolved from hunting to agriculture, trading, and industrialization, family businesses evolved as well to make this possible. They take many forms. Our nature as human beings is expressed in how we act in our economic life, and family businesses are the most common manifestation of this. While the market view of commerce emphasizes economic behavior as individual choices and rational self-interest, this book takes the perspective that at the core of our economy are living families that seek and stand for so much more than financial profit.

This book presents the findings of a global multiyear project to understand the evolution and essence of large, global family enterprises that have succeeded over generations (a glossary of terms used in this book is at the end of Chapter 1). The research team interviewed family leaders from different generations of over one hundred large global families, each of which has thrived as a shared economic entity for more than three generations. These families are successful both as extended families and as businesses. By viewing the evolution and history of the largest and most successful global families, by looking back and looking forward, we can learn something about the nature of social evolution. We can also observe the human foundation of global commerce, which has largely been hidden from view. By hearing from families with great wealth and longevity, we can look beyond individual businesses to the positive foundations and use of economic wealth.

Long-Lived Business Families

My purpose is to learn from the best of the best family enterprises—extended families that have been in business for more than three generations—to uncover the internal secrets of their success. Their wisdom can help families just starting on this path—those moving into a second or third generation and facing significant challenges. Their stories can also be instructive to the millions of lawyers, accountants, bankers, coaches, consultants, board members, and other trusted advisors who offer resources to families to keep them on course. While the families my research team and I interviewed own complex businesses and other assets, I see them as families first because that is what the owners are. As family members, the owners have personal relationships, and these relationships are about far more than just running a profitable business. Such a family is more than a single business, or a business alone, because the family can start, buy, and sell many businesses as it adapts and grows across generations and because the family consists of many households related to and caring about one another and their future.

I am particularly interested in long-lived family businesses because, by their nature, a family business or family enterprise is fundamentally different from a public corporation. The owners of a public corporation have nothing in common, and no relationship, other than a desire for a profitable business. In a family business, the owners know and care for one another and share values as well as a desire for profit. This makes a huge difference to the enterprise.

The family has concerns beyond profit that go beyond the business. The family's business expresses a core aspect of the soul and identity of the family. Their values, reputation, role in the community, and impact are all considered in its oversight of the business. Because the business originates from a family, it also embodies and reflects the nature and personality of the owning family. All of this creates a different form of business, arguably one that is more complex and faces more agendas. When a family enterprise lasts for several generations, its family nature is a central feature of how it operates.

The book's title comes from the observation “You don't own a family business; you borrow it from your grandchildren.” When I first heard this expression, attributed to a fifth-generation family member of the Hermes family, I was blown away. Professionals spend a great deal of time helping older generations consider whom they want to “give” the business and their wealth to. This notion turns it around and views the family's enterprise and wealth as a gift from the future that current family members are able to use only with conditions. It catches the most important difference between family and nonfamily business: the awareness that current family members make decisions looking generations ahead. I have since learned that this worldview is adapted from Native American and other global indigenous cultures, who do not believe that land and natural resources can be owned by individuals; they are to be shared, valued, and preserved for the future. That mindset makes so much difference to the nature of families who have acquired large amounts of wealth, and how they see the role of their families as stewards of their family wealth.

My Journey

This project has been a dream of mine and a labor of love. After nearly forty years of teaching, research, and practice, since the dawn of family businesses as a field of study, I have wanted to do this project. A dozen years ago, after working only inside the United States, I began to wonder how families from other cultures were similar or different. I knew that family businesses emerged in every part of the world, and I wanted to see if the practices and tools professionals were suggesting to them were applicable in other cultures. Because my experience was only with US business families, I assumed that I had only a partial picture of the nature of these foundational social institutions. For six years I have traveled and met global families, many of whom became part of this study.

In many ways, my work today, after fifty years, was formed by my youthful passions. After graduating college in the late sixties, I was a founder of a project for runaway youth. We called it Number Nine, after a Beatles song. We helped runaway young “street people” call their parents and set up an intergenerational conversation, in a safe and neutral place, to talk about their differences. These conversations were my first experience of how values and behavior could be so deeply contentious and hurtful in a family. I also learned that parents had to allow their children to grow in their own way but also find some common ground with the values of their elders.

