According to Rob Lachenauer and Omar Romman, establishing boundaries is a delicate, multigenerational balancing act, but one that strengthens a business by preparing it for the future.
Subsequent generations need boundaries to ensure the family business’s sustainability. Boundaries prevent confusion, define responsibilities and create an environment where reinvention is possible.
For the founding generations, however, structure can be daunting. Their success is often a product of their complete involvement and lack of boundaries, but the efficacy of this model lessens over time and with growth. Finding a balance means communicating a clear vision of the future without losing sight of the past and using boundaries to get there.
We sat down with Rob Lachenauer and Omar Romman to learn more.
How are boundaries and expectations related?
Rob: Boundaries can help us deal with expectations. When setting boundaries, families should consider where expectations come from and whether those expectations align with their expectations of themselves.
One of our clients, the 60-year-old CEO of a successful family business, was a trained physicist. His conversation with us was emotional because he felt that he had wasted his life. Despite being a successful CEO, his passion was physics. Decades before, he was forced into the business by his father. In the end, his success was measured on his father’s terms, not his own.
Many family members come in subject to somebody else’s expectations.
Omar: Dealing with incongruencies like these is part of generational succession – it’s the critical juncture when boundaries become paramount.
Typically, the absence of boundaries is a factor in the founding generations’ success. The lack of bureaucracy in decision-making – complete trust in the founder’s instincts – is often a defining feature of a successful first-generation business. Imposing boundaries, even in the name of business continuity, can be discomforting to a founder, hence the need for a strategic conversation.
“The other system that we see is what we call ‘the four rooms’. In essence, family members create effective boundaries around different roles and responsibilities in the family and the business…Everyone knows what decisions are made in each room and who is allowed to be in that room to make those decisions.”
How can families start the boundaries conversation?
Omar: It can be a daunting task, which is why we like to start by talking about the future. It helps if leadership is able to envision the business in 10-20 years when they are no longer in control. This perspective enables the creation of structures that will ensure its sustainability when they are gone.
Rob: Founders start a business free from obstruction. We often call that environment ‘the loft’ – a big room with no boundaries. When businesses are new, conversations and decisions typically happen in an ad hoc manner – family members might make business decisions at the dinner table and plan their family vacations at the office. There are no real boundaries.
The other system that we see is what we call ‘the four rooms’. In essence, family members create effective boundaries around different roles and responsibilities in the family and the business. There are four distinct areas that need boundaries in our four-room model: the business room, the board room, the owner room and the family room. Each of these rooms has distinct roles and leadership. More importantly, everyone knows what decisions are made in each room and who is allowed to be in that room to make those decisions.
Instead of building walls between themselves, family members work together to create boundaries between their many different lives. In an effective four-room model, for example, the discussion about opening up new offices doesn’t happen around the dinner table. Instead, it happens with the appropriate people at the appropriate time, most likely at the office with the management team. We see some version of the four-room system with successful multigenerational family businesses.
“…Reinvention, which is not unrelated to entrepreneurship, plays a significant role regardless of the generation. Successful multigenerational businesses often look nothing like they did when they were founded, which is evidence of the necessity for change.”
Do some boundaries come naturally?
Rob: Sometimes – for example, later generations often aren’t as involved in the operational side of the business as their predecessors were. Not everyone possesses an entrepreneurial spirit, but that doesn’t preclude them from being excellent owners. These family members are sometimes defined as stewards of the family business. They have a more hands-off approach but play a vital role in maintaining the family business’s value system.
That said, when it comes to the first and second generations, entrepreneurship is essential for success. Founders and their progeny must be hungry for the deal and passionate about the minutiae of their business. However, boundaries usually form over subsequent generations, and the structure of the business changes naturally.