Resilience of 100-Year Family Enterprise

How opportunistic innovation, business discipline, and a culture of stewardship guide the journey across generations

Merrill Center for Family WealthTM


What are the ingredients for creating successful, multigenerational family enterprises — that is, those families who are able to maintain business success while sustaining their culture and family unity across generations?

Given our experience advising many families of significant wealth, we recognize this question hits upon two of the core motivations of these families — establishing a culture of stewardship and engaging rising generations.

The Merrill Center for Family WealthTM, Merrill Lynch’s Family Office Services, Bank of America Private Bank and Merrill Private Wealth Management are pleased to sponsor the in-depth global research conducted by Dr. Dennis Jaffe, Ph.D., as part of his 100-year family research program. We are excited to share the following executive summary of Dr. Jaffe’s research, which profiles four key factors underlying the success of generative families’ efforts to sustain and reinvent themselves over generations.1

Family businesses play a large and important role in the country’s economic ecosystem, and we’re interested in aiding their sustainment and growth. Sharing lessons learned by families who faced and overcame the many challenges of combining family and business will help emerging families as they embark along similar paths.


Why is it some family businesses have survived multiple economic cycles, political and civil unrest, and huge social, cultural and technological transformations, while others have failed to exist beyond one or two generations? What is it about these companies and the families at the helm that makes it possible for these long-lived enterprises to prosper?

Long-term resilient families — defined for the purpose of the research as those who maintain business success and family connection over three to more than six generations — pursue business opportunities together while passing their legacy principles, culture and resources to each new generation. While few family enterprises reach this milestone, those that do amass impressive resources.

They share a family culture of relationships, commitments, traditions, respect and learning that underlies their business capabilities. Their family culture is the foundation of their business acumen. They dominate the economies of many countries because they are able to innovate and pursue opportunities with sustained commitment and resources. We call them generative families because of their vitality, creativity and ability to continually reinvent themselves over generations.

Generative families add to and amplify various forms of family wealth. A generative family uses its resources not just to sustain what it has but to create something new, extending its legacy in new directions that add not only to the family’s financial wealth but also to its human, social, relationship and spiritual “capital.” After creating success in a legacy business, each successive generation builds on this legacy, adding value through innovation, new ventures, and inspiring visions for family and business success.

Generative families are enterprises that sustain consistent control over a Long period of time. Unlike so many business ventures that focus only on current profits, these companies endure with principles that transcend profitability. They stand for something, offering lessons that can be learned not just by family businesses in their first generation but also by non-family enterprises that want to operate with principles beyond the bottom line.


The skills, capability and character to live in a complex, difficult and demanding global environment


The philanthropic vision and engagement, creating a community connection and caring for those beyond family


The ability to stay connected within the extended family, to compromise and work together creating caring, positive and productive relationships, and to develop structures for making decisions and managing family capital


The mission, principles, core purpose and shared meaning that are the foundation of the family and its approach to wealth and relationships to each other


The inspiration for the white paper and this summary is the 100-year family research project, a multiyear research program that has engaged nearly 90 families across 20 countries in detailed interviews. These extraordinarily successful families met three criteria:

  • Business/financial success. Created a successful business or set of businesses with annual revenues of more than US$200 million; 44% of the participating families have a net worth of over $1 billion.
  • Adaptability over generations. Successfully navigated at least two generational transitions with control being passed to the third (or later) generation.
  • Shared family identity. Retained a shared connection and identity with practices and processes that sustained values as an extended family.

The intention of the research was to gather personal accounts about what the families did to successfully transition their businesses and how they did it. A leader from each family was interviewed at length and in depth. (Two family members from different generations were interviewed in about 20% of the families.) They were asked to describe their evolution over generations and tell stories that describe not just what they did, but how they were able to do it. Among the families in the study are many renowned families from different countries, many of whom are household names.


