The success and longevity of family-owned businesses is often credited to the level of engagement of the family members in the business, the investment and management of the family’s wealth, or both. As a boutique executive search and board governance firm that specializes in championing the unique connection between family-owned businesses and family offices and advising family leadership on talent development and strategy, we at RSR Partners have observed what it takes for families to grow and transition their businesses and wealth from generation to generation. While every family is unique in their makeup, values, and culture, we have recognized a few themes that contribute to high engagement among family members. We are pleased to present this series of blog posts that summarize some of the topics and ideas we have discussed with our clients. Key to high engagement is an education program that appeals to multiple generations, includes a philanthropy component, and weaves a talent development strategy throughout the curriculum. Developing such a program can be a challenging and onerous task. For those of you with this important responsibility, we hope this guidance will be helpful.
1: Bring the Family Together
Annual In-Person Meetings
Bringing the family together in-person as much as possible helps members of the family build relationships and develop a bond of trust, fellowship, and rapport. It can be a challenge for members of the family to commit to in-person meetings. Many of our family clients hold a required, in-person, annual meeting and develop an agenda to keep family members engaged throughout the day (more ideas below).
Developing a Family Charter
If a family does not have a mission statement or a charter, developing one is essential. The family members can revisit the charter during the annual meeting every year. Annual meetings are also a great time to educate and discuss the family’s history and legacy thus far, so that family members are reminded of the effort taken to accomplish the achievements and success the family enjoys.
Overview of the Family Business
The annual meeting agenda also usually includes an overview of the strategic plan for the relevant family business, an explanation of the family’s assets and investment strategy, general educational sessions around financial management, and information regarding the family’s philanthropic efforts. Future blog posts will take a deeper dive into how to educate family members about the business, tailor and evolve the educational sessions for various generations, and discuss the family’s assets and investment strategy.
Another great way to get families together – and to engage with the up-and-coming or next generation – is through an annual “philanthropy day” or session during the annual meeting. A member of the family office can describe what philanthropy is, explain the various categories, and how the family currently contributes wealth and time to these causes. Some families have come up with mock (or even real) dockets and portfolios for the family members to build. This allows the family members to think through their passions and interests and learn from their commitments and mistakes. Some of our clients have done this with family members as young as 7 or 8 years old! This process also often helps family leadership to identify the family members who have an interest in philanthropy and the ability to strategically approach investment opportunities.
Regular Trust Meetings
Many of our family clients also hold regular trust meetings in addition to the annual meeting to ensure that the family members are educated and have a positive relationship with their wealth. Recurring meetings help to remind family members of the importance of understanding the trust instrument, who the beneficiaries are, and how inheritance is distributed over time. Family members who are educated and prepared for milestones tend to handle the related responsibilities with more ease.
It can sometimes be helpful for the family to take time during annual meetings to discuss any disruption or disconnection that has impacted the family, the family’s business, wealth, or philanthropy efforts over the previous year. A third-party facilitator or moderator can help with these sessions. It is healthy and productive for the family to acknowledge challenges and work together to overcome them.
It can similarly be helpful to acknowledge that some family members, as well as some spouses, partners, or others who have married into the family, may not be allowed to participate in trust meetings, or other aspects of an annual meeting, depending on the trust documents and how decision making is conducted. Our family clients suggest developing a family inclusion policy that outlines when and how a non-member of the family can be involved in business or family initiatives. Many of those who marry into the family have their own careers and independence but desire to have a voice. Allowing the “outlaws” to have their own session, perhaps with a moderator, at the annual meeting to discuss their roles and how they can contribute tends to be beneficial.
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In sum, families that own businesses and have family offices, and have transitioned through multiple generations successfully, all emphasize that an in-person annual meeting is an important opportunity to underscore and reiterate the family’s mission statement and to build trust and appreciation for one another.
In our previous post, we discussed how the success and longevity of family-owned businesses are often tied to the family’s level of engagement. Family offices are uniquely positioned to provide education programs that can deepen this engagement with multiple generations, resulting in smoother leadership succession. Bringing the family together for an annual meeting that includes educational sessions is a great first step. Additionally, family leadership should consider the various pathways each family member could follow as they mature and develop.
2. Establish Education Pathways
Generally, family members fall into the following categories: (1) business management/leadership, (2) board member, (3) shareholder, and/or (4) family member. It is best practice to develop an educational program for each pathway, even where many family members may fall into more than one category or move between categories at different point in their lives. A distinction between pathways helps family members understand the varying responsibilities related to each role.