Later on, my career took me into the corporate world, where I worked with the effects of deep change in corporate cultures. This field of study looked at how each business developed its own culture, usually stemming from the values and vision of the founders. As businesses grew, the culture came under strain, and the businesses had to adapt but also retain important features of the founding culture. Many of these businesses were family businesses, though at the time that fact was not really known to me.

In the early 1980s, several groups—containing organization consultants, family therapists, lawyers, accountants, financial advisors, and family business leaders—began a seminal joint conversation. Talking across professional boundaries was unusual, and it led each profession to begin to view their work differently, through the eyes of others. Across the disciplinary boundaries, these groups found a common interest in family businesses. We realized that their nature, presence, and influence were largely ignored in professional business literature and practice. Right under our noses was a deeply important field of study that we had ignored. I attended some of these meetings, and two formerly disconnected strands of my life coming together. I saw that the nature and relationships of the family were at the root of family business and that the resolution of family issues was necessary for businesses to succeed over generations.

To undertake this study, I assembled a team of talented researchers and advisors, each of whom contributed time and ideas as well as conducted interviews and gathered the data. Their biographies are included in the appendix. To launch the study, we had the support of two global family enterprise organizations: Family Office Exchange and Family Business Network. They enabled us to develop our research model and contact families that thrived over multiple generations. After publishing our first working paper, we were fortunate to gain the support of Bank of America's Merrill Center for Family Wealth, which sponsored the working papers we produced each year.

The Research Perspective

The perspective that led to this project is somewhat different than the perspective of other family business research. It stems from practices called action research, research based not on discovering causal connections between family and business but upon asking how to help families in business be more successful and avoid difficulty. This research is not just for other researchers but offered to the families and their advisors to help them do a better job. The project is premised on several basic assumptions as follows.

Study the best, not the average or most troubled.

Management psychologist Abraham Maslow, one of my mentors, noted that you would never learn very much about healthy people if you only studied those with mental illness. Similarly, there is a limited amount one can learn from studying family businesses that have failed, collapsing amid conflict and poor business practices. That doesn't necessarily help to see how to create a climate for success. If you avoid failure, you don't necessarily achieve success. There's more to it.

You don't have to look too far to find an article about how to destroy a family business. Using business relationships to redress past family wrongs or to serve endless family financial needs can undermine even the strongest business. Natural forces of business maturing and innovation take down many more. It is much harder to sustain thriving family enterprises across generations. How can a family increase its chances of long-term success?

The field of management has benefited greatly from studies of the most successful businesses. There are many books by business leaders; these books are inspiring but also a little suspect as they share only one side of their story and do so in retrospect. Personal success stories are a staple of business and family business literature. They are inspiring, but a more dispassionate view is also needed.

A number of research and theory-based books have also tried to distill the wisdom of long-term business success: Thomas J. Peters and Robert H. Waterman, Jr.'s 1982 breakthrough book, In Search of Excellence;¹ James C. Collins and Jerry I. Porras's Built to Last² a decade later; and many follow-up works. These volumes are my guides to a form of research that is called “appreciative” because it looks at what is good about business and how it can be enhanced.

Appreciative inquiry, an approach designed by David L. Cooperrider and Diana Whitney,³ has led to some of the most useful and practical research on the nature of successful companies. In this approach, a researcher or consultant begins with what the business or entity is doing that works well and expands upon that, rather than fixing problems. Families find this perspective both attractive and useful. This is the view taken by this entire project.

The research can be labeled “narrative sociology.” By presenting their stories and experience without evaluating, I uncovered the collective experience of long-term global generative family enterprises, those family business and financial operations that succeed over multiple generations. Throughout the course of the book, I present what these families actually do. This is nonjudgmental and nonevaluative. But since I am studying the families that are most successful, I cannot escape some aspects of value judgment. By focusing on long-lived families, I necessarily call upon reflections about what elements of their experience teach families how to survive for the long term and help them anticipate and even avoid disaster.

Family is the foundational unit of study, and businesses are vehicles to support family goals and values.

It is to be expected that business researchers look at business as their basic unit of study. The rise and fall of a business is their focus, including the role of a family as owners and operators. But what if the family sells the business and moves on to other pursuits? Is this the end? In this research, I view the family as the basic unit of study and how businesses and other assets create resources for the family on its journey. Taking this view, I look at the people and the journey across generations, as family members pursue different opportunities and paths and are still able to remain together as aligned partners. With this perspective, it becomes clear that their goals are more than just running an effective business and that these wider goals are essential to understanding these families.

