eBook-The-Lifetime-Path-To-Professionalizing-Ownership.pdf

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The Lifetime Path to
Professionalizing
Ownership
(A compilation of selected articles on professionalizing ownership.)

The Lifetime Path to
Professionalizing
Ownership
(A compilation of selected articles on professionalizing ownership.)

Contents
Introduction
The Family Business: Impact of Family Businesses to the Global
Economy 1
The Global Impact of Family Businesses 7
The Impact of Family Business in Summary 2
The Impact of Family Business in Summary 9
Professionalizing Family Business Owners 3
Professionalization in the Family System 4
Professionalization in the Ownership System 5
Professionalization in the Business Systems 6
A Practitioner’s Perspective 7
PART 1: Competent, Committed, and Sustainable Ownership 7
A Practitioner’s Perspective 18
Insights from the Research 9
Being Competent in Ownership 11
Being Committed to Family Ownership 12
Making Ownership Sustainable 13
PART 2: Competent, Committed, and Sustainable Ownership 15
Shared Values and Goals 16
Psychological Glue 17
Ownership Competencies 18
Informal Family Governance 20
Formal Family Governance 20
The Trigger for Change 21

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Introduction
This introduction comes from an article I published in LinkedIn way back February 18, 2018, “The
Family Business: The 3-Circle Model of Renato Taguiri and John A. Davis”
.
Historically family business has been the agenda of many research initiatives from academic
anthropologists and historians since the 19th century (Perez Colli, 2013).
There’s a lot of history noted in the evolution of family systems of organization and structures of
social life in post 1940s (Perez Colli, 2013).
The family system had been a focus of many dissertations of European and North American scholars
since the 1940s drawn from theories culled from extensive field research developed in Africa, South
America, Oceania, and Asia.
The momentum of using all these extensive research and knowledge into a set of tools that will
eventually be the arsenal of future family business consultants may have stemmed from the efforts
of Barbara S. Hollander.
Hollander published first empirical studies emphasizing the relationship between the family and the
business.
During the 1980s the family firm began to be perceived as a unique business form and was quite a
discredited topic at that time according to John Davis when he was interviewed May 13, 2009.
Those who were practicing family business consulting at that time see themselves as “Business
Doctors” who solved problems, theorized, performed research, and published articles on family firms.
Since the beginning, the whole exercise of legitimizing family business studies was mainly a
professional and academic process mostly taking place in the United States.
Richard Beckhard and Ivan Lansberg organized a meeting in 1982 to bring together people who
shared the same concerns about the family business.
This meeting eventually led to the founding of the Family Firm Institute or FFI with Barbara Hollander
being its first president and founder.
FFI was officially incorporated in the Commonwealth of Pennsylvania with 22 founding members in
1986.
A framework for understanding the family in business became more organized when Renato Taugiri
and John A. Davis published their article Bivalent Attributes of the Family Firm in the Family Business
Review in 1982 introducing the Three-Circle Model in Family Business (Taguiri Davis, 1996).
Eventually this model got referred to by different names such as The System’s Theory Model of
Family Business or the Three-Circle System.

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What is the Three-Circle Model telling us?
The model represents the three overlapping and interdependent systems in a typical family
enterprise, namely: family, business, and ownership. As shown in the diagram below:
The premise of this model is this: For a family enterprise or family business to effectively function
throughout its existence, each of the system (family, ownership and business) must support and
must understand each other.
The stakeholders in each of the system must understand their respective roles in the system and the
scope of their decision. All this decision-making, interaction, and decision-making roles is what you
refer to as family governance.
Since this model was introduced in 1982, it has become a central organizing framework of discerning
the dynamics of family business systems.

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Stakeholders and Their Context in the Three-Circle Model
Clearly, the model shows intersecting areas. Stakeholders can find themselves in the context of
seven (7) zones within those intersecting areas.
The interdependence of the stakeholders in the system are more understood once we look into the
context of each stakeholder within any of those seven zones.
Zone 1 - Family Owner and Employees
Stakeholders in this zone includes those who are family members,
company shareholders, and are also employees or are directly
involved in day-to-day operations. Founders of the enterprise almost
always are in this space. Anyone in this space would know the family
and business very intimately. This person will most likely know the
individual family members’ strengths and weaknesses at the same
time know the company’s history, culture, and operation.
Zone 2 - Family Employees
This is where family members who are also employees but do not
own any shares in the company or do not have any form of owner-
ship in the company belong.
Zone 3 - Non-Family Owner Employees
Stakeholders inside Zone 3 are largely non-family owners and are
involved in the enterprise as employees or executives owing to the
equity they have put in.
Zone 4 - Family Owners
This zone is where the family members who have shareholdings in
the enterprise belong. Stakeholders related by blood or marriage in
this zone have shareholdings or ownership but are not involved in
the operation of the enterprise.