Certain myths have grown up about family businesses. The actual experience of generative families challenges these myths, a few of which are:

  1. Family businesses face a predestined decline across three generations.
    Many business families have internalized a belief that business growth occurs only in the first generation. It is followed by a decline or stagnation in the second generation and an acquiescence to professionals in the third generation. Rather, generative families follow a cycle of continual change and reinvention across generations.
  2. Wealth creation takes place largely through the achievement of a single entrepreneur in the first generation.
    While the founders clearly make an incredible contribution, in many of these families they were only the first of a series of wealth creators. A generative family enterprise often has several different wealth creators, in successive generations.
  3. Wealth creation mostly results from founding one successful business.
    In reality, business success includes several seminal activities. A mature business produces capital to move into new areas, and each successive event spearheads further wealth creation.
  4. Sale of the legacy business marks the end of the family enterprise.
    While the sale of the legacy business is a huge transition for an extended family, generative families make an explicit commitment to renew the family and reorganize as a business family.
  5. Business success occurs because the family moves away from involvement and influence.2 
    The reality of generative families is the business is built on a deep foundation of family culture and principles about how to do business. While family principles and practices can certainly undermine the business in some cases, generative families minimize the ways the family drains the business while optimizing the family’s positive qualities.
What differentiates a generative family is a generative family redefines itself and moves forward in a new direction after upheaval occurs.

Generative families represent only a very small fraction of family businesses. What comes to light in the research is the nature of these families’ resiliency and their ability to continually transform themselves while sustaining a consistent core of shared culture, principles and identity.

Like other family businesses, they face numerous challenges resulting from significant technological, operating and competitive changes along with market shifts. What differentiates a generative family is a generative family redefines itself and moves forward in a new direction after upheaval occurs.

Each new direction adds wealth to the family as the family grows and adds various enterprises. Given so few families survive with both financial fortunes and family relationships intact, the research sheds light on how this occurred so more families can duplicate their success.

The following sections address four factors that help distinguish generative families:

A. An ability to adapt to emerging challenges in a continuously changing environment

B. The willingness to undergo transformation to keep the family and the business on a path of constant improvement

C. A strong and well-defined family culture rooted in values

D. The use of governance practices to objectively address internal family affairs and external business challenges

A. An ability to adapt to emerging challenges in a continuously changing environment

A commonly held view of business-owning families is the family is inseparable from its legacy business. This view held without the business, a family lost not just its livelihood but its identity. The experience of 100-year families, however, is quite different. They are not single businesses owned by a family so much as ever-changing business partnerships, sharing a business legacy, principles and culture as they navigate through a turbulent environment. A generative family goes through multiple reinventions.

A common feature in the culture and mindset of generative families is the drive to adapt, change and innovate. Their unique evolution begins with the business and financial principles of the founder — principles that are then sustained and expressed by each successive generation.

To succeed, a business family must build a resilient business culture able to anticipate and overcome crises as they emerge while becoming stronger in the process. Adaptation is a challenge for any business, but when a family is involved, the task is even more difficult because families tend to be conservative and uphold the status quo. The wisdom of the generative family enterprise lies in its resiliency in the face of change.

Generative families are growing families that have banded together to conduct business. Their legacy business is the initial vehicle for family livelihood, but not the only one. Over several generations, generative families move from a single successful venture to multiple business entities that continually seek opportunities to diversify in new directions. They achieve this while also remaining a close, connected and consistent family, sharing and teaching values and skills to each new generation that moves into leadership.


During the 100-year journey, continual change and evolution is necessary because the family faces emerging challenges from inside and outside:

  • Within the family, each new generation brings more people and a different range of talents and desires. Older generations die off and new family members must organize, make decisions and align their different skills, principles and visions.
  • Outside the family, the business environment is ever-changing and unpredictable. Each generation has to steer their business entities across different terrain — whether that involves increased competition, new processes or technological advances.

Many business founders and leaders simply want things to continue as they have because they have known nothing but success. Business families fail because they are unable to retain the spark of creativity that could lead to innovation and reinvention.


Creating an innovative business that’s adaptive and vital in a changing global business environment is a wonderful achievement, but it’s not enough. A disciplined business can easily become stale and lose its vitality to a competitor or to new technology. To help counter this tendency, a family enterprise must also remain entrepreneurial, open to discovering new paths with new ventures. Being successful requires family enterprises to develop and employ business development strategies. Two strategies of generative families are the craftsman and the opportunist.


Craftsmen develop the special capability of doing something better than anyone else. Many 100-year families created a product or technology that served a need, and they competed with larger entities by producing great products and being exceptionally responsive to customers. And, as they kept creating better products, they moved to supply larger and larger markets. Companies like these become market leaders in specialized areas other companies find it hard to enter. They often create the technology early, continually reinvest in new products, and expand into new markets with their core capability.


