Demographics and Family Governance: The Vanishing Middle

by Kelin Gersick, PhD

Many of us spend a lot of our time designing and advocating family governance:  boards of directors, family councils, family offices, family assemblies, foundations, and ad hoc committees to decide what to have for dinner.  There is no doubt that responsible ownership requires the right architecture and process of governance.  But these designs are not theoretical exercises, and all of our structures and plans have one thing in common — they need bodies to do the work.  People — family members — are the ones who will attend the meetings, join the conference calls, review the materials and agendas, take their turn at leadership, do the site visits, attend the conferences and informational sessions, and answer the phone when somebody has a crisis or just needs to get something off her chest.

There are a few lucky families that are large enough that finding the volunteers to fill all the governance roles is easy.  Some of them even have to solve the problem of selection and representation.  But many others have a limited pool of candidates, and the work seems to expand faster than the family can grow.  For them the problem is recruitment, and the family labor pool is a critical issue.

Some things can make it harder.  If the family culture believes that only blood descendants of the founders should be eligible for governance, the pool is cut in half.  If there are also gender restrictions, and strict requirements for equality across branches of increasingly disparate size, the pool shrinks further.  Take out the cousins who have moved to Madagascar, and the ones who are busy raising children or struggling with careers or just not interested, and the ones that the rest of the family would never elect to any leadership role no matter what, and it’s easy to see why some families face a serious human capital challenge.

There is also the problem of “governance fatigue.”  I led a workshop a few years ago at the FFI Conference on “Mature Family Councils.”  One of the audience members voiced a common experience:  “At the beginning, we were so enthusiastic, everyone wanted to serve, and we had a very lively discussion and election.  At the end of the first terms, we still had people who had waited for their turn and were ready to take over.  By the third term, we had to go back to some of the original people and ask them to run again.  Now, after a decade and a few elections, it’s a big job to recruit candidates, and some of the old timers are really burned out.”

So where do demographics come into the discussion?  When we look forward.  In 1960, the average family in the United States had about 2.3 children.  By 2010, that number had dropped to 1.8.  If the parents have college degrees — pretty common in the 2nd generation and beyond of business owning families — the numbers drop another 25%.  The result is that over the coming decades the number of available bodies is going to be smaller — maybe much smaller.  We and the families have to take a hard look at practicalities, not just ideal designs.  Should some boards, committees, and councils be smaller, or combined?  Can some be “sunsetted”?  How can we use technology to reduce the travel demands for meetings?  What about in-laws, and younger family members?

Finally, there is an interesting hidden consequence of shrinking family size.  In 1960, of those families with children under 18, about 40% had 3 or more kids.  By 2010, that percentage had shrunk to 24% — and closer to 20% for college educated parents.  So what?  That means the number of middle children has been drastically cut, by almost half.  Without making too much of the complicated research on birth order, there is pretty good evidence — and strong face validity — that there are differences in the typical approaches of different birth order offspring to career and to collaboration.  Oldest and only children are overrepresented as business executives and professionals — ambitious, seeking leadership, opinionated, and anxious.   Last-borns are the paradigm changers — artistic, freedom-seeking, challenging.  The only consistent profession with an overrepresentation of middle children is consulting.  They do not have the access to authority that goes to the first born or the indulgence that falls to the youngest, so they have to learn to use communication, alliances, and strategy to get their share of the family’s resources.  They need to know how the system works, and how to work the system.  That makes them tremendously valuable in collaborative governance.  It’s not just the numbers that will pose challenges — its the scarcity of those essential “process champions,” the middle kids, that will add pressure to governing families in the coming decades.