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Zone 5 - Family Members
Family members who do not own shares or do not have owner-
ship of the enterprise and are not involved in the operation of the
enterprise are found in this zone.
Zone 6 - Non-Family Employees
Non-family employees or professionals in the business enterprise
belong in this zone.
Zone 7 - Non-Family, Non-Employee Owners
Investors who are not family members or are not related by blood
or marriage belong in this zone.
How is Balance Achieved within the Three-Circle Model?
The balance lies in the alignment of the business, ownership and family systems. According to
Premier Family Business Consulting, a multi-disciplinary family business consulting firm, this is
possible if the intervention process allows the achievement of the following outcomes:
• Validation of the family’s commitment to learn about building
family unity.
• The organized gathering of data and information necessary to
plan, organize, and implement activities to achieve family unity
and wealth perpetuation outcomes are acquired, organized, and
provided to lead and collaborating consultants.
• The individual family members are well-disposed to the aims,
goals, and spirit of the family culture and unity building activity.
• Process, materials, team composition, and the desired
outcomes for a particular family are validated.
• The family’s shared history, values and culture are re-
discovered.
• The guiding principles and timeless values that made the
family successful are articulated and institutionalize.
• Ensure the preservation of the family wealth (keep wealth
within the family).
• Individual family members are protected against personal
financial and business risks.
• The next generation of leaders are prepared to succeed.
• Organizational strengths and constraints are identified and
change initiatives are formulated.

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• Strategic goals are defined and initiatives are prioritized.
• A competency framework for the family enterprise is designed
and specific competencies defined based on strategic goals
and initiatives.
• Job content and compensation of family and non-family in the
business are leveled off to industry or near-industry standard.
• Mechanisms for behavior-based interviewing and hiring
decisions are in place and rolled out in the family enterprise.
• A system for performance appraisal for the family enterprise is
rolled out or implemented.
• A program for developing leadership and management
competence of family and non-family members of the business
is in place.
• Measurable outcomes are defined at the activity and the
service level of the family enterprise.
A family member who wants to participate in the leadership or management of the family
enterprise can use the Three-Circle Model to see the perspective and concerns of the
other stakeholders found within the different zones of the model. It helps in looking at the
context of the respective stakeholders.
In the perspective of a family business consultant looking into a family in business, it gives
them a context in which they can design an intervention or a service that can best help
the family and their business.
In this book, we will be focusing on only one system: Ownership.
We will pay particular attention to professionalizing ownership.

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The Family Business: Impact of Family
Businesses to the Global Economy
Late last year, I was called to sit in a meeting with a
local chamber of commerce regarding a program
they are working on with a conglomerate. The
program entails selecting male heads of families
and letting them join an enterprise startup
competition.
The enterprise is supposed to be built around the
conglomerate’s many (like hundreds of) products
ranging from processed foods, dairy products,
beverages, meat, powdered products, etc.
I was called in because I conceptualized a similar
program in an international school but it was
primarily targeting women, and this program they
are organizing is specifically targeting men as
heads of their families.
In short, they needed me to give inputs to ensure
they can make the program work. Based on what I
have seen with enterprise development programs
especially on micro and small enterprises, I gave
them a piece of my experience.
Don’t make it about the head of the family. Make
it a family thing. Get the whole family involved
and ensure that one of the rubric or criteria for
success is the involvement of the whole family.
The advice was also appropriate since they were
getting the local government involved by allowing
them to look for candidates for the program. It
was also a chance for me to bring home the point
about family businesses.
The Global Impact of Family Businesses
According to the 2015 Global Family Business
Index from the University of St. Gallen and
Ernst Young (EY), the 500 largest family firms
worldwide may just as well be the third-largest
economy considering that its combined annual
sales amounted to $6.5 trillion (Wharton School
of the University of Pennsylvania, 2016).
These data have consistently shown the impact
of family enterprise with an estimated 70%-
90% of global annual GDP attributed to family
businesses (Family Firm Institute).
The sustainability of family businesses provides
stability in the markets because they tend to
have long-term perspective in their direction and
strategy.
Very few listed companies have 20-year plans
because most often top executives are only there
for the short-term with goals most likely designed
to appease shareholders also for the short
term. This is also the same reason why family
businesses tend to look at employee relationships
in the same way, that is, long term.
In the job market, between 50%-80% of jobs in
the majority of countries worldwide are created by
family businesses (European Family Businesses,
2012).
Impact of Family Businesses according to the Family Firm Institute
Here’s more statistics on the impact of family business from across the globe courtesy of the Family
Firm Institute or FFI:
China
• ●85.4% of China’s private enterprises are family owned (Zhejiang University, Sun
Yat-sen University, and Lee Kum Kee, 2010)
• ●Majority of the wealthy families belonging to the next generation prefer keeping
succession within the family (FT, 2014)