Opportunists adapt by seeking out and seizing upon new opportunities. Like traders, they’re always looking for good deals. Companies like these develop a portfolio of assets and aren’t sentimental about selling those assets that no longer produce. They’re entrepreneurial and continually pursue innovation and new ideas.

While either of these styles is effective on its own, many generative families have adopted both, pursuing them at different stages of their evolution. The two styles represent different capabilities exhibited by the family at different times. Generative families aren’t undermined by conflict between the craftsman and opportunist styles but appreciate there’s a time and a place for each one and that they must co-exist. At different times, one or the other may be in ascendance.

Generative families develop the readiness and skill to rebound.


Generative families are characterized by how they handle planned and unplanned transitions — the degree to which they anticipate and respond to emerging challenges. Generative families develop the readiness and skill to rebound. They find ways to anticipate and respond that leave them in better shape than before. Generative families often employ a resilience cycle when responding to change:

  • Prepare/anticipate. Even when they aren’t preparing for a specific change, generative families expect and anticipate broad general changes, such as the need to foster development in a new generation of family members or prepare for a shift of customers or products. They notice early warning signs of potential changes or challenges.
  • Engage/decide. As a change approaches, generative families gather to consider what it means. They engage multiple family members and listen to differing points of view before they take action.
  • Redefine/renew. After the change, generative families don’t go back to the way things were. They find a new path and work to implement it. While they respect tradition, they’re able to let go of anything that’s obsolete.

It’s not simply the presence of change but this cycle of adaption and resilience that differentiates the generative family.

Family expects and remains open to new ways

Family members listen to all points of view

Family develops new path, works to implement it

Generative families are characterized by making tough decisions and carrying them out.


In spite of its best efforts, however, there are many pitfalls that can derail a family enterprise. Family enterprises can overexpand or become too focused on family politics while neglecting external challenges. They might think too highly of themselves and overvalue their business. They may idealize their principles to the extent that they ignore signs they aren’t living up to them.

By facing challenges or issues that may be buried or ignored, the family becomes aware of the impending need for change. By paying attention to warning signs, these families are able to then prepare for emerging difficulties. Family conflicts about business issues can be difficult for a family to resolve, but generative families are characterized by making tough decisions and carrying them out.


  1. The craftsman and opportunist strategies represent two approaches to retain vitality and adapt to changes in the business environment.
  2. Resilience is demonstrated by adopting a consistent approach to responding to challenges — anticipating change, assessing alternative paths and taking action.
  3. When faced with challenges, generative families make tough decisions and act.

B. The willingness to undergo transformation to keep the family and the business on a path of constant improvement

Family enterprises undergo significant transitions while crossing generations. Generative families aren’t only aware of necessary changes, they redesign and renew themselves after each transition to emerge stronger and better.

A majority of the generative families move along a path punctuated by four milestone transformations:
















Selling a business means transferring value for money and leaving the business behind. Harvesting, though, refers to a family’s departure from majority ownership of its legacy business — but the event isn’t an end. A family that harvests decides to take resources from a single business to nurture and develop other opportunities. The sale of assets can occur more than once; some families harvest a major asset every generation to offer family members the chance to go on their own or the opportunity to take on new challenges.

Harvesting has two transformative effects on the family. It can:

  • Allow some family members to cash out and leave the family partnership. Selling an asset is like letting pressure out of a pump; it allows the family to continue to operate while reducing pressure for continual returns on its invested assets.
  • Enable the new generation to develop new businesses that employ its skills and meet the family’s need for new sources of wealth. By selling assets, the family is able to refocus on new efforts and investments.

In most family businesses, only a few family members at the ownership or board level make the decision regarding a sale. Generative families find a way to engage the whole family in the conversation about the possible sale and solicit opinions before taking action.

Sometimes families may decide against a sale. For example, they may want to continue to maintain the culture, legacy and principles they’ve established. Or they may choose to remain committed to the business for future generations. As a result, they put their energy and resources into renewing the business.

There may be reasons to consider a sale. For example, family members may have other professions, so the business stays in the background. Or the family doesn’t have the drive, skills or resources to address emerging business needs. A sale transports the family in a new direction that it must address and adjust to. For many, the business sale marks the end of the family as an organized, shared enterprise. For the generative family, it marks a turning point to a more diverse and creative future together.


