Why is alignment of purpose crucial for the long-term success of a family, similar to a business?
Like a business, families fail when misaligned. No amount of material wealth can solve this problem—if people are not pursuing the same goal, a lack of coordination can lead to failure. Eventually, the family might drain its resources, or its intentions could become unrecognizable compared to the predecessor’s original vision. CEOs fight against this tendency in their institutions by creating accountability through governance and stability to ensure that those institutions last beyond the tenure of their leadership. In the same way, a family can successfully combat the natural tendency towards decline by turning itself into a living institution that codifies a generational vision and set of values into a governance system.
Can predecessors simply commit their vision for the family to paper, or is there more to it than that?
A family must document a well-defined vision and value system to ensure long-term success. Ideas committed to paper have less risk of becoming corrupted—subsequent generations can encounter them from a primary source. However, a document can go stale without a way to sustain it into the future. Thus, predecessors should bequeath their vision not only by recording it but also by cultivating the family as a living institution to enshrine and regenerate it. If members develop an understanding of the institution, they become capable of passing it on through an active witness of what it stands for. When successive leaders eventually take the reins and adapt to current issues, they are grounded in shared traditions and a common framework of understanding with their predecessors.
What role does governance play in preserving a family’s vision across generations?
Once a family has thoroughly documented its vision, it should adopt a system of governance to define how a family operates. To establish a governance structure that accomplishes the family’s goals, a living institution needs to consider the needs of future generations alongside the present and seek the fulfillment of all members by giving them a voice. Designing and employing a system of governance that does both will incentivize children to take up the mantle by allowing them to make tangible contributions. A healthy institution will have the following:
- Appropriate representation among the various members of the family
- An annual review and renewal of dedication to the core vision and values of the family
- Conventions for how to handle family crises or disagreements
- A commitment to a practical succession plan that oversees the partial transfer of assets and authority during the current head of the family’s lifetime
Governance can also protect against potential derailments. For example, a family would benefit from developing close bonds with advisors who can serve as custodians of the family vision. These advisors should seek to understand the vision intimately and could help execute it by administrating advisory boards, trusts, or philanthropic entities.
What makes the creation of a living institution different, and what goes into it?
Passing down a vision is not effectively accomplished solely through administrative structures or the governance of a trust. Writing down a vision is also not enough. A living institution allows the vision to be intentionally lived and actively witnessed.
Creating this environment involves deliberately cultivating the younger generations as valuable contributors to the family’s legacy by personally spending time instilling values, transmitting the ethos of the family, and nurturing the skills and mindset necessary to carry forward the vision. Younger members must be mentored and educated to become effective stewards capable of understanding, preserving, and evolving the core values and goals established by their predecessors. Parents should encourage their children to develop strong relationships and intellectual curiosity. Investing time in developing these future leaders is essential in terms of knowledge and technical skills and in fostering their understanding of humanity as it relates to the institution of their family. By doing so, the living institution can maintain its vision’s continuity and integrity and further enhance it as it transitions across generations.
How does this living institution ultimately sustain the family’s prosperity rather than just transfer wealth?
The sustained prosperity of a family transcends a transfer of wealth. A family is much greater than its possessions—shared experiences, culture, social bonds, and beliefs are the cornerstones. Documenting the family’s foundational principles and establishing structured governance to manage these complexities become vital for safeguarding this legacy across generations. However, deliberately nurturing future stewards, instilling values, and fostering a solid family culture ensures the continuity and evolution of the family’s cherished heritage. Through these concerted efforts, families preserve their legacy and empower successive generations to carry forward the torch of their collective vision for the purpose and enjoyment of wealth.