Family Business: 4 Components of Family Capital

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Framework Primer
Family Business: 4 Components
of Family Capital
Presentation created by
Tribe
Family
Identity
Stewardship
Trust

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Contents
Overview
Family Capital
Components of Family Capital
Templates
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The 4 components of Family Capital is what drives Family Businesses to
survive to their 3rd generation
Presentation Overview
Having a strong culture is an inimitable, Competitive Advantage of any organization.
Family Capital is a true differentiator between family-owned businesses and companies with a
fragmented shareholder base. Family Capital expresses itself as the organization’s culture, ethos, and
network. While hard measures liking it to performance are elusive, Family capital clearly conveys
powerful advantages.
McKinsey Organizational Health Index database indicates that family-owned businesses enjoy a
significant advantage in providing career opportunities to employees. This is a gap that grows even
wider among Family Businesses in the top quartile of healthy companies. However, even the benefits of
a positive family-oriented network can go awry in the mix of personal and professional tensions that
may affect Family Businesses.
This framework discusses the 4 core components of Family Capital. While it is the 4 factors that a
family organization has by virtue of its ownership, it is also the 4 factors that builds the family
organization’s Competitive Advantage.
Family Capital is the strongest intangible asset of Family Businesses. Having a good understanding of
the 4 components of Family Capital allows Family Businesses build a strong Corporate Culture.
1 Tribe 3 Trust
2 Family Identity 4 Stewardship

A Family Business is an engine for Change and Innovation, requiring a
longer horizon of execution
A Family Business is a classic example of “patient capital” and an invaluable
counterbalance to the short-termism of many non-Family Businesses.
Family Business – How They Differ
Family Businesses are unshackled from the quarter-to-quarter pressures of non-family firms.
Family firms can
invest for the long
term. They allow
good ideas the time
needed to prove
themselves.
Stronger cultures and values
Measure success differently – more
than just profit and growth
Decision making is faster/more
streamlined
More entrepreneurial
Take a longer term approach to
decision making
Need to work harder to recruit/retain
top talent
Take more risks
Find it harder to access capital 32%
40%
48%
55%
61%
71%
72%
74%74%
72%
71%
61%
55%
48%
40%
32%
Source: The Missing Middle, PwC, 2016

Contents
Overview
Family Capital
Templates

Family Capital is a bundle of unique resources
Family Capital – 4 Components of Family Capital
The 4 Distinct Components are the 4 factors that a family organization has by virtue of its
ownership.
Family Capital differentiates family-owned businesses from companies with fragmented shareholder base.
It is the organization’s
culture, ethos, and
network.
It conveys powerful
advantages.
It conveys a sense of
belonging, loyalty, and
commitment to the
development of
employees.
It fuels a social conscience
that extends to
philanthropic engagements
and fuels a virtuous cycle
of Family Capital.
The McKinsey’s Family Business Practice research unpacked 4 distinct
components of Family Capital.
Tribe
Family
Identity
Steward-
ship
Trust
The sense of connectedness,
shared culture, and support in the
social fabric of a Family Business The degree to which
members of families that
own businesses identify
with them can vary widely
The degree of
owner’s reliability The strength of
family values
Source: Fine-tuning Family Business for a New Era, McKinsey, 2016

Family Capital creates a Competitive Advantage for family firms
Family Capital – Competitive Advantage of the 4 Components
Family Capital is the strongest tangible asset of Family Business.
The 4 Components of Family Capital have its advantages and disadvantages. Taking a good view of both sides
allow Family Businesses to maximize its Competitive Advantage.
PROS CONSVS
Tribe1
Closeness to family
Togetherness in organization
Less diversity in the organization
Culture of “fit in or fly off”
Difficult performance management
Family
Identity
2
Identification with Family Business
Family-ownership image
Family atmosphere
Introversion
Lack of innovation and knowledge-
sharing culture
Trust3
High trust in family
Open environments
Blind trust
Complacency
Stewardship4
Solid family values
Business’s interest come first
Long-term view
Authoritative leadership
Excessive attachment