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Europe
• ●European family businesses achieve a turnover 1 trillion Euros representing
60% of all European companies (KPMG, 2013)
• ●Family businesses in the European Union account for 9% of its GDP (KPMG,
2013)
• ●Family businesses in Europe create over 5 million jobs representing 40 to 50% of
Europe’s overall employment (KPMG, 2013)
India
• ●Family companies in India account for two-thirds of its GDP (KPMG, 2013) and
accounts for 90% of gross industry output.
• ●27% of overall employment and 79% of employment in the organized private
sector across India is provided for by family firms (KPMG, 2013)
• ●13% of family businesses in India survive to 3rd generation and only 4% of family
enterprises make it to the 4th generation (KPMG, 2013)
Middle East
• ●Most of the Middle East’s GDP, more than 80% of businesses, and even beyond
those in the oil sector, are either family controlled or family-run (PWC, 2012).
• ●Family enterprises in the UK generate 25% of its total GDP (PWC, 2012)
• ●Three-fourths of family enterprises in the UK have put in place procedures to
resolve conflicts or issues among generations of family members (PWC, 2012).
•
United States
• ●At least 50% of companies in the United States are family enterprises (Harvard
Business School)
• ●More than half of all publicly listed enterprises in the US are family owned
(Harvard Business School)
The Impact of Family Business in Summary
Tharawat Magazine summarized the economic impact of family businesses as follows:
(Economic Impact of Family Businesses - A Compilation of Facts, 2016)
• ●In the long-term, family enterprises tend to exhibit higher profitability.
• ●Family enterprises tend to keep people rather than laying them off and to hire
people even with the prospect of economic downturn.
• ●Family enterprises is motivated primarily to creating a legacy for the coming
generations and in consequence have a strategic outlook that is long-term.
• ●Family enterprises are less likely to increase their debts and are more prudent
with their finances.
• ●Family businesses are more likely to contribute charitably in their communities
and engage extensively in philanthropic pursuits.
According to Premier Family Business Consultants, families in business can have investment across
many industries. Jonathan Ramos, founding chairman of Premier Family Business Consultants,
says: “Our client families own and operate enterprises in merchandising, real estate and property
management, education, shipping, fishing, finance banking, construction, food beverage,
hospitality, etc. competing or aiming to compete against the best global brands.”

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Professionalizing Family Business Owners
In the 1970s and down to the 1980s, you will most
likely have a conversation with business owners
or entrepreneurs that goes like this:
“We’re different!”
This refers to how founders or owners see their
business.
Around the early 1980s practitioners and
professors in leading universities specializing
in behavioral science and business, started to
understand what is this “thing” that makes each
business “different”
.
Dr. John Ward is referring to the family.
Family is the thing that's making enterprises
different or is the differentiating factor in business.
A synthesis of 80 years of accumulated knowledge
and groundbreaking research by John Ward led
to the understanding of the dynamic systems
that come into play within family businesses.
Dr. Ward's research and insights together with
Renato Taguiri and John A. Davis became seminal
resources many practitioners will refer to in the
coming years.
Dr. Ward and Dr. Davis are both fellows and
founding board members of the Family Firm
Institute (FFI).
Renato Taguiri and John A. Davis, published a co-
written article “Bivalent Attributes of the Family
Firm” in the Family Business Review in 1982
introducing the Three-Circle Model in Family
Business (Taguiri Davis, 1996). Professor Taguiri
worked with Dr. Davis on the Three-Circle Model,
sadly Taguiri died in 2011.
If you just want a plain English gist of the Three-
Circle Model, read my article on LinkedIn.
Dr. Ward shared his discovery. His position is that
in every aspect of the system, the family, must be
considered.
There are similarities in successful family
businesses and these best practices form a body
of knowledge which can help professionalize the
family and the business.
Dr. Ward also believed these similarities were
predictable, and such predictability allowed
family advisers, academics, and other consulting
practitioners developed the body of knowledge
being used today to coach families in business
and family enterprise owner-founders.
The process and path to encourage and to
advocate the adoption of best practices in family
enterprises is referred to as professionalization.
Professionalization within the different systems in
the family namely in the family system, ownership
system, and the business system should be
happening at different levels.
The “best practices” that other companies
subscribe to is limited only to business, family
business must strive to learn best practices within
each of the systems within which they exist.

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Professionalization in the Family System
In the family itself, professionalization should happen within the family council leadership and among
the individual council members.
Jonathan “Jon” Ramos, the Founder, CEO and Chief Family Business Adviser of Premier Family Busi-
ness Consulting focuses on family advising in general and wealth advising on a very focused and
strategic level for families in business.
Jon is always advocating that the family council must take the lead in introducing best practices and
embraced the first step in learning best practices in leading the family.
His firsthand experience being part of a family business and starting his own businesses have raised
his awareness of challenges among families in business including his own.
One of the most significant learnings Jon have experienced is the dynamics of family behavior,
governance structures, the effect of clearly articulated core values, guiding policies or the absence
thereof.
Jon took an FFI course on family advising and family wealth advising to deepen his understanding of
his experience with families in business. With this new found knowledge and deeper understanding
of the family system, he now understood the underlying dynamics of the family.
Almost a decade after, we are proud to tell you that Jon is now serving in the board of FFI.
Jon eventually built services around his new found knowledge in collaboration with his sister Theresa
Ramos.
This collaboration created one of the most effective programs for families in business for uniting
families and protecting family wealth: The Family Enterprise Planning or FEP.
For the first time, I get to share a photo of me with the “Pillars” of Premier Family Business Consulting
taken just this 2021 amidst the pandemic: (from left to right: Neil Arnold Montesclaros (COO), Theresa
Ramos (Founder, Family Dynamics Facilitator), Jonathan Ramos (Founder, CEO Chief Consultant),
Genevieve Ramos (CFO), and yours truly.
I hope you don’t consider this an overzealous promotion of my colleagues. I was just really happy we
got the chance to be together doing strategy and having a sumptuous lunch.
Let’s go back to the conversation at hand: Professionalization.

