Family Business Audiocast | Episode 69 | JOSh BARON
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Here's the cleaned-up transcript:
The Family Business Audiocast
Guest: Josh Baron
Host: R. Adam Smith
R. Adam Smith: Welcome to the Family Business Audiocast on LinkedIn. I'm R. Adam Smith, creator of this Audiocast series. As an entrepreneur, investor, founder, investment banker, and board leader the last 25 years, I'm fortunate for my many experiences within the family firm industry. A brief comment on why I created this broadcast.
Private companies are a passion of mine. Having grown up in a family of entrepreneurs and having engaged for two decades in deals, strategic transformations, investments, and boards with an array of fascinating family enterprises, family firms, and family offices, I founded this series to offer a useful platform for listeners to hear from veterans, academics, and leaders in the vast family firm ecosystem.
Whether you're a family business owner, building, running, or advising a family office, or just expanding your family office activities, I hope these conversations are useful and enlightening. Now it's time to turn our attention to our accomplished guest on today's episode.
I'm very pleased to be joined by Josh Baron, one of the leading voices shaping how modern family enterprises think about governance, ownership, and long-term continuity. Josh is a Senior Lecturer at Harvard Business School. Josh, great to have you here today.
Josh Baron: Thank you so much. It's great to be here — I'm a big fan of your podcast.
R. Adam Smith: Thank you. Josh teaches and researches family enterprise governance and ownership strategy at Harvard — all the topics we cover on this podcast. He's also co-founder and senior advisor at Banyan Global Family Business Advisors, one of the elite organizations in the industry, where he's advised some of the world's most sophisticated families on succession, governance, and multi-generational continuity.
Josh is recognized for helping shift the conversation beyond traditional succession planning toward a broader, more institutional view of family enterprise — focusing not just on transferring wealth, but on developing capable owners, resilient governance systems, and enduring family institutions. He's also co-author of the HBR Family Business Handbook, one of the most influential modern frameworks in the field.
Today we'll talk about the greatest challenges many enterprises face beyond simply creating wealth — the stewardship and responsibility over that wealth over time. Josh, ready to go?
Josh Baron: I'm ready. Let's do it.
R. Adam Smith: Let's start with the evolution of family enterprise thinking — from succession into enterprise governance, as families grow more complex than traditional institutions, and as the family office rises as an institutional platform. You and Banyan have been central to modernizing this field. Why isn't the old succession model enough anymore?
Josh Baron: Very kind of you to say that. As with many fields, those of us working today have the privilege of standing on the shoulders of giants, and that's certainly true here. Looking at how the study of family business evolved — it's remarkable how recent that evolution is. In the '80s and '90s, the field was built on what seems obvious now but was a critical insight at the time: in a family business, you have to pay attention not just to the business, which already got plenty of attention in business schools, but to the family itself — a space that deserves and needs its own organization and attention. If you neglect the family, it spills over onto the business.
That insight sparked a wave of innovation that continues to spread globally — things like family councils and family constitutions, now considered foundational to how we think about family businesses.
What I, my colleagues, and others have tried to add is the recognition that what really distinguishes family businesses is the intersection between family dynamics and ownership. The family's role as owners drives much of what happens in the family, the business, and the family office — and as you noted, that's growing more complex. Ownership is such a powerful concept — arguably the most powerful force in business. It shapes how economies evolve, how companies evolve, how families evolve.
I think about ownership through three lenses. First, ownership carries the power to destroy assets — think of family conflicts, the show Succession, or the real-life Murdoch drama. Family ownership can take a successful enterprise and unravel it very quickly. Second, ownership carries the power to win, to compete — there's something about family ownership and its long time horizon that lets families operate differently than other businesses or investment vehicles, and there's real advantage to leverage there. Third, ownership carries the power to sustain — to build institutions that last generations, even centuries. Unpacking how ownership shapes both the family and the enterprise is where I spend most of my time and energy.
R. Adam Smith: Thank you, Josh — fantastic, and I completely agree. It's been quite an evolution, especially the last couple of years across SFOs, MFOs, and the broader governance ecosystem. Let's talk about the difference between wealth transfer itself and developing genuine ownership capability across the family. Inheritance alone doesn't create responsible owners — sometimes heirs don't even want the inheritance, or aren't equipped for it. There's also the distinction between beneficiaries of the wealth and those managing the operating company or family office. Families that prepare heirs academically, financially, and operationally are off to a good start, but there's also soft skills and psychological preparation involved. You talk often about developing "capable owners" — what does that actually mean, and what happens when families transfer wealth without that preparation?
