Family Business: Transitioning from Small to Large Family

Paolo Morosetti

The transition from small to medium and large size is a recurring theme in academic and business debates, on which much reflection and writing exists. The subject’s popularity is also due to the dissemination of exemplary cases that capture the imagination. Ample literature is available on the factors that facilitate such a transition, including growth strategies and the organisational and leadership models to adopt. This research motivates individuals who pursue this ambition or who have no other option but to grow to survive a competitive market.

Another dimensional transition is little discussed, despite being of great interest in family business: transitioning from a small family group to a medium or large family group. Medium groups contain 15–30 family members, while large ones have over 30 family members. The timing of these dimensional transitions depends on demographic dynamics: fertility rate, life expectancy, marriages, separations, and deaths. These are slow cycles that can last a generation, unless two or more independent entrepreneurial families ally themselves.

I still remember a lunch with three brothers. When it came time for dessert and fruit, one of them took an apple from the basket and divided it into three equal parts, placing them on the plate with geometric precision. Then, he took another apple and divided it into six equal parts, which he arranged on another plate, but the geometry became less linear. Next, he took another apple and divided it into thirteen parts of different sizes, which he placed on a third plate in a completely disordered way. The first plate stood for the second generation—that of the three brothers. Things had been simple. The second plate was the third generation- small tensions were suppressed due to the presence of the parents. The last plate, the fourth generation, represented the confusion in place. The brothers realised that a new melody had to be composed, with modern instruments chosen, roles assigned, and a lot of practice applied before it was staged. But no one knew how to proceed in gathering the whole orchestra – 22 members – beyond spouses and partners.

The metaphor convinced the other two brothers that it was time to intervene after hesitating for many years.

Research and field experience offer interesting insights for those who want to face these kinds of dimensional leaps in a timely and competent manner. Five aspects are offered below, outlining the correct posture in the face of change.

Dialoguing without taboos

The growth of the family size is pursued with a firm step when the climate and culture within the family allow for open dialogue, without allusions, reticence, suspicion, or ambiguity. To avoid betraying its purpose, such dialogue must also be respectful and consistent, but above all, protected from those who see it as a means to adopt opportunistic or tactical behaviours or even to reinforce their position of power within the family. The responsibility for initiating open dialogue lies with the leadership in command, who must act promptly and demonstrate wisdom, especially in the initial stages, to embark the entire family on a journey whose destination is clear but whose precise point of arrival may not yet be evident in the beginning.

Creating awareness

Change occurs when people become aware of its necessity. Otherwise, there are big announcements but few concrete results. To spread awareness, dialogue can be moderated by third-party professionals who bring complementary sensitivity and skills to those present in the family. Before rushing to make decisions, families must give time enough to people to reflect and study the experiences of those who have already been through it, either successfully or unsuccessfully. Storytelling skills are needed to impress a family’s emotional dynamics. Furthermore, to be ready to make the leap, the family mission and vision must engage the younger generation. If not, it is better to stop and review them since they are statements that help shape the narrative of change, looking towards the future and breaking free from the behavioural and emotional patterns of the present, which act as invisible barriers.

Developing proprietary know-how of governance

To develop a know-how of governance, it is useful to invest in family education. Of course, its purpose is not to turn family members into governance experts. However, it is important to help them acquire a common language to discuss on this subject, to compare themselves with each other, and to understand the potential choices on the family governance level, which inevitably becomes more structured as the family grows. Effective education must be combined with the application of the acquired know-how. In this way, new ideas are co-created. They can be formalised through the drafting of documents that are the basis of developing family protocols and agreements to facilitate internal coordination and prevent future conflicts. Notably, family governance know-how is proprietary in nature, meaning that every family decides which principles, organisational routines, and processes are most effective.?

Focus on the process

Dialogue, awareness, education, and formalisation are all essential ingredients of a strategic change process to support family growth. As in democracies, this process must be transparent, inclusive, and visibly fair. Sometimes, decisions must be made without reaching unanimity, but a large majority. There may be discontent to manage. However, no one should ever complain about feeling unheard or not understanding how the process was configured.

Selecting family leadership

Developing competent, recognised, and impartial family leadership is another key aspect. While leadership is not an inherited gift or genetic factor, it is worth noting that in large families, leadership can be exercised by a group rather than by a single person: a family council is a leadership forum, for example. Furthermore, such leadership differs from business leadership in that it carries the specific qualities and competencies to exercise it. Leadership development emphasises the next generations and the role of leaders in helping them mature their talents. When there are many talents, a family culture focused on professionalism leads to selecting the best for everyone’s benefit. These types of choices are not common in small families and less common in medium-sized ones. However, for large families, they become a sort of mandatory path that can be undertaken because both business and family cultures embrace the value of merit.

Festina lente?

Festina lente is a classical adage attributed to Augustus that can inspire in this field: make haste slowly so as not to arrive too late or take things lightly.