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Professionalization in the Ownership System
Within the Ownership system, professionalization will be in terms of setting “policy before the
need” to address risks and issues for acquiring assets, equitable distribution, use, investment,
improvement, and disposal.
Jon always talks about the impact of risks on ownership and the management of family wealth. Most
of the challenges of families in the ownership system are tied to finance and all the risks that come
with it.
If there’s someone who knows financial risks, it’s Jon.
Jon built his wealth in the insurance business and he’s really good at it. He is going to be your “go
to guy” when you want to understand risks to ownership and wealth, and where it will most likely
come from. As a bonus you get to hear tips from him about tools to identify and mitigate the impact
of these risks.
Capital in business is almost “biologically-linked” to family ownership.
Family enterprises are almost always financed by family wealth or the individual wealth of family
members. Unfortunately, so many families in business have a low level of awareness of their own
motivations as providers of capital for the business.
They literally have to be coached so they can articulate clearly their motivations, and get clarity how
to move forward with these personal discoveries towards competence in ownership.

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Together with succession, ownership is a key challenge for families in business. There are laws on
succession, inheritance, and the regulatory taxes in the transfer of ownership, and the dynamics of
ownership is further made complicated by what we refer to among family advising practitioners as
the “principle of equality” among parents and children.
Issues on ownership are always an integral part of “policy before the need” when framing family
constitutions.
The most operational initiative that families in business can do, however, is to acquire what we call
“ownership competence” and “ownership strategy”
.
Explaining these concepts however is going to require two separate articles.
Stay tuned.
Professionalization in the Business Systems
Now here’s a system where I’m more attuned and have spent more than 30 years of my consulting
engagement: the Enterprise.
Of course, you already know that a family enterprise can be a sole proprietorship, a corporation, a
limited liability company, a holding company or even a global conglomerate.
Professionalization of the business can be done at different levels. If we believe that the quality of the
maturity of an organization can never exceed the quality of its leadership, the most important level of
professionalization therefore is at the board of directors and top management levels.
These are the levels that are critical since it is the level that sets direction for strategy, policies,
investments, and growth.
Not only must people at these levels take a lead in their organization, they have to take the lead in
their respective industries and their communities if they are to achieve success in their chosen space.
In the operational level, professionalization will have to take place in the different domains in an
organization that drives its maturity. There are a lot of frameworks out there of what aspect of the
organization to focus on.
This book will focus only on professionalizing ownership.

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PART 1: Competent, Committed, and Sustainable Ownership
Being in family business consulting or advising carries a certain need to get insights from other
practitioners.
In our case, in Premier Family Business Consulting, it is reading the latest research on families in
business. One of these researches done by the Family Firm Institute or FFI is about ownership.
FFI released a report about “Professionalizing the Business Family” focusing on The Five Pillars of
Competent, Committed, and Sustainable Ownership authored by Claudia Astrachan (Lucerne
University of Applied Sciences Arts, Switzerland), Fabian Bernhard (Edhec Business School,
France), Anneleen Michiels (Hasselt University, Belgium), Torsten Pieper (University Of North
Carolina At Charlotte, USA), and Matthias Waldkirch (EBS University, Germany).
The report focuses on family professionalization.
Before we go there, we need to understand the concept of professionalization or professionalizing in
the context of families in business and family businesses.
The report articulates the goal ultimately of professionalization is to ensure functional and long-lived
ownership and entrepreneurship for the family.
For this goal to be achieved, the family has to be unified and functional, a competent and effective
decision-making body, providing value to the enterprise through their relational, emotional, and
financial commitment and resources.
A Practitioner’s Perspective
There has been a lot of depiction about family firms for decades among management researchers.
The FFI report mentioned some of these depictions and a lot of them had been around for some
time:
• ●There’s a long-standing tradition that family firms are generally
unprofessional organizations.
• ●Some are actually advocating those owners of family businesses
should step back to allow non-family professional managers to
assume management of the enterprise.
• ●As we gain more understanding of successful professionalization
in different family firm types, we come to realize that extensive
professionalization or formalization may not be appropriate or even
needed.
• ●Empirical evidence suggests family enterprises when they grow in
age and size benefit from more formalized processes and structures
while others exhibit very little success.