Josh Baron: I think about ownership as a spectrum — from the most active owners, involved day-to-day in the business or office, to purely passive owners at the other end, with plenty of space in between. I like to think of three distinct roles. On the active end, you have operators — running the business or office day-to-day, the wealth creators actively driving things forward. On the passive end, you have investors — people who might attend an annual family meeting and vote on major decisions but aren't deeply involved in the enterprise itself. In the middle, you have governors — not involved day-to-day, but not purely passive either; they sit on boards or investment committees, actively providing oversight.
What's important to realize is that being a "capable owner" looks dramatically different depending on where you sit on that spectrum. For an owner-operator, being capable means understanding the power and influence that comes with wearing both an executive hat and an owner hat. I always tell people: imagine there's a spotlight on you at all times when you work in a family enterprise, because you represent ownership, not just management. That's arguably the most powerful role in the business world — combining executive authority with ownership-level decision-making power. The skill there is learning to use that power appropriately, not overstepping, and being aware of how even small things — like taking a longer vacation than everyone else — shape the culture.
At the other extreme, being an owner-investor requires a very different skill set — how you select managers, select investments, structure your portfolio, since you're likely a minority investor in someone else's business or fund, trying to maximize a limited allocation across a range of investments rather than focusing on one opportunity.
Governors in the middle need yet another skill set entirely — learning how to delegate appropriately, empowering those running the business day-to-day without abdicating your role in setting direction, defining values, and selecting the people who run the enterprise.
These are different skill sets, not one unified capability, and I often see families run into trouble when they migrate from one role to another — say, from owner-operators who knew everything about the business day-to-day, to suddenly being investors or governors after a sale, without having developed those new skills. Understanding where you are, what kind of ownership approach you're taking, whether your skill set matches it, and if not, how you learn it or adjust your portfolio to fit what you're actually good at and passionate about — that's the real work.
R. Adam Smith: Thank you — we've covered preparation with many of your industry colleagues, even going back to Ron Diamond discussing SFO wealth transfer. There's no single right answer, so a holistic view really matters. Moving to governance — a practical but complex topic that becomes especially critical around selling an asset, a death, or the loss of a main owner, with major implications for lifestyle outcomes. There's a growing consensus that communication tools, continuity of dialogue, vulnerability, accessibility, and collaboration underpin good governance — and failures often stem from emotional differences, ego, or pride. What does healthy governance actually feel like in a functioning enterprise?
Josh Baron: Without governance, family enterprises can feel boundaryless, complex, and confusing, because you're mixing fundamentally different kinds of decisions together. A model we've found helpful is what we call the "four-room model." Just as you do different work in your kitchen versus your living room, a family business has four distinct types of decisions and work.
There's the management room, where you run the business or office day-to-day — operational decisions. There's the boardroom, where you select management, think about strategy — where are we headed over the next several years, how do we deal with disruption like AI — select leaders, and set their compensation. Then there's the owner room, where a relatively small number of very important decisions get made — do we keep or sell the business, what does success mean for our family office, do we want higher growth and risk or more liquidity, are there investment categories we exclude because they conflict with our values? Owners select the board, so there's a hierarchy — management answers to the board, which ultimately answers to the owners.
We put the family room off to the side, since it's not about business decisions at all — it's about keeping the family connected, developing talent so people can eventually find their way into the other rooms, and managing shared family assets like vacation homes that aren't business assets but can cause real conflict if mismanaged.
Whether it's a small nuclear family or one with 500 members, understanding these four distinct spaces, and developing appropriate governance for each and how they connect, makes all the difference between healthy dynamics and much more challenging, emotionally fraught ones. Emotion is part of family business — you'd never want to eliminate it — but it needs to be channeled constructively, and thinking clearly about these four rooms is what enables that.
