Owners’ Role in the Management Room

What decisions happen in the Management Room?

The Four-Room model pushes nearly all remaining business-related decisions to the Management Room. Of course, every business has a long list of management decisions—recommending strategy, operating the business, hiring or firing the management team, to name a few. While the owners have the right to make these decisions, with the Four-Room model, the owners who are not explicitly operators step away from management decisions. The Four-Room approach gives management the language to put back in its appropriate room any “helpful advice” from nonoperating owners or other family members, thereby enforcing important boundaries.

Who is in the Management Room?

In the early stages of a family business, you may only have family members acting as managers. As the business grows, you’ll probably need to add nonfamily professionals to help run it. Some family businesses require their business to be run by family members; other firms prohibit family members from working in the company. Most businesses are somewhere in between, and successful family businesses exist across the entire spectrum. But you don’t have to choose between being family-run and being professionally managed. With the right policies and processes, you can be both. (See the Harvard Business Review Family Business Handbook for more on the challenges of family and nonfamily working in the business in chapter 9.)
A nonfamily CEO can be central to the success of a family business. But it’s important to recognize that by bringing one in, the owners are ceding some amount of decision-making power. To position both the owners and the new CEO for success, take the time to clarify the scope of the new CEO’s authority, as well as how you will work together.

*Adapted from the Harvard Business Review Family Business Handbook by Josh Baron and Rob Lachenauer. Pages 65-66