Case Study: The Four-Room Model in Practice

At Banyan, we have heard repeatedly that the Four-Room Model is the most impactful framework in the Harvard Business Review Family Business Handbook. In this video, third-generation family business owner, John Phelps, describes how his family implemented the Four Rooms and the impact it had on their business—and their relationships.

Time Stamps and Key Takeaways from the video are below.

Time Stamps:

[0:10] John describes how his family uses each of the Four Rooms in the Four-Room Model.

[3:44] One of the biggest impacts the Four-Room Model has had in the family business is in the relationships. Using the language of the Four Rooms has helped to bring clarity and structure to conversations.

[5:11] The journey to implementing the Four Rooms was an important part of the process because they got buy in from everyone and outline the ways each person and room would be accountable which build trust.

[9:00] The Four-Room Model governance and language helped in the development of the G4 before they joined the business.

Key Takeaways:

• The Four-Room Model is a good guideline for implementing structure in your family business, and it can be customized to work for your business and family.
• Aligning on and then using the language of the Four-Room Model within the business can help remove the tension from conversations with family because everyone understands which room they are in – or are allowed to be in – and agreed upon the boundaries between the rooms.
• The process of setting up your four rooms is as important as the destination. Aligning on decision-rights and boundaries of each of the rooms helps to put everyone on the same page and build trust throughout the system.
• The Four-Room Model can be an effective way to for the next generation to learn about the business and how the current owners work together. It also builds up a common language and trust between the family members.