R. Adam Smith: It'll be interesting to watch how governance evolves as families grow larger, with cross-border deals, consolidations, and MFO scale. Your colleague Christina Wing of Wingspan has been on the podcast twice discussing scale and enterprise, and Alfredo De Massis has that great term, the "family business galaxy." Talk about the transition from operator to enterprise owner — particularly the impact of a liquidity event, where a family goes from running a business to suddenly holding hundreds of millions or billions of dollars. Setting aside preparation for a moment, why is stewarding that liquidity so difficult for so many families?
Josh Baron: Part of the difficulty connects to what we discussed earlier — you've fundamentally changed what the family actually does. Going from running and owning a single business, understanding what doing that well looks like, to suddenly investing across a diversified portfolio, requires a different skill set entirely, which alone makes it challenging.
But there's an even more fundamental challenge I'd call the "purpose challenge." Owning an operating business has a kind of natural gravitational pull — it connects the family to something tangible, real, with employees, maybe factories or stores. You have a clear sense of what you're doing and its impact on the world around you, and that can be a powerful source of family identity — "we've been in this business for generations."
I'm writing a book on conflict right now, and one strategy for managing conflict is purpose. Without a clear reason for sacrifice, a reason to do things together, people default to "what's in it for me." When a family sells the business and migrates into a broader pool of capital without a clear, compelling reason for staying together, that gravitational pull disappears, and there's less obvious reason to keep doing this together — especially since, with a family office, there's always the counterargument that you could simply hand your money to any wealth manager. There's less absolute need to own or manage the capital collectively, even if there are real benefits to it. Every successful enterprise needs a powerful sense of "why," and it's genuinely harder to find that once you move from an operating company into a broader family enterprise. You have to actively look for it, invest real time and energy connecting to that "why" — it's not impossible, but it's not as natural, and without it, holding a family enterprise together becomes much harder.
R. Adam Smith: Agreed — tricky, but you and your colleagues across the field are doing great work bringing objective, thoughtful advice to it — at Banyan, at the Ultra-High-Net-Worth Institute, Cambridge, and elsewhere. It feels like a maturing industry, though there still seems to be some imbalance between growing scale and complexity, versus willingness to bring in external advice. What do you think?
Josh Baron: When I entered this field about 20 years ago, almost nobody talked about family offices — a few existed, but it was rarely a topic of conversation. That's exploded over the last 10 to 15 years. I always tell people the flip side of a private equity transaction is often the formation of a new family office, since an entrepreneur who's just been through a liquidity event now needs to figure out what to do with the capital. As the number of family offices has grown, so has the surrounding ecosystem. It used to be common advice that below $100 million you shouldn't start a single-family office and should go to a multi-family office instead. Now there's a whole set of lawyers, accountants, and advisors who can help families navigate these transitions.
R. Adam Smith: Let's turn to the challenging topic of breakdowns — which can be traumatic, confusing, and take a long time to fix, whether from governance failures, communication breakdowns, value misalignment, or conflict between founders and management. Organizations here also often lack the best practices of large corporations. Can you talk about these failure points — what's happening beneath the surface, and the balance between practical failures and relational ones?
Josh Baron: I've been reflecting on this — what are the common failure patterns among once-successful family enterprises that come apart? I call them the "six killer D's."
First, dissatisfaction — people lose their sense of why they're doing this together; it's a lot of work and struggle without a clear sense of value. Second, connected to governance, dissension — decision-making gets hard and muddled as the family grows larger, there's no longer a single person making decisions, and no functioning governance system replaces that, so agreement becomes harder to reach. Third, disconnection — people lose perspective, become passive beneficiaries rather than engaged owners, and grow reluctant to contribute their time and talent to family councils, investment committees, or boards. Fourth, distrust — family enterprises run on trust between owners, family, and employees, and when leaders lose the support of shareholders, the next generation, or spouses, it becomes very hard to keep things going. Fifth, disruption — like any business, the world changes around you; many companies are rethinking how AI affects their operations, whether they're still relevant. Sixth, discontinuity — things stay static across a long leadership tenure, sometimes 20 or 30 years, and then change arrives suddenly, and the family fails to navigate that constellation of changes.
There's a mix of strategic decisions you can get ahead of, but fundamentally, at the core of any family enterprise are relationships — and you have to find ways to reinvent them over time to handle these natural challenges.
R. Adam Smith: Follow-up — looking at the empirical patterns behind these crises, what's the balance of what's actually predictable?
