Leadership decisions, particularly at the very top, can be a minefield for family businesses. Family Offices have a unique environment that requires a juggling act from the top role; they must centralize, preserve and transfer significant family wealth across generations. This process can also foster valuable discussions on the creation and measurement of value. For every family member on the board, one external, nonfamily member is also nominated. Family offices usually begin as small operations focused on managing the wealth generated by existing businesses.
They share insights relevant to investment opportunities, such as analyses of market multiples and macroeconomic projections, and critical metrics, such as targets for the internal rate of return, to guide the investment process. But as a result of poor talent management, many fail to thrive or even survive. Real assets are those that allow the family to exercise some degree of management authority over the underlying asset. The interviews, conducted in person in the local language by Egon Zehnder consultants around the world, were audiotaped, translated into English, and coded. That includes their values, which is very different from a résumé that says this person built up the Russian business. At a Japanese consumer business, the board appointed a family member who had risen through the ranks. Greater transparency can lead to greater knowledge sharing and from this development of better benchmarks to move families forward.
For this reason, an increase in outsourcing to improve cost-efficiencies is expected. And yet family-owned or -controlled businesses play a key role in the global economy. . If so, are the various roles, responsibilities, and incentives aligned to promote effective support in these areas? Twenty-eight percent of international families, family offices and family businesses have already been victims of cyber-attacks, according to a new , and this trend is expected to escalate going forward, unless family offices draw up the necessary cybersecurity policies and governance structures and address underinvestment in the required information technology systems. Digitization Family businesses, especially those that are underinvested in technology and systems, should be aware that going forward if they wish to remain competitive and sustainable. Meanwhile, 94% of the surveyed firms were controlled by supervisory or advisory boards of about nine members, on average.
A family office needs clearly defined governance mechanisms. Family offices should be open to sharing best practices to insure proper controls exist and are followed consistently and appropriately. A big part of it is mindset. We can provide you with the accurate and unbiased information you require to make vital decisions. At the same time, this should not only look at financial indicators but at the organizations as a whole. But in the family businesses we studied, values seem to be the acid test. The Doosan Group, a South Korean conglomerate, was thrown into turmoil when the clan that runs it replaced one brother with another in the chief executive role.
This will require improved analysis and reporting models and tools that provide an at-a-glance, yet dynamic, view of business health. Those that do continue often see their value decline significantly as a result of mismanaged succession. Fewer than 10% said their companies were effective at attracting, hiring, retaining, or firing employees or at leveraging diversity in the workforce. Even among the leading companies in our study, a quarter of the nonfamily executives we interviewed said they originally had governance-related concerns about joining a family business: uncertainty about levels of autonomy, hidden agendas, lack of dynamism, and the potential for nepotism and irrational decisions. These might include majority ownership positions in another company, minority positions with board representation, or real estate investments that entail active involvement in development or management. Financial assets are securities or other investments that do not give the family influence over the management of the underlying asset. The continued attention to and maintenance of sometimes precarious family dynamics is part of being a leader at a family office.
Family offices should consistently compare their performance with benchmarks. Because the management of financial assets requires capabilities that are different from those needed for the management of real assets, separating the management responsibilities is usually the most effective approach. I am the founder of Simple, a strategy and brand management consulting firm based in Copenhagen, Denmark, that focuses on developing agile strategies for family offices. The family must also have capabilities to evaluate the economics of opportunities and to negotiate and close deals. In one case, a family office was the vehicle through which a family with businesses heavily concentrated in one country managed to diversify its geopolitical risk and protect its wealth for future generations. They focus on the next generation, not the next quarter. Furthermore, to be cost competitive relative to external providers, the family office should ensure that its front and back offices and its transaction systems are optimized for operational efficiency, the specifics of which will vary with the amount of capital managed.
Another family sold its business after many decades as a leading national food retailer and set a new aspiration: to become a global financial investor. A leader carefully weighs all the possibilities, once a decision is made, and understands that wavering is not productive…while at the same time remaining flexible to the possibility of shifting course if new information or feedback arises. To find out more or apply, please We also offer a limited number of Corporate Partnerships through our Resource Council. Create policies addressing social media use, public wi-fi, identity protection and minimising risk from the internet of things. The firms we studied usually have one key family member but up to three standing at the center of the organization, like the sun in our solar system. © 2019 Family Office Association All rights reserved.
Our attention to detail — during and beyond the planning process — provides the most cost-effective, timely and valuable service available. The family office might support the family in determining the best uses—for example, building an entirely new business portfolio or pursuing new initiatives in philanthropy—of the liquidity that results from the sale of a business unit. Family representation on these boards averaged 46% in Europe, 28% in the Americas, and 26% in Asia, but a clear separation between family and business existed in most cases. Managing family wealth presents unique challenges, because the required capabilities are, in many situations, quite different from the entrepreneurial skills that enabled the family to build its thriving business. A leader carefully weighs all the possibilities, once a decision is made, and understands that wavering is not productive.