Continuity Model Generation

Keystone Meta-Framework

Knowledge of this meta-framework's keystone, four theoretical approaches, two logics, and three circles will enable anyone to understand and interpret with some authority the complexity of the tripartite family, business, and ownership landscape as well as gain insight into how these areas function independently and interdependently.

Four Foundational Theoretical Approaches

Agency Theory

Agency theory explains so much of the world. Originating in arguments presented as early as 1932, agency theory describes what happens when owners appoint others to act on their behalf—or, in the theoretical jargon, when principals appoint agents. The core argument is that any organization, at some point, will reach a stage, due to growth or expansion, where the principal cannot do everything that needs to be done, so they must appoint someone to do some of the work. This eventuality brings about or facilitates a cost: the person, or agent, appointed by the principal to act on their behalf will require monitoring, which incurs agency costs, also known as monitoring costs. As a leader of a third-generation European family enterprise shared insightfully, “My sole job is to reduce agency costs.”

Broadly, then, the job of a leader is to put in place mechanisms in the organization to ensure that agents’ behavior is aligned with interests of the principals. This alignment is achieved through incentives and perquisites.

Importantly, agency costs occur throughout an organization. ...