It’s fairly common that family businesses don’t last past the third generation, but that often has less to do with wealth itself and more to do with the type of people in the business. On this week's episode of Success That Lasts, Dennis T. Jaffe, Ph.D., joins Jared Siegel to share insights from his book Borrowed from Your Grandchildren about how large, long-lasting business families succeed across generations.
Dennis is Senior Research Fellow at BanyanGlobal Family Business Advisors. As both an organizational consultant and clinical psychologist with over 40 years of experience, he is one of the architects of the emerging field of family enterprise consulting.
A frequent contributor to periodicals such as Family Business Journal of Financial Planning, Private Wealth Journal of Wealth Management, and Worth magazine, Dennis is also author of Finding Her Voice and Leaving a Legacy; Cross Cultures: How Global Families Negotiate Change Across Generations; Stewardship in your Family Enterprise: Developing Responsible Family Leadership Across Generations, and Working with the Ones You Love.
His global insights have led to teaching or consulting engagements in Asia, Europe, the Middle East, and Latin America. The Family Firm Institute awarded him the 2017 International Award for service, and in 2020, he was awarded a special commendation as an individual thought leader in the field of wealth management by the Family Wealth Report. Dennis has a bachelor's degree in philosophy, a master's degree in management, and Ph.D. in sociology, all from Yale University, and is professor emeritus of organizational systems and psychology at Saybrook University in San Francisco.
Tune in here, at delapcpa.com/podcast, or wherever you listen to podcasts:
Here are a few highlights from Jared's conversation with Dennis Jaffe:
- Generative families are those with businesses that have gone past the third generation in terms of ownership and control; have an identity as both a family and a business; and were large and thriving, though not necessarily in the legacy business.
- It’s fairly common that family businesses don’t last past the third generation, but that has less to do with wealth itself and more to do with the type of people in the business.
- Successful business families make a commitment to the future, Dennis shares. “They developed all kinds of ways in which the family was creating non-financial wealth — they were creating value by educating the next generation, giving to the community, and having wonderful, thoughtful people get together.”
- In generative families, the wealth creator creates the wealth, but they do not create the generative idea — this is typically done by the second or third generation.
- Jared asks Dennis to describe the roles of the first three generations of a business family. “The shift from the first generation where it's all about one person with no need to collaborate with anybody to the next generation comes when the family begins to have a single family meeting and they talk about their wealth,” Dennis explains. “Is this the business that they want to be in, or do they want to be in another business? Do they want to have a foundation? And they start to have conversations, and out of the conversations the family says, ‘We have so much wealth, we have so many issues to talk about — we have to meet regularly.’”
- Self-reliant wealth creators must get over the idea that because they've been so successful, they know how to do it better than anyone else.
- Older generations have to understand that things are different, and should respect those differences rather than try to make things be the way they were before. They’d only be setting themselves up for failure by taking the latter route.
Borrowed from Your Grandchildren: The Evolution of 100-Year Family Enterprises
Dear Younger Me: Wisdom for Family Enterprise Successors