A course schedule and timeline can be developed for each pathway. For the management/leadership tract, consider why and how family members become interested in the business. There may be opportunities to host sessions specifically to inspire curiosity about the business, the relevant industry or market, and the family’s legacy. Next, chart the relevant topics and substantive knowledge the family member should master into a 5- or 10-year roadmap to track progress and set milestones and expectations. This process also serves as a great opportunity for dialogue between family members and current leadership/management to ensure alignment. We note that this pathway should serve as a supplement to, and not a replacement for, a family member’s formal education processes, and it will be most effective when tailored to identify critical gaps in knowledge or experience relative to the family business.
Also, regardless of the pathway, there are some basics that should be covered for those interested in a role with the family business and managing wealth. Spending the time to have these conversations with a combination of older and younger generations can be critical to business transition and succession. We will discuss potential program sessions in our next post.
For the board member and shareholder pathways, consider desired traits and prior successes (and failures) of productive board members and shareholders. Examine the information that will be made available to them and explain key performance indicators that will be used to measure success. For board members, essential topics might include fiduciary duties, responsible decision-making, roles of committees, communications, and maximizing interactions with other board members.
Some family members will either be uninterested or unable to participate in the family business, but their importance to the overall health and success of the company and family should be recognized with an educational pathway. Consider sessions that help parents advise their children as they mature and gain a deeper understanding of the business and their wealth. All family members could benefit from lessons on risk and the potential impacts of their unrelated activities on the family business. Additional ideas for sessions, facilitated or moderated by a professional, include handling stress, publicity, and family dynamics and support.
Prior to each annual meeting, it is helpful for the family office to consider performance and progress through various pathways and then set (or revise) educational goals for the coming year. These goals can and should be aligned with the company’s business plans and/or the family’s wealth management and investment strategies. This prioritization then creates the foundation for sessions at the annual meeting and provides ideas and a trajectory for ongoing courses throughout the year. Blocking dates and times for the ongoing programs at the annual meeting can help establish a rhythm and keep family members on track. An added benefit is that this process demonstrates transparency to all generations, sets the stage for the year, and hopefully furthers trust and buy-in for the educational process from family members.
It may also be necessary to assess whether an individual has the capacity to fully commit to a program. Creative topics can help engage this audience. Knowledge of the courses and timeline for each pathway also empowers family members, as they understand the resources available and can contribute ideas around how each topic is covered. Courses can be mixed and matched depending on how family members learn. The courses can be run by the family office, or can be via an educational institution, professional services firm, guest speakers or others.
Lastly, an advantage to establishing educational pathways is that the process helps leadership observe the development of each family member, gain a sense of each individual’s skills and capabilities, and gauge interest in the business or in wealth management. It can be helpful to identify and create criteria or attributes that are associated with success in each pathway and then put assessments or other tools in place to determine when each individual develops necessary qualities and demonstrates the capabilities to advance to the next stage of their progression. These assessments can include online testing, probing different leadership experiences, or formal written evaluations. This is particularly common for family offices involved in operating businesses. These benchmarks can help family members take the educational program seriously, as they will see and experience how participation and successful completion of programs coincides with their progression within the family business.
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In sum, establishing educational pathways can help family offices and family-owned business engage multiple generations of family members. Spending the time to consider the milestones along each pathway will help facilitate and guide family members to becoming and remaining productive contributors to the business, the family office, and the family itself.
Upcoming Blog Posts:
3: Areas of Education and Who Handles Education / Education Options
5: Education & Succession and Impact of Family Culture on Education
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About Our Family-Owned & Family Office Team
Our dedicated family-owned & family office team focuses on attracting best-in-class investment, financial, operational, and general management talent to the unique benefits of working within a family office. As family offices become more professionalized, with more robust internal investment teams, higher quality investment reporting, and more incentivized compensation structures, clients have relied on us to persuade candidates to move to a family office environment. Our work across traditional asset managers, endowments and foundations, alternative asset managers, outsourced CIO firms, and private wealth management firms enables us to recruit from a broad and diverse candidate base. We have a strong track record of success, and in many cases, we have been enlisted to build our successful candidates’ teams and eventually to recruit their successors. With patient, long-term pools of capital, family offices are increasingly viewed as a stable and stimulating investment management platform, requiring the “best-in-class” talent that RSR can provide. Examples of positions we commonly fill at family offices include:
- Chief Investment Officer
- Chief Operating Officer
- Executive Director
- VP of Operations
- VP/Director of Sales & Marketing
- VP/Director/Manager of Human Resources