In their 2002 article*, Habbershon and Pistrui coin the term “family-influenced, trans-generational wealth creation.” They distinguish their concept from the traditional notion of “family business” which usually connotes several generations of a family passing down a single business from generation to generation, within the family, sometimes building it along the way. They argue that for families with trans-generational wealth creation as a goal, an entrepreneurial sense is essential, and that being wedded to one business entity (and the founder’s legacy) can be stifling for subsequent generations from a family investment growth perspective.
They suggest that founders who want their families to achieve trans-generational wealth creation allow the next generation to use the family resources to take risks and build an “entrepreneurial orientation.” They also question whether many of the proactive, entrepreneurial strategies such as diversifying assets through a sale (“even at a premium”) or strategic alliances leave “family businesses” unnecessarily defined as failures. In such situations, and with a goal of growing and developing family assets, the authors consider these absolute successes for enterprising families that can lead to further growth opportunities.
What is the lesson?
Enterprising Families: If your goal is to grow your family’s wealth and pass it on to subsequent generations for their stewardship, carefully consider if you are giving enough opportunity for the next generation to take risks and pursue new directions that are essential for multi-generational growth.
Advisors to Enterprising Families: Do you have assumptions about defining family business success that might get in the way of the multi-generational success of your clients? Are you able to help clients understand the need for a proactive, entrepreneurial orientation to help them create the kind of growth that can sustain (and be sustained by) future generations?
In my view, it is not a question of abandoning the founder’s legacy but rather redefining the concept of legacy. Enterprising families need a concept of legacy that promotes flexibility and entrepreneurial risk-taking so future generations can add their mark and achieve multi-generational growth. I believe this to be true regardless of whether the family stays committed to the original operating entity or branches out.
*Habbershon, T.G., & Pistrui, J. (2002). Enterprising Families Domain: Family-Influenced Ownership Groups in Pursuit of Transgenerational Wealth. Family Business Review, 15(3), 223-238.