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• ●Here’s an observation that seems to be common to both the family
and the family enterprise: Formalizing processes, structures, and
relationships (for example by means of family protocols or family
constitution) turns out to not have a direct correlation to family
longevity.
The last observation actually runs counter to a lot of long-established beliefs among practitioners
that families with different goals and needs, should rely on a breadth of formal mechanisms to guide
decision processes, lessen conflicts, and control the degree of influence the family bears on the
business.
In our experience, having a family constitution, by itself will not ensure unity nor guarantee a
more secure ownership protocol. In fact, there are families that request templates of the family
constitution so they can do it themselves as if it is the answer to all their family challenges.
You can get any lawyer to draft the family constitution but it will not bring all your intentions in
alignment with your values or your goals of longevity.
We have a program we call the Family Enterprise Planning or FEP that has the framing of the family
constitution as one of the key processes.
Take note: one of just many critical processes.
There’s this belief that having a document like a family constitution will ensure there is a basis for a
family to make decisions or to enact policies. What most don’t realize (including lawyers) is that the
process and the experience of framing the family constitution, more than the document itself is the
whole point of the exercise.
The process is important because it provides the family the opportunities to come together to
articulate their intentions, their desires, their fears, their misgivings, their vision of the future in an
environment facilitated by a professional.
The dynamics of the interaction help individual families discover something about themselves, make
them appreciate who they are, and in so doing bring them closer.
The family constitution as a document must reflect the family agreements, the articulation of family
core values, the acknowledgment of what is important to them, and therefore a manifestation of
their unity.
Unity, common understanding, and shared values must exist first before the actual framing of the
constitution.

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By getting a lawyer and drafting a constitution without the process that unifies the family and
articulates their unity, the document becomes a tool to impose the intention of a few members not
only on the rest of the immediate family but also the next generation.
Insights from the Research
So, what does the new data tell us about owning families based on new analysis?
Now here’s some interesting insights:
1. The efficacy of any effort towards professionalization will depend on the owning family
characteristics such as:
• ●a unifying goal
• ●a set of shared values or the absence thereof, and
• ●level of commitment and cohesion
2. The informal or formal approach to governance is only effective if it takes into account the
family’s idiosyncrasies.
3 .Generic or what may be referred to as “off-the-rack” solutions providing little customization
may offer little or no value in the long-term and may, in fact, be harmful to the owning family.
4. Mechanisms towards professionalization that are poorly aligned or even “over
professionalization” can deepen existing conflicts, impose rigid processes and structures on the
next generation, and may not appropriately reflect the family’s goals and values.
Take note of the reference to the professionalization of the family as a unified, functional, competent,
and effective decision-making body. Value is provided through “their relational, emotional, and
financial commitment and resources”
.

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This implies that unity and competence are not to be achieved by professionalization, but are
actually ingredients or prerequisites for professionalization to work.
Does this mean that a dysfunctional family cannot make a family constitution work?
A constitution in a dysfunctional family will actualize the underlying need for control of dominant
personalities in a family and may lay the groundwork for conflicts that may threaten the very survival
of the family and the business.
The most important thing to note is that even functional families will have struggles in their daily
living.
What differentiates them from a dysfunctional one is their ability to talk about these challenges,
support each other because of shared values, and can adjust and change accordingly.

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Being Competent in Ownership
Did you know that there isn’t much systematic research looking into identifying competence that
contributes to family ownership performance?
It is a bit surprising how little attention is given to acquiring ownership competence in the family
considering how much effort and time are spent on educating professional managers.
If you really look at it, family unity and even longevity may be the true measure of ownership
performance. Ownership competence supports the desire of the owning family to retain control over
their thriving family business.
In maintaining unity, letting go of any family member perceived to be working against the family can
be one action that a family may have to take as a decision-making body.
Unfortunately, the report shows it is not a lack of awareness that is the bane for the family, it is the
lack of willingness among family owners to make a concerted action to tackle the issues they clearly
consider to be important.
It appears that most business families at the moment lack the interest or foresight to sufficiently
dedicate their resources to educate their family in successfully discharging or performing their
present and anticipated ownership roles.
So what makes a competent family owner?
The FFI report identified four categories constituting competent ownership:
1. Family Competence
Family competence refers to the family’s and the individual family member’s ability
to contribute to family functionality and efficacy. Founders or owners must acquire
this competence because, without a profound understanding of the underlying
family dynamics, they will be unable to pick up and interpret why family members
act and react the way they do.
2. Business Competence
The competence that enables the ownership group to guide and oversee
management, make strategic decisions, and provide important resources to the
business; and the individual family members to effectively perform their ownership
and/or business role(s).