As new members enter the family by birth and marriage, the challenge of sustaining commitment to long-term goals while sacrificing shorter-term profit distributions re-emerges as new shareholders seek a good return from their asset. This can lead to pruning, or buying out some family members, leaving only those who are committed to business ownership.

As the number of family owners increases, each shareholder holds a smaller share, making it more difficult to achieve alignment and shared goals. Adopting redemption policies or exit policies can help families avoid tension around differences and destructive conflict.

Such arrangements need to be carefully planned. By allowing owners to exit, the family postpones the geometric rise in number and dilution of share ownership. Many generative businesses have a relatively small number of shareholders. Those who remain are willing to forestall current profits for longer-term goals.

Some business families face another kind of liquidity event: the dissolution of a trust with multiple beneficiaries. Most trusts have an ending date, but when they are set up, the ending date may be generations away. When that date actually approaches, the beneficiaries of the trust need to make a choice about how the trust’s assets will be held in the future. They must decide whether they want to remain together and, if they do, how to invest the money.

Pruning, or buying out some family members, leaves only those who are committed to business ownership.

Some families address the circumstances of multiple beneficiaries and trusts by eventually forming a private trust company. With this structure, the trust company serves as the trustee through a board of directors to prevent the proliferation of trustees as trusts split up when family members pass away. It may also facilitate the redemption of shares. These entities have advantages as well as drawbacks.


Diversifying is the buying of other businesses and making other investments, thus creating a business portfolio. The evolution from owner/managers of a legacy business to managing a portfolio of businesses often arises when a new generation of young leaders begins to take over. The emergence of a rising generation with a desire for innovation can move the family in a more entrepreneurial direction. This entrepreneurial energy can challenge and balance the conservatism that may exist in the older generation and the professional business leaders.

Moving to a portfolio can allow for differences in the type of family leadership. Instead of a single leader, the family might develop multiple leaders with different skills who manage different types of assets. However, the portfolio needs a central holding company or board of directors that can manage the interaction of all of the assets together. The legacy company may have had a single family leader in the previous generation; the shift to a portfolio opens the door for shared leadership by family members who can oversee different areas.


Grounding may involve creating a family office to centralize and oversee the multiple business entities and operations. A family office also provide services to a family, including tax filing and legal compliance, financial advising, wealth portfolio management, support for family lifestyles, administration of trusts, and estate planning.

Forming a family office is often not a clear decision at a single point in time but may evolve as the family requires increased attention to taxes, investments, personal expenses, philanthropy, and shared family activities outside the business. Accordingly, a family office can become more relevant as the number of family members who do not work in the business yet remain important shareholders grows, along with their financial service needs. While this makes the governance more complex, a family office can help enable the family to remain together as an organized, value-creating entity.

A family office can help enable the family to remain together as an organized, value-creating entity.

The family office oversees and manages assets beyond the legacy business. Acquiring additional assets allows the family to diversify; this helps to lessen the risk of owning just a single concentrated asset. The diversified family office might include a trust, a holding company, a Limited Liability Partnership (LLP), a private trust company or other form of partnership. The goals of the family office are to preserve and grow assets, build a diverse array of businesses, and act as a center for other family activities.

A key decision at some point is where the family office sits. Some families operate their family office from within the business, while others want to keep it separate from the business.

Moving away from a single legacy business, the family office becomes the heart and soul of the family.

Generative families create a strong and well-defined family culture consisting of principles about family, wealth and the purpose of the family enterprise.

C. A strong and well-defined family culture rooted in values

A generative family continually develops, sustains, extends and redefines itself as it passes through the major transformations described earlier. But there’s a consistent and enduring core: the legacy values and ways of doing business make up its identity as a business family.

The culture of a multigenerational family business is enduring and consistent. A clear and strong culture defines what it stands for — its principles, practices and ways of doing things. Generative families create a strong and well-defined family culture consisting of principles about family, wealth and the purpose of the family enterprise. This culture doesn’t emerge all at once. It begins with the legacy principles and actions of the business/family founders, then evolves as the family renews and develops itself in each new generation. While each family’s culture is distinctive with a different personal style, there are consistencies across generative cultures.


Recognizing the necessity of continual renewal in the business and the family, generative families undergo a series of transformations:

  1. Harvesting resources from the initial family business and reinvesting them to develop new opportunities.
  2. Pruning the number of family owners, keeping intact family members who are committed to the long-term growth of the business.
  3. Diversifying into other businesses and investments to create a portfolio of businesses.
  4. Grounding the family and its related business interests in a single entity, the family office, to provide greater coordination and oversight to all the component elements.
Generative family enterprises aren’t looking for immediate profit or short-term gains; they are there for the long term.