Contents
Overview
Family Capital
Templates

Tribe is the sense of connectedness, shared culture, and
support in the social fabric of a Family Business
Tribe – Overview
Treating staff as extended family is a core company and family value.
PROS
Closeness to family
Togetherness in organizations
CONS
Less diversity in the
organization
Culture of “fit in or fly off”
Difficult Performance
Management
COMPONENT Tribe
DESCRIPTION
It is expressed through a
sense of closeness that
nonfamily employees feel
toward the owners.
It goes beyond the
immediate clan or owning
family.
RESEARCH FINDINGS
A degree of togetherness in the organization exists.
Owning family would help employees in a personal crisis.

Family identity is the degree to which members of families that
own businesses identify with them can vary widely
Family Identity – Overview
The family identity is an expression of the family’s image and brand.
COMPONENT
Family
Identity
DESCRIPTION
It extends to how
consciously families decide
to express their image
through the company brand
and how much a sense of
family promotes the
family’s legacy and visibility
in the market.
RESEARCH FINDINGS
Family values are incorporated into the business brands of their families.
A sense of family atmosphere upholds the owner’s visibility and legacy.
Family identity is felt at all levels of the organization.
PROS
Identification with Family
Business
Family-ownership image
Family atmosphere
CONS
Introversion
Lack of innovation and
knowledge-sharing culture

The Family Capital’s trust element refers to the owners’ reliability
Trust – Overview
Family foundation can be used to build trust in places where the business operates.
COMPONENT Trust
DESCRIPTION
It is the degree of trust the
organization’s members
have in the ability of family
leaders to improve the
company’s performance.
It is the ability of family
leaders to keep their
promises to stakeholders
and do what they say they
will do generally.
RESEARCH FINDINGS
High level of trust in family leaders exists.
Extends to broader communities where Family Business operation is
located.
PROS
High trust in family
Open environments
CONS
Blind trust
Complacency

Stewardship denotes the strength of family values
Stewardship – Overview
The vision of the founder is the unique source of values for Family Businesses.
COMPONENT Stewardship
DESCRIPTION
It is the idea that family
leaders put the
organization’s interests
above their own.
The degree to which family
leaders take a long-term
perspective.
RESEARCH FINDINGS
Family leaders serve as good stewards.
Family Businesses scored higher for shared vision and meaningful
values.
Long-term perspective, honor, doing the right thing, fairness, and
authenticity are values inherent in Family Businesses
PROS
Solid family values
Business’s interests come first
Long-term view
CONS
Authoritative leadership
Excessive attachment

Contents
Overview
Family Capital
Templates

Insert headline
4 Components of Family Capital – TEMPLATE
Insert bumper.
Tribe
Family
Identity
Stewardship
Trust
• Insert filler text, filler
text, filler text, filler
text.
text.
text.

Insert headline
4 Components of Family Capital – TEMPLATE ALTERNATE
Insert bumper.
Tribe
Family
Identity
Trust Stewardship
The sense of
connectedness, shared
culture, and support in
the social fabric of a
Family Business
The degree to which
members of families
that own businesses
identify with them can
vary widely
The degree of
owner’s reliability
The strength of
family values
1 2
3 4

Insert headline
4 Components of Family Capital – TEMPLATE ALTERNATE
Insert bumper.
Tribe Family Identity Trust Stewardship
The sense of
connectedness,
shared culture, and
support in the
social fabric of a
Family Business
The degree to
which members of
families that own
businesses identify
with them can vary
widely
The degree of
owner’s reliability
The strength of
family values
1 2 3 4
• Insert filler text,
filler text, filler
text, filler text,
filler text, filler
text.
filler text, filler
text, filler text,
filler text, filler
text.
filler text, filler
text, filler text,
filler text.

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for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
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