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3. Self-Competence
Self-competence pertains to the family’s and the individual family member’s ability
to support individual family members’ personal development and growth.
4. Contextual Zeitgeist Competence
Regards the family and the individual family members’ ability to adequately deal
with specific challenges and advantages arising from family characteristics and
the business context, and to recognize opportunities and mitigate challenges
related to societal, political, regulatory and other developments.
I agree with a lot of the insights and conclusions of the report since it validates a lot of what we
already know in our practice. Premier Family Business Consulting advocates what we call the
“Legacy of Love” as an outcome of one of our programs, the Family Enterprise Planning.
This program has a specialized module just on ownership and the conclusions we are drawing
from the results of the research confirm a lot of our assumptions when we design our program on
ownership including the focus on ownership competence.
Being Committed to Family Ownership
Individual family members have a way of connecting to the family and the business enterprise on
different levels and in many different ways.
For individual family members, cohesion is driven primarily through either financial or emotional
means and emanates from either the business enterprise or from the family.
Cohesion refers to how well members of the family are connected with each other and is a significant
determinant of family commitment and functionality. Functionality here is linked to the ownership
competence we just mentioned above.
Torsten Pieper of the University of North Carolina at Charlotte, and one of the authors of the FFI report,
introduces a cohesion model to help understand the different family cohesion layers and describe the
several measures in increasing cohesion towards the family and the enterprise.
The cohesion model presupposes that a lot of family members experience cohesion through multiple
dimensions, meaning they react to several varieties of cohesion-creating measures.

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Our practice has experienced these cohesion dimensions during the course of facilitating the process
of unity called Family Culture Building.
My own exposure to this process has made me understand why the framing of the family constitution
should not be done by legal practitioners without proper training on family dynamics.
If you want to know more about Family Culture Building or Family Enterprise Planning just contact us
through our website for free consulting time.
While the report showed the relevance of cohesion in family commitment to ownership, the concept
of Psychological Ownership refers to the emotional and cognitive attachment an individual family
member feels to the business.
Even if the attachment has no legal or factual basis, ownership perceptions have been found to have
a great impact on the family’s motivation and behavior, and their sense of identity.
So, what’s the significance of this in drawing ownership commitment from family members?
These findings have significant implications not only for the family but also for us who are practitioners
in family business consulting or advising.
For families in business, even family members with minimum or no ownership at all (such as the
young ones representing the next generation) can have psychological ownership affecting attitudes
and behaviors.
Making Ownership Sustainable
So how do we make family ownership sustainable?
The report suggests that informal and formal governance structures and relationships in the family
and the business be in place or nurtured.
It appears from the results of the survey on which the report was based, whether governance structures
or relationships are formal or informal it should be grounded on specific core values.
Informal ways of managing and guiding the owning family oftentimes come from the founder’s imprint
on the enterprise and most often are passed on to many generations, rooted in the family core values.

14
Another tool owning families can use is storytelling and role-modeling. The way founders and
elders carry themselves or how they conduct themselves in the presence of family members proved
instrumental in understanding and learning expectations, values, and norms within the family.
Recounting and retelling the behavior of founders or predecessors forms a legacy that provides a
template or framework for desirable behavior serving as informal control within the enterprise.
Mechanisms representing formal governance do not lead to longevity by themselves.
In our own practice, a family constitution can be one mechanism for formal governance but adherence
to this mechanism will only be effective if it is a result of a professionally facilitated process and
completed as a result of consensus and collegial decision.
This mechanism can lead to sustainable ownership if supported by a governance structure within the
family called Family Council and in the enterprise in the form of the Board of Directors.
We have a service that can put the governance structures in place called Building Effective Governance
or BEG.
In this service, we assign a senior consultant to sit in the family council or the board of directors (or in
both), to coach the family on how to manage the conduct of meetings and how to arrive at a decision
on certain contentious matters.
The survey results provided very insightful information. The many conclusions are good material for
reflection for founders, family members, and practitioners in family advising.

15
PART 2: Competent, Committed, and Sustainable Ownership
This section was taken from the final installment of an article published last April 7, 2021, providing
insights about the Family Firm Institute’s report publishing the results of a survey on professionalizing
the business family.
In that article, I gave my insights into how a family can have a “committed, competent, and sustainable
professional ownership” as summarized by the FFI report.
In that article, I have articulated some conclusions and insights from the authors of the study and
the report, which we already believed in and integrated into our practice.
The results of the survey also validated the underlying rationale of how some of our services were put
together to respond to family, ownership, and enterprise issues business families are experiencing.
In this section, I’ll be focusing on how to go about achieving the professionalization of ownership
through the five pillars mentioned in the FFI report “Professionalizing the Business Family: The Five Pillars
of Competent, Committed, and Sustainable Ownership”
.
The five pillars can be summed up in a model we call the “Business Family Professionalization
Framework” more visually organized in a graphic below:

