Spotlight

The Four-Room Model

The Four-Room analogy is a simple but dynamic way of rethinking decision-making in family businesses that can be transformative. Think of the governance structure of your family business in four distinct forums: the Owner Room, the Board Room, the Management Room, and the Family Room. By establishing appropriate boundaries between rooms, you can avoid conflict and make better decisions, together.

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01. Introducing the Four-Room Model
02. The Owner Room
03. The Board Room
04. The Management Room
05. The Family Room

01.

Introducing the Four-Room Model

Thinking about governance as a “four-room house” is an effective way to organize the people, relationships, and decision-making systems in your family business. This ensures that the rules and boundaries of decision-making are clear to everyone.

Case Study: The Four-Room Model in Practice

By Karen Dillon

Family Business Owner, John Phelps, shares how the Four-Room Model transformed his business.

Making Better Decisions in Your Family Business

By Josh Baron and Rob Lachenauer

Want to make great decisions together as a family enterprise? Start by mapping out your Four Rooms.

When Good Intentions Can Cause Misalignment

By Ben Francois

In family offices, the family is both the owner and the client. This unique dynamic can be challenging to navigate without the proper governance structures.

Understanding the Four-Room Model

By Josh Baron

A quick overview of a helpful framework for family business governance.

When Your House is Not in Order

By Alison Isaacson , Josh Baron and Rob Lachenauer

When decision-making is not working in your family business, it’s usually a sign that your Four Rooms are not functioning correctly.

Empty Structures Syndrome

By Marion McCollom Hampton and Nick Di Loreto

When family owners feel little psychological ownership of their family business governance, the fate of the stakeholder group is at risk.

Overloaded Structures

By Marion McCollom Hampton and Nick Di Loreto

Because governance structures are built over time, families often don’t see the signs of overload. But the consequences can be devastating.

Does Your Family Business Have a Succession Plan?

By Nick Di Loreto and Omar Romman

Family business succession planning should take place across all aspects of family enterprises. Here’s how to think through getting your family succession right.

02.

The Owner Room

The most important (and often under-developed) room in any family business is the Owner Room. The decisions you make here will shape your business for years– even generations. You must be thoughtful about determining who gets to be in the room and which key decisions are too important to delegate.

The Importance of the Owner Room

By Josh Baron and Rob Lachenauer

Your Owner Room will shape business decisions for years. It’s important to define who is in your owner room, what decisions you make, and how you’ll work together.

It’s Not All About Voting Power

By Alison Isaacson

Some owners may have the legal voting power, but that doesn’t mean the perspectives and ideas of other owners shouldn’t be considered.

5 Kinds of Ownership Roles in a Family Business

By Nick Di Loreto

One of the common unspoken tensions in a family business is the reality that different owners don’t all want to be involved in the same way– and that's ok.

Deciding How to Decide

By Omar Romman

The first step to strengthening your Owner Room is determining how your governance should work.

How Will You Handle an Owner’s Exit?

By Vlad Barbieri

Instead of waiting for a moment of high tension to come up with a plan, agree in advance how to handle the situation if any family owners want to leave the business.

The Importance of Your Shareholder Agreement

By Josh Baron and Rob Lachenauer

As one of the most influential documents in family businesses, a shareholder agreement essential.

03.

The Board Room

Which decisions are appropriate in the Board Room? Business decisions that are so significant that a bad choice could place the company at risk. A well-designed Board Room is a critical link between the Owner and Management Rooms, making sure that executives focus on the Owners’ objectives.

Setting Up an Effective Board Room

By Josh Baron and Rob Lachenauer

Your boardroom is a key link between owners and managers. An effective board should oversee the business, not run it.

Building your ‘Fit for Purpose’ Board

By Rob Lachenauer

Instead of deciding who should be on your board, start by deciding what the board should accomplish. Then find the right people to do that.

Building the Best Board of Directors for Your Company

By Omar Romman

Here’s what you need to know about getting your first board up and running.

Balancing Representation with Qualification on Family Business Boards

By Ben Francois and Omar Romman

How can you build a high-quality board that takes advantage of the benefits of family directors without compromising on its effectiveness?

Family Business Boards: The Arbiter of Fairness

By Devin Bird, Judy Lin Walsh and Stephen Salley

A well-structured board of directors can serve as a “shock absorber” between divergent interests in ownership and management.

04.

The Management Room

Day-to-day business decisions (such as recommending strategy and operating the business) belong in the Management Room. While Owners may have the right to make any decision about their business, in an effective Four-Room Model, Owners who are not explicitly operators should not be in the Management Room. Rather, they should focus on the handful of important decision reserved for Owners.

Owners’ Role in the Management Room

By Josh Baron and Rob Lachenauer

In the early stages of a family business, the lines between owners and managers can be blurry. As the business grows, you need to create important boundaries.

Owner-Operator Culture: When It's Time for a Change

By Marion McCollom Hampton

Many family business leaders assume that the only way to be a good owner is to also run the company. That’s not always the best strategy.

How To Thrive While Leading a Family Business

By Josh Baron and Rob Lachenauer

Thriving while leading a family business requires different skills than corporate environments. Here are the four things you have to get right.

Should You Join the Family Business?

By Judy Lin Walsh and Rob Lachenauer

The key questions you should ask yourself — and your family business leader — before making that choice.

Dealing with the Unique Work-Life Challenges of Family Businesses

By Josh Baron and Rob Lachenauer

Being “all in” or “all out” are two unproductive ways of finding a work-life balance in a family business. There is a better third way.

Can an Outside CEO Run a Family-Owned Business?

By Josh Baron and Rob Lachenauer

Every such leader should expect – indeed embrace – intricate family dynamics if he or she hopes to be successful.

Surviving in a Family Business When You're Not Part of the Family

By Josh Baron and Rob Lachenauer

Non-family executives must know how to navigate the tricky territory between business and the family. Here are some winning political moves.

05.

The Family Room

The primary purpose of the Family Room is to ehance family unity and develop family talent. A Family Room allows all family members– including spouses and next-generation family members– to build and strengthen bonds, share epxeriences, and stay connected with the business.