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.
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.
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.
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.
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.
05.
The Family Room
The primary purpose of the Family Room is to enhance 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 experiences, and stay connected with the business.
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