16
Shared Values and Goals
You are most certainly willing to commit to something personally aligned with your value system and
your long-term goals, and arguably these are the two most significant factors driving family enterprises
and owning family.
The value system of a family and their long-term perspective seem also to be a strength of family
enterprises. I mentioned this in my article published in LinkedIn March 3, 2018, “The Family Business:
Impact of Family Businesses to the Global Economy”
Families in business are seldom driven by fashions and fads. Beliefs about how an enterprise should
be conducted is grounded on family core values, deeply rooted in the family enterprise’s traditions and
culture.
Organizational values believed to be “typical” such as customer commitment, integrity, and even
their quality orientation is mainly coming from the family’s experiences and values, embodied in daily
practices within the context of culture, and organizational structures, thereby shaping the family
enterprise’s identity.
According to the FFI report, a unified family value system offers family enterprises with an advantage
and builds alignment among many goals and among family members.
Our own experience in processing families before helping draft their family constitution validates this
survey result.
In our Family Enterprise Planning, we organize a team building activity exclusively for family members
to allow them to articulate their dreams, their moments of happiness and of pain, learning moments,
significant decisions they have made, and lead them to articulate the underlying values allowing them
to make decisions or even come together.
This exercise makes them clearly agree on the underlying values that drove them, that kept them
together. Once the keywords they articulate are seen and validated, they are now more conscious of
the values that lay the groundwork for their unity.
The report also suggested that when family’s financial goals such as employment and dividends,
and non-financial goals such as supporting employees and protecting enterprise reputation are not
aligned with the foundations of their family values, such inconsistencies may lead to conflict among
family members over time.

17
A family and even practitioners in family advising will face challenges when they don’t take into
account the idiosyncrasies of families. These idiosyncrasies are embedded in family values. You just
can’t have a one-size-fits-all approach to professionalization.
Mechanism such as governance structures and family constitutions will not be effective simply
because it needs trust and cohesion to make it work in the first place.
Protocols in governance structures and legalistic provisions in a family constitution will fail to make
family members agree on matters and set aside differences.
Ownership professionalization must reflect the goals and shared core values of the family and the
family enterprise.
Psychological Glue
Mechanisms of cohesion was mentioned in the first installment of this two-part series. Now let’s get
into psychological ownership
Torsten Pieper of the University of North Carolina at Charlotte, and one of the authors of the FFI
report, has introduced a cohesion model to help understand the different family cohesion layers and
describe the several measures in increasing cohesion towards the family and the enterprise.
Psychological ownership is important because calling something “ours” influences us to treat that
“something” or object with extra care, nurture and foster it, invest a bit more effort, and view it more
like an extension of us. There are actions and measures to foster psychological ownership.
Why is it important to cultivate a psychological glue among the family members?
The psychological glue ensures that family members feel that connection with each other, keeps
them identified with the family and the enterprise, and feel committed to contributing to the family’s
well-being and the success of the family enterprise.

18
In more pragmatic terms, business families should create opportunities to be together and develop
shared experiences, acknowledging relationships by spending moments together and getting to
know each other.
In the process of helping families draft their family constitution, we take advantage of the process
of allowing families to articulate their shared values, recognize their individual strengths, encourage
caring, candid and honest conversations, to foster an atmosphere that brings them closer together.
You can get more information and understand this process by getting in touch with us.
The process strengthens family cohesion, allowing better understanding of their family dynamics,
improving communication, and enhancing the ability of the family members to deal with conflicts.
Ownership Competencies
A big part of the first installment of this two-part series, is about ownership competence.
To recall in Part 1 we enumerated the different ownership competences:
1. Business Competence
2. Family Competence
3. Self-Competence
4. Contextual Zeitgeist Competence
Examples of business competences are in the area of business acumen and leadership. In family
competences, it is competence in family dynamics and facilitation of communication and conflict
management.
In the area of self-competence, it comes in the form of self-improvement or management of boundaries
and self-regulation; while, safety, security, and recognition of trends are examples of contextual
zeitgeist competence.
Whether basic or high-level competence for owners, decision-making is a role almost indispensable
under business competence.
Owners or family members in the organization must have the competence to interpret financial
methods and indicators, have intimate knowledge of industry, have familiarity of the rudiments of
strategy and operational execution, and basic regulatory awareness and legal knowledge if they are
to make sound decisions.

19
An added expectation under business competence, especially for family business leadership, is strong
vision and social skills that allow them to imprint on their workforce.
Family competence hinges on the ability of family members to have profound understanding of
the family or more specifically their family dynamics. Without this profound understanding, family
members will have difficulty understanding the dynamics of family and discerning why they behave
the way they do.
It is important that the family invest in acquiring or improving their conflict management and
communication skills.
It is ironic that families in business or families of wealth spend money learning to drive a car, learn golf,
learn to shoot a gun, and even get their dog trained, but fail to invest in a learning that will help them
understand each other.
Most of the issues argued about in the boardroom or in operational planning within the family enterprise
are considered business issues when most often these are symptoms of unmanaged, unarticulated,
and unresolved family dynamics at play.
The report suggests families can acquire family competence by many methods including family therapy
(individually or as a group), learning programs, working with families having similar experience, and
coaching.
Self-competence can be cultivated through a strong desire to improve yourself continuously, and a
high receptiveness to feedback often actually seeking it.
With the right attitude self-competence can be developed, guided by the right values and a supportive
culture. Family attitude can be reinforced at a very young age through consistent parenting, delaying
a child’s gratification, and teaching children about action and their consequences.
Contextual competence can be achieved by learning situational awareness and compensating for what
the family currently cannot provide. Families are different and more so over time across generations.