Because family owners have a history, legacy and personal relationship to each other and their business, their values, goals and operating principles are more extensive than those of owners who simply desire a good financial return. Six themes are common in most generative families’ culture, differentiating them from the short-term and more transactional culture of non-family businesses.

1. Long-term commitment
Generative family enterprises aren’t looking for immediate profit or short-term gains; they are there for the long term. As family stewards, they look more than a generation ahead for the benefit of their children. This engenders patience as they develop the values, skills and resources of each new generation to contribute to the growth and development of the enterprises. Without such patience and thoughtful preparation, success would be difficult to repeat and sustain. Because this type of commitment is demanding, it must be affirmed regularly by the family. Unless the family is willing to make a substantial time commitment to overseeing the enterprise, it’s likely not an advantage to remain owners.

2. Extension of family values into business
The meaning of family in a family enterprise extends beyond bloodline family to include employees, suppliers, customers and the community. This explains its ability to engender commitment and inspire performance and shared purpose. For example, by taking a long-term focus, the generative family creates an environment in which employees can depend on the family to be there for them and their children.

3. A disciplined, focused, professional business
Whatever values are held by a family, each family enterprise is a business intended to be profitable. Family values and entrepreneurial attitudes have to be housed within a sustainable, professional and competent business. For example, a first-generation business founder may have been an improvisational leader, often operating without a design or plan and making gut decisions. The founder is oftentimes an authoritative figure who takes risk and makes quick decisions. When successive generations enter leadership, they face the challenge of adding conventional business practices and discipline. They cannot continue to run on improvisation. Successive leaders also may need to have more collaborative personalities, as the business may call for a team builder, consensus builder or project manager. Families have to develop skilled family leaders or recruit non-family leaders who share the family’s values and long-term commitment.

The meaning of family in a family enterprise extends beyond bloodline family to include employees, suppliers, customers and the community.

The transition to a professional focus involves coming to terms with the reality that business needs come before the family. Rather than seeing the business as an arena for meeting family needs, the family sees it as a delicate resource requiring professional care to be sustained and moves away from the tendency to treat the business as a personal bank.

4. Collaboration with non-family leadership
After one or two generations where family owners are also hands-on business operators, the family reaches a point where the family talent pool cannot encompass all the needs of its various enterprises. At this point, the family must consider where it will find next generation business leaders.

The family increasingly looks to recruit and collaborate with non-family leaders who share the family’s values and support its unique culture but add further skills and capability. The shift away from being family owner/operators while still sustaining the family culture and values is a critical transition for the generative family.

The shift away from being family owner/operators while still sustaining the family culture and values is a critical transition for the generative family

Anticipation and preparation certainly aren’t the norm in family enterprises. But in generative families, they occur more often than not in an orderly, predetermined path.

5. Professionalization of family leaders
Parallel to the support of non-family leadership, family members may also need to upgrade their business knowledge and skills. Members of a generative family have the option of working in one of the family enterprises and perhaps advancing to a leadership position. However, as the business grows and the family’s ventures become more complex, opportunity comes with conditions. Family employees must be capable, open to collaboration with non-family employees, and have the accountability and discipline that befits a business professional.

In the new business culture, family members don’t come first. Instead, the family extends its values to include non-family leaders as true partners. Professionalism and accountability within the family send an important message to non-family leaders: You don’t have to worry that family members will limit your promotion.

Activities to help develop professionalism in family members include:

  • Setting clear expectations for how hiring should be considered by the business
  • Encouraging outside learning (university, business programs)
  • Requiring candidates to work for a predetermined minimum number of years for other businesses
  • Carefully crafting messages about family hiring for both family and non-family staff

6. Entrepreneurial attitude encouraged in each generation
In order to succeed over several generations, generative families must find ways to be innovative and opportunistic. A stale, predictable business, even if such a thing could survive today, doesn’t greatly interest the most talented members of the next generation. The challenge for every family is to develop the entrepreneurial mindset and requisite skills in key members of each generation.

