Renewing a family office for 4th and 5th Generation
Dilemma: The third generation patriarch of a family office, that controlled a Fortune 500 corporation and many other assets, was approaching 80. He was the glue that held his family, four adult children with their own grown children, and his three siblings and their families, together. The family office was near his home, and several long-term employees served family members and managed their investments. He wanted to shift his leadership to his sons and daughter, who formed the family board of his family branch, and had two representatives on the family office investment committee. After his death, he was uncertain whether his siblings and their heirs would want to continue the family office. His own family was increasingly fractionating, with the re-marriage of one of his sons. He was concerned that the whole structure of family connection would dissolve at his death.
What Was Done: A family council for his family branch was created, bringing together for the first time not just his children, but the two dozen young members of the fifth generation, some of whom barely knew each other. They presented their extensive holdings to the group, and trained them in their responsibilities as heirs. They defined their values and goals for investment, and for philanthropy in their new family foundation. They created clear rules for including the 5th generation in the family investment board. In the family office, they helped the old guard to move on, and hired a new professional manager as a leader. The board set some criteria for accountability and goals for the family office.
Outcome: The redesigned, more professional and accountable, family office won the support of all family branches, and grew to include other families as members. The main family branch continued to connect, and involve the 5th generation in both investment management and philanthropy.
Letting Go and Defining the Future of a Successful Business
Dilemma: Two parents had developed a large, successful retailing business with high visibility in the community. Their four children had key management roles. The father had left active management for a time, but kept returning, making the next generation unsure of their roles and responsibility. They also felt he was not willing to listen to new ideas. There was some question of whether to hire an outside CEO, promote family members, or sell the business.
What Was Done: Create a family council to air family concerns and create a future vision for the business. Help the management team operate independently by clarifying roles and responsibility, and helping the father/chairman withdraw from daily management, but receive regular reports from the management team. Agree to hire an outside CEO, and develop a strategic plan.
Outcome: Father withdrew from daily management, making it possible to hire an outside CEO to groom the son for that role. Strategic planning led to new business directions. Board added two outside members. Two siblings decided to leave the business for new ventures.
Clarifying Roles of Family Owner/Managers
Dilemma: Working together, a father, his wife, and a son and daughter, created a catalogue business that began to grow. All of them worked to make it successful, though the father had another career. The son was named President, the father chairman. As the business grew, there were issues about who was in charge of what, how family members were compensated, and the authority of non-family managers. Conflict was brewing about these issues in the family, and the son felt he had no authority to make decisions.
What Was Done: Family members were simultaneously owners/board members, managers and family. There was no differentiation among these roles, and no clear roles for family managers. The family owners as the board of directors, created a contract with their son/brother/CEO to define his authority. Step-mother and sister clarified that they worked in the business, but were not part of the executive team. A working executive team in which the only family member was the son was formed. Family members agreed not to undermine or make management decisions, and to support their managers