Josh Baron: We have to be careful with empirics when discussing mostly private enterprises — the honest answer to almost every question is that we don't know with real confidence, since it's easy to find success stories and build arguments around them, but we rarely hear from people who tried the same things and failed. That said, in my experience, when I see a family going through a feud, lawsuit, or dissolution, and I assess what they did or didn't do against known good practices, the vast majority of the time it's not because they tried everything we know works and still failed — it's because they skipped a number of practices we have real evidence support success, like having family members work outside the business first, or having boards with genuinely independent directors. In some ways that's unfortunate, but in another way it's empowering — it means doing these things and learning from others with relevant guidance meaningfully increases your odds of making a family enterprise succeed.
R. Adam Smith: Last question — the future of the family enterprise. There's so much happening — institutionalization, expansion, multi-family office formation, large operating company creation, cross-border collaboration, government engagement, technology. What's your view on which families are most likely to thrive over the coming decades, and what qualities create that foundation?
Josh Baron: In a single word: culture. I gave you the "killer D's" — on the flip side, I'll offer some cultural "C's" that define the families best positioned to navigate what's ahead. Families have always had to navigate disruption, and the ones who succeed share a certain approach.
First, choice — an underrated aspect of making a family enterprise work. You don't have to do this — not as a family collectively, and not as an individual. Regularly asking "do we want to continue doing this?" and giving people a genuine opportunity to opt out if they don't want in, is really important.
Second, collaboration — successful families commit to doing the work together. This is a team sport; you can't just have strong individuals. You need people willing to sit at the table, have tough, emotional conversations, and stay committed to working through them together.
Third, change — the constant you'll always have to navigate. You have to be willing to adapt, recognizing that what got you to this generation may not get you to the next — while also knowing what shouldn't change: your bright lines, your values, the fundamentals that stay constant no matter what's happening in the world.
Fourth — successful families never believe they fully understand what's going on; they never think they've mastered it. They keep asking questions, learning from others, listening to podcasts, attending conferences, rather than assuming they have it all figured out.
Fifth, celebration — this work is genuinely hard, owning things alongside relatives day in and day out isn't easy. The most successful families celebrate wins, big and small, and rather than playing the "credit game" — who deserves credit for which decision — they play the "appreciation game." Many families actually end meetings by expressing appreciation for each other's contributions.
Leaning into these elements builds a culture around the family enterprise that gives you the best chance of navigating whatever comes next, both from the broader business world and from within the family itself.
R. Adam Smith: Fantastic. One more minute — you mentioned curiosity earlier. Go a bit deeper on how a family actually builds that culture.
Josh Baron: You build it by asking questions and challenging yourself — and ultimately, like most cultural traits, it has to be modeled by those in leadership. That means saying: "We know we've done well as a family — our net worth, our reputation shows that — but we still need to keep learning." Going to a family business conference together, reading books together, sharing what you learn. It's really up to the leaders — not just the business leader, but the family council, owner council, and board — to foster that spirit of asking questions and continuing to explore, rather than saying "we've got it figured out, look at our track record." It's about never being satisfied, not in a self-critical way, but recognizing there's always a next horizon, and leading the charge to make sure your family is genuinely a learning organization.
R. Adam Smith: Thank you — that's a genuinely undercovered factor, both in creating an accommodating environment for the next generation and in fostering the openness and curiosity that leads to better communication and dialogue. That's a wrap for today — I could talk for hours, and I really enjoyed having you on, representing both yourself and your work with Banyan and Harvard Business School.
One of the central ideas today is that enduring family enterprises aren't built solely through capital, wealth, and legal structures — they're built with intention, through developing people, trust, governance, and responsibility across generations. Families that thrive long-term aren't simply transferring wealth; they're building institutions capable of continuity, rooted in family, values, purpose, and stewardship. Josh, thank you again for these insights and your leadership in the field.
Josh Baron: Thank you, Adam. It's been a pleasure — I really enjoyed the conversation.
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Explore the strategic intricacies of family business success with the RAS Family Business Audiocast. Join R. Adam Smith as he delves into exclusive discussions with global leaders shaping the future of private wealth and enterprise. Each episode offers a rare glimpse into the core decisions driving prosperity in high-stakes markets. Tune in to gain expert insights and innovative strategies that empower family businesses to thrive across generations.
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