20
Families will have to find some way to bridge the gap in terms of characteristics and capabilities in
the old generation by developing desired qualities and acquiring new capabilities in the younger
generation.
Zeitgeist competence is the ability to adapt to changes in every generation or the predominant trends
of the time. With the millennials, it is understanding the impact of digital technologies on families and
their business.
Informal Family Governance
Family norms that are informal and value-based can shape behavior and thinking of family members.
In order to develop, instill, and preserve family core values, business families must foster informal
mechanisms for governance among the family ownership group.
These norms can often come from the founder’s imprint on the family enterprise and oftentimes are
preserved through many generations, emanating within the family’s value system.
Much of the opportunities to pass on or to create norms is via storytelling and role-modelling. Tools
like storytelling and role modelling serve as a template for good behavior, and a form of control within
the family firm against undesirable behavior.
Noteworthy to remember: While informal governance systems can provide social control, cohesion
while positively influencing commitment among family and enterprise stakeholders, they may also
prevent renewal in the family enterprise.
Stories highlighting powerlessness among family members can prevent innovation within the family
business. This means families must also reflect on what stories should be passed on most especially
those that talk about bad habits.
Formal Family Governance
Last July 28, 2018 I published an article in LinkedIn entitled, “The Three Distinct Phases of a Thriving Family
Business” about the stages of evolution of a family enterprise, namely:
Stage I - The Owner-Managed Business
Stage II - The Sibling Partnership
Stage III - The Cousin Collaboration or Cousin Consortium.
While evolving to a sibling partnership can turn out to be manageable without all that formalization, a
cousin consortium presupposes some coordination on the part of the family.
Formalization within the family can come in the form of formal family meetings such as regular
breakfast conversations, family council meetings, and family gatherings presided over by an elected
family leader or elder.
A big role we play specially with families who just approved and signed their family constitution is to
convene as soon as possible the family council. This is the part where we play the role of coach for the
founder and the members of the family elected to sit in the family council.

21
Through representation of each family group in the family council, the family can have a unified voice
in speaking about the business and get assurance that goals are being pursued.
With unity represented by the family council, the provisions of the family constitution will make more
sense, and represent codified answers to common and anticipated issues typical of a family with a
growing layer of complexity.
As mentioned in the first installment of this section, the process of creating a document like the family
constitution is more important than the document itself.
In our experience, the discussions that take place in this facilitated process brings to the surface larger
issues and conflicts forcing the family to address or to confront the “elephants in the room”
.
Just like informal governance systems, there is a need to revisit formal governance mechanisms such
as the family constitution to ensure it represents prevailing consensus among members of the family.
The Trigger for Change
Professionalizing ownership in a family enterprise obviously represents a significant change and a
condition towards a strong state of discomfort for many. This is also a trigger to seek out help.
This discomfort could come from a conflict in the family, ownership and management succession
challenges, and leadership development.
The results of the survey and the subsequent report provide families and most especially practitioners
a most recent insights about the dynamics of family ownership, validate existing beliefs, and form new
insights about family ownership.
The online survey conducted within the network of FFI in August 2019 came from a total of 177 usable
responses.
A set of 155 of these responses came from active FFI members.
The sample population is global, with focus on North America (43%) and Europe (29%), and a smaller
group of respondents from Asia (13%), South America (9%), Australia/New Zealand and Oceania
(4%), and Africa (3%).
In order to retain information, the survey team included partially completed questionnaires for analysis.
The respondents of the survey have considerable experience in consulting with family firms.

23
I specialize in making your enterprise productive by
strengthening nine (9) critical systems of your organization,
namely:leadership,planning,resourcemanagement,operations,
risk management, improvement/innovation, performance
evaluation, communication, and documentation.
I have worked with teams most of my life and have built the
departments I managed from the ground up in every job I
accepted. A large part of my life was in marketing and customer
service development, most of it in the information technology
sector.
Inlateryears,Itookonmoreandmoremanagementresponsibilities
managing and developing assets, people, processes, systems,
programs, projects and enterprises. Throughout my career, I
have organized and facilitated conferences, workshops, exhibits,
and public relations campaigns.
I take pride in my involvement in development work and in many
occasions have volunteered in programs developing industries
or localities.
In many of my engagements, I have taken responsibilities for the
induction of people, creation and development of teams, design
and deployment of leadership programs, and rally support for
many advocacies.
I have written articles, concept papers, case studies and white
paperstosupportcustomerserviceordeveloptrainingmaterials.
These papers cover a wide variety of subjects and themes.
Most of these papers were developed from notes I have kept
after each project and from post-project reports I prepared.
Case studies and articles are usually developed using materials
and experience from actual projects or engagements.
I hope to be just doing development work and writing.
LinkedIn:
https://www.linkedin.com/in/virgilioparalisan/
Virgilio “Toy” Paralisan
is the Executive Director
for Operational Excellence
of Premier Family Business
Consulting, the only family
business consulting firm in
Southeast Asia providing
holistic services that integrate
thefamilyandbusinesssystem.

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