Generation to Generation

Gersick, Davis, McCollom Hampton and Lansberg, researchers and advisers in family business, wrote this as the standard academic treatment of how family firms develop over time.

The framework builds on the three-circle model, which represents a family business as three overlapping systems: the family, the business and the ownership. Any individual occupies one or more of the resulting seven positions, and the model explains why conflicts arise: a family member who is an owner but not an employee has different interests from one who is an employee but not an owner, and both differ from a non-family manager.

The book's contribution is adding time. Each of the three systems develops through its own stages, and the combination determines what the business faces. The ownership axis moves from controlling owner, through sibling partnership, to cousin consortium, and each transition multiplies the number of owners while diluting each holding and increasing the distance between owners and the business. The family axis moves through young business family, entering the business, working together, and passing the baton, driven by the founder's and children's life stages. The business axis moves through start-up, expansion and formalisation, and maturity.

The practical value is that it identifies which problems arise from which transition. A firm moving from sibling partnership to cousin consortium faces liquidity demands from owners not employed in the business, the need for formal governance, and dividend policy conflicts that did not exist before. A firm whose founder is approaching succession faces different problems entirely.

The book is academic and thorough. It is descriptive rather than prescriptive: it explains what a family firm at a given point faces without saying what to do, and readers wanting operating advice must supply it. It remains the reference framework in the field.