Updated: Aug 28, 2020
Your family is similar to a corporation—it’s a group that needs to make money and use the profit wisely to continue to exist and to grow. Decisions made by one or more members affect the outcome of the family entity as a whole and the individual parts that make it up. By acting like a thriving corporation, your family can be more successful.
A McKinsey report offers several characteristics shared by corporations who make good decisions:
Big-picture thinking – evaluate the decision as part of the firm’s comprehensive decisions, putting organizational goals ahead of business unit goals and building consensus across business units.
Transparency – rely on openly discussed criteria for the decision
Manage risks – pay attention to the risks of the project, examined through the financial ramifications, sensitivity analysis and the relationship of those risks to the risks of other projects
How do each of these translate to your own family financial operations?
The Big Picture
In your family, you’ve got just one pot of money for everyone. When the money is gone, the pot is empty for everybody. How do you decide to use the family money so that it meets everyone’s needs without running out? In our family, we've tried to create an environment where each of us in our family can use the money we have to satisfy needs and wants. That requires compromise, and inherent in compromise is that no one gets exactly what they want. It’s helpful when families tend to like the same sort of thing like sports or adventure travel so funds can be directed toward those ends. But even when family interest are diverse, knowing your turn is coming can make it easier to wait while family money is used to advance another’s goal.