Case Study: Transforming the Single Family Office and Family Alike
This fictitious case study is based on our experiences working with dozens of Single Family Offices. The name we used in this case study, “Miller Single Family Office”, was chosen arbitrarily.
What Is the Issue?
Founded in 1998, the MILLER Single Family Office (SFO) based in New York City is at a pivotal juncture. Managed by a team of 25 employees and serving about 60 family members across four generations and five family branches, the SFO is facing several challenges at once. On the one hand, the office struggles with high employee turnover, which appears to be driven by what employees perceive to be unreasonable demands on behalf of the family, and insufficient pay given the workload and expected all-day availability. On the other hand, the family council has been struggling to engage family members, particularly the younger generation, in educational and social activities, many of which are coordinated through the family office. They are worried that the family is becoming increasingly disconnected from one another, and that the family office is not effective at supporting the family in building and maintaining family unity and alignment. These challenges have led many family members to question the purpose and the future of the SFO, which culminated in a heated discussion around the SFO budget, pricing, quality of employees and more during the last family shareholder meeting. The family hired Generation6 to assess both the office and the family group, and to support them in defining a roadmap for a sustainable future for both.
Taking One Step Back: Why Is this Happening?
As family groups and family offices grow, many SFO employees find it increasingly difficult to understand and connect with the family they serve. As the family shareholder group expands, individual needs and wants take precedence over collective objectives, particularly in absence of a unifying vision and a strong foundation of shared values. This particular family has a broad array of needs, with older generations primarily using lifestyle and concierge services and younger generations asking for investment and wealth management support. While the family is generally satisfied with the services it receives from the SFO, there are common concerns and frustrations, such as a perceived lack of flexibility, frustration with frequent staff changes, and a feeling of not being fully understood. This is exacerbated by a lack of clarity on the purpose and scope of responsibilities of the SFO: Many family members simply do not to understand what the SFO provides or does not provide. Combined with the issue that SFO staff is required to adhere to standard policies of the SFO that make it hard to meet the unique needs of family members, there is a high level of frustration among both staff and family members.
In essence, the model of the SFO no longer fits the needs of the family that is now much larger and less connected than it was 25 years ago: The SFO staff no longer has close, trust-based relationships with the family members, and the number of family members they serve no longer allows them to fully customize all of their services to family members’ individual and vastly different needs. The family has outgrown its office.
On the family side, the family has not invested enough resources (think time, money, emotional effort) to nurture family unity and alignment – they have half-heartedly tasked the family office to do that, but neither lent support through the family council, nor provided guidance, nor held the SFO accountable to meet their commitment. Family bonds have weakened over time.
While family members can diversify their assets by investing them elsewhere, the SFO depends on the owning family for funding and support: The only way MILLER SFO can get new clients is through birth, adoption, or marriage: Having a satisfied and committed client base is therefore not just important, but existential. As one family member succinctly put it, “without the family, there is no family office.”
The Journey
At Generation6, our initial step always involves a thorough evaluation of the current status of the family and their family office or enterprise. While best practices sound good in theory, they rarely stick, as every family and every SFO is different. The only ‘best practice’ we adhere to pertains to the process, which focuses on making all participants feel heard, included, and valued.
Once we have gained a thorough understanding of the family’s context, we identify potential future paths that consider the unique context and dynamics of each family. Instead of establishing vague and possibly unattainable goals that can be derailed by unforeseen changes or circumstances, we focus on developing actionable plans together with the family and the family office that are harmonized under a shared orientation, while creating space for new possibilities to emerge as the journey enfolds.
For this particular case, we would likely suggest the following priorities:
Clarify SFO Purpose and Scope of Responsibilities: Collaboratively, the family and SFO leadership align around a future-oriented purpose for the SFO, based on current and future needs of the family. This requires the family to first agree on the expectations they have from the SFO, in terms of services provided, cost associated with those services, performance expectations, availability of the employees, and more. It is also valuable to have a process in place to hold family accountable to uphold ‘their end of the deal’, for example when they ask employees to go beyond agreed-upon deliverables.
Balance Scale and Customization: It is impossible to meet every single family member’s individual needs and wants while adhering to broadly generalized policies. There needs to be a conversation around what we are willing to sacrifice to achieve scale (i.e., reduce cost and also the burden placed on employees to satisfy these individual requests). Based on what family and office agree on, sensible policies that balance rigidity and flexibility to meet agreed upon objectives can be crafted.
Positive Workplace: For SFO leadership, nurturing conditions that encourage commitment and mutual support among employees should be front and center – less managing, and more leading the SFO should be the prevalent orientation. It would likely help to offer opportunities for more frequent and unstructured interactions with family members to enable deep understanding of family values, needs, and preferences, and to nurture more mutual trust and connection. In that same vein, reviewing compensation schemes to ensure they are aligned with the expectations of the job, and supporting employees in maintaining healthy boundaries (i.e., unscheduled late night or weekend requests) should greatly contribute to a more positive culture.
Change in Orientation: For the family, elevate the role of the family office from a mere service provider (like a bank) to a pivotal instrument for fostering family cohesion and unity, and endow the office with the necessary resources to do the job well – managing ever increasing family complexity does not come for free. With appropriate responsibilities and talent, the SFO enhances family connectivity and boosts members’ ability and motivation to contribute meaningfully to the family and the enterprise. Currently, the family sees itself more as a client of the SFO rather than its owner. However, for the family office to thrive long-term, a strong sense of ownership among the family is essential – a feeling that cannot be delegated to the family office staff. This will not only enhance the family’s engagement with the SFO, but also boost their commitment to ensuring its success for generations to come.
Summary
In the midst of high employee turnover and an ambiguous relationship with the owning family, both the SFO and the owning family embarked on a transformational journey. At the core of the process was the intention to give voice to both SFO employees and family members, to validate, and to courageously engage in potentially controversial discussions. Successful multi-generational families with a SFO benefit from seeing beyond the SFO client-service provider relationship and stepping into a space of ownership and active participation, creating the conditions for the various other initiatives to take deep root and other possibilities to enfold in the future.