Success takes place over time and must be viewed as an evolutionary process, a journey of resilience and reinvention.

Most research represents a “snapshot,” a view of a family or business taken at one moment in time. But evolution of a family takes place over time and across generations, with the continuing challenge of preserving the legacy wisdom and also adapting and finding new paths forward. To understand families, research must look at its evolution, how the enterprise solves successive problems and overcomes challenges at different stages of development. Family enterprise is dynamic and evolutionary. Their stories are movies, not snapshots.

I present stories about the evolution of these generative families as well as their businesses and other family enterprises. My focus is on creating a picture of the diverse ways that generative families resolve the common challenges facing a family enterprise over generations. Because of the diversity of such families, I am not able to make quantitative comparisons. Instead, I report what these families do, without judgment, and try to ascertain common patterns.

My goal is more than just telling stories, however. I also want to document the evolution and nature of a unique social institution—an extended family that is joined not just by blood but also by a legacy that leads them to be owners and stewards of often large business and financial conglomerates. While their influence can be seen in their businesses, this research goes behind the business to look at how the extended families create, sustain, and influence their businesses and role in society.

If you've seen one family business, you've seen one family business.

Much research, unfortunately, is in a hurry to generalize and make causal connections to understand family enterprise. But I believe that the diversity of global family enterprise is so great that there is no way to speak of family business in general as a single entity. We can articulate common patterns, but we can't really get to the point where saying that one specific action “causes” success. But if we listen to enough families, we can see that if something is done by so many families that are successful, it may be a good thing to try that in an earlier-stage family as it tries to survive for one more generation.

Overview of the Book

The book is organized to present the evolution and nature of the global generative families that my research team and I studied. There are four parts:

• Part One: The Wisdom of Generative Families offers an overview of the long-term history of family enterprises. I suggest that the recent challenges facing family enterprises are unique and unprecedented. I introduce the concept and nature of the generative family, the focus of this research.
• Part Two: The Evolution of the Resilient Family Enterprise looks at how the family evolves as a shared enterprise over generations. I present a “movie” of how generative families evolve over four or more generations and then focus on the business; how these families change over generations; the elements of the unique family enterprise culture that characterizes generative families; and the origin of the role of steward that emerges in families that oversee a portfolio of diverse ventures.
• Part Three: Inside the Family: Family Governance to Create a Great Family focuses on an area of activity that is unique to a family enterprise: the organization, governance, and activity of the family separate from the business. It presents the key elements of family governance, including the family assembly, family council, owners' groups, and the board, and how they are all tied together in a family constitution, a master agreement that defines who the family is, what it does, and how it works.
• Part Four: The Rising Generation: Sustaining the Future discusses how the family takes up the special task of preparing family leaders to sustain and move the business into new generations.

To the Reader

This research project is intended to help families who are either beginning their journey across generations or finding themselves enveloped in increasing complexity in the form of internal family disagreement and external global change. If you look ahead to the future, the experience of generative families can help you design your own path, as you pick and choose from what other families have done.

This book is also designed to help family advisors of every professional designation take a broader view of the families they serve and, in so doing, teach and advocate for their families to adapt new practices that are designed with their future in mind.

Each chapter contains stories and narratives from the families in the study. These stories and narratives explain the many ways that generative families act, grow, change, and thrive. There are many paths, but I believe the general themes about mission, values, governance, and development of the next generation are essential building blocks of multigenerational success.

My intention is for the stories in this book to be of practical use for families that desire to move into generative territory. If you are a member of such a family, this book may help you make decisions and develop practices in earlier generations to orient your family to potentially become a long-lived generative family. To do that, at the end of each chapter, I offer a section containing tools and activities that apply the learnings that were presented. It is entitled “Taking Action in Your Own Family Enterprise.” Each one suggests ways to apply practices from the chapter to your own family enterprise. The activities can also be used by advisors who are helping families.

Whether you are a member of a new family business, a successor at one that has been successful for several generations, or a family advisor or employee, learning about generative families will help you look ahead to your future. I am excited to invite you to go on this journey with me and to celebrate and learn from the most valuable, successful, and impactful family enterprises.