To release opportunistic innovation, the family must link attitudes and encouragement with concrete actions. The clearest way a family does this is by setting aside family funds to support innovation, new ventures and various forms of social entrepreneurship by the rising generation. The family rightfully asks for accountability, but the active process of looking at new value-based ventures in generative families combines intention with clear pathways to action.


Six cultural themes differentiate generative families from other families:

  1. Long-term commitment.
    Not looking for short-term gains, the time horizon the family considers is measured in generations.
  2. Extension of family values into business.
    Employees, suppliers, customers and the community are all seriously considered in decision-making.
  3. Disciplined, focused, professional business.
    The family’s perception of the business shifts from being a means for providing for the family’s lifestyle to a resource requiring professional leadership and business practices in order to help ensure its long-term success.
  4. Collaboration with non-family leadership.
    To meet the growing needs of its various enterprises, the family looks to employ from outside professionals who possess skills and capabilities the family lacks.
  5. Professionalization of family leadership.
    As the business grows more complex, family members’ employment in the business is not a given; family members must be qualified and demonstrate a willingness to collaborate and be accountable.
  6. Entrepreneurial attitude encouraged in each generation.
    Generative families develop an entrepreneurial mindset in the rising generation, and further, link that attitude with encouragement and concrete action.

D. The use of governance practices to objectively address internal family affairs and external business challenges

A family business begins with a visionary founder/owner/operator. The subsequent generation often continues to view ownership as connected with operations. For at most two generations, a family enterprise can run on an ad hoc basis with little defined structure. But at some point, the business will become too complex to manage ad hoc.

As the third generation comes of age, they usually discover ownership is very different from operations. As owners, they have to make decisions about the fate of the business, balance the use of resources, and reach out to non-family executives and advisors. They also have to decide how to use their wealth. Should it be reinvested, used for the benefit of the family, or employed for other purposes like philanthropy? As owners, their focus shifts from operating a business to overseeing family and non-family leaders and making choices about resources.

The transition from family business to business family is more than a change in how the company is managed. In generative families, family members tend to submit to the discipline of a professional business and play the role of responsible owners. They do not use the business as a personal bank or employment resource. The family moves beyond being taken care of and takes active responsibility for overseeing the new structure.

To create, sustain, and adapt the family culture and principles over generations, the family must be aligned, make fast and effective business decisions, and implement them. Shared cultural principles, policies and practices don’t just emerge. The family has to sustain them by resolving differences and making painful choices. There’s often family upheaval as owner/managers must change their behavior and become more accountable. The process by which the family owners collectively organize themselves to develop resilience in dealing with internal family affairs and external business challenges is referred to here as governance. Through each successive generation, generative families evolve active and complex systems of governance. They listen to many voices and resources and translate what they learn into effective operations, clear decisions and adaptive responses to new challenges.

Generative families act as stewards, producing wealth that has lasting and appreciating value with an eye toward providing for generations to come.


Every family enterprise must consider the kind of owners they want to be. Generative families choose ownership that’s actively engaged in the principles and culture of their family enterprises. They act as stewards, producing wealth that has lasting and appreciating value with an eye toward providing for generations to come.

While ownership can be dispersed among many family members, the enterprising family wants to assure that control over major decisions is in the hands of family members who protect and look after all family members, not just the most prominent current owners. They differentiate their own self-interest from the family as a whole. Family enterprises can fail because individual needs are not subjugated to the family as a whole. The concept of stewardship arises when an owner shifts from maintaining a personal agenda to considering the best interests of all the family stakeholders.

Family enterprises can fail because individual needs are not subjugated to the family as a whole.

When a next generation leader transforms the business into a disciplined, professional entity, the rest of the family may feel sidelined. Conflict can erupt as family members lose status and roles. As stewards, active owners shift their mindset from protecting their own interests to looking ahead to everyone’s best interest. This can be a challenge. For example, when multiple branches of a family are joined in a family enterprise, it isn’t hard to see how individuals might worry only about their family branch. It takes great trust for all the branches to set aside individual needs and interests and adopt a single-family approach.

As the family enterprise grows, governance structures can become more complex. There can be a board for each entity, and sometimes boards report to other boards. By the fourth generation, the ownership group can become quite large. To oversee the family enterprise, multiple governance boards might be required to manage the complex relationships.

Multiple governance structures, while complicated, can create opportunities for family members to participate. A family could at times have not only business boards, but would operate family councils, shareholder assemblies, investment committees, a family foundation and various trusts that require trustees. It is critical, of course, to populate these structures with the proper family members. Additionally, it is also important to continually train family members to become effective directors and overseers and not just focus on those who manage the business.

Generative families are unique because they also take pains to communicate with all family members.


To empower and respect shareholders, a family enterprise becomes an open and transparent body. Openness is critical for family members to make effective decisions they can stand by. This is also particularly important as the older generation helps prepare the rising generation for leadership.

While the family owners and their designated board control the business, generative families are unique because they also facilitate the communications with all family members. They’re prepared to listen to concerns and ideas from all parts of the family, including non-owning family members and those whose ownership is in trust.


The board of directors is the core instrument for a family to build and sustain its distinctive culture and exercise values-based oversight. It upholds the legacy and principles as well as defines the relationships among owners and across generations. It also remains open to anticipating and initiating change to take advantage of new possibilities or respond to crises.

Boards develop over generations. They evolve from an informal group of owner/managers to include other family members, then frequently non family advisors, and finally family and non-family directors. By the third generation, most generative families have a board with both family and independent, non-family directors.

The board of a family enterprise typically evolves across generations in several steps:


Passive family members represent branches


The board begins to engage and mediate different family interests


Family owners enlist professional advisors as a resource for development


Non-family directors join


A non-family board majority emerges, especially in public companies


Generative families spend a great deal of time considering how their boards are constituted. A good board must balance several factors, starting with the interests of the owners, both major and minor, other family members, and future owners. Then there’s investment in innovation, development of business discipline and returns to family owners. An effective board represents the owners, but it also obtains professional expertise relevant to the current and future needs of the business.

As the business grows over generations, requirements for board members become more stringent. Each generation finds they must set the bar higher for board members. Over time, families may become more explicit in their selection processes. For example, some might define specific selection criteria, institute limited board terms, or develop a system of checks and balances for proposed board members.


At some point the family business becomes more complex, and generative families adapt to new challenges:

  1. Adjusting the mindset from family business to business family requires the family to adopt disciplines employed in professional businesses and be responsible owners.
  2. Acting as stewards, generative families shift away from a personal agenda and consider the best interests of all family stakeholders.
  3. Collectively organizing themselves, family owners address internal family affairs and external business challenges through governance.
  4. Maintaining transparency and openness in its dealings is an imperative if family members are to remain engaged and interested in the family enterprise.
  5. Evolving their business governance, generative families move from an ad hoc group of family members to include close family advisors, and finally engage non-family members who are selected on the basis of the expertise and skills they can contribute to the betterment of the enterprise.

In enterprise families, it’s important for young family members to learn about the business, the role of the board, and the skills required for board membership. For example, a junior board made up of family members who want to develop their skills and knowledge can help the business achieve increased transparency while fostering learning and development of younger members for future roles. An advisory board made up of family members who are still learning can meet with the official board and provide informal strategic advice. These informal board observers or advisors can then become potential candidates for formal membership.

The inclusion of independent board directors is part of an overall transformation of the family enterprise, and over generations, generative families tend to increase the number of independent directors.

Having an active board that acts as stewards and contains independent directors and competent representatives of family owners can allow the family to focus on the business goals of craftsmanship and innovation. Business governance is the ringmaster of family organization and continuity.

In closing

Generative, multigenerational families offer a model of wealth creation and sustainment that diverges from the conventional operating business model of exclusively focusing on profits and aggressive competition. Business families play the game of private enterprise well. But as generative families, they grow and remain profitable within a values-based legacy that links their success to the success of others. They cultivate a family culture of principles and learning that allows them to continually reinvent themselves and engage family members across generations.

By sharing these families’ experiences and the lessons drawn from those experiences, our hope is that emerging family business owners can better understand the ingredients of success and prepare their own recipes to successfully sustain, grow and transform their family businesses into business families.

As you think about your own family situation, we encourage you to work with your advisor to develop ideas from this research that you can incorporate in your own business and family activities.



1 Resilience of 100-year family enterprises: How opportunistic innovation, business discipline, and a culture of stewardship guide the journey across generations.
2 This research builds upon the pioneering work of Danny Miller and Isabel La Breton-Miller, whose book Managing for the Long Run (Harvard Business School Press, 2005) pointed out the positive nature of the family culture in successful family enterprises.
3 The harvest concept comes from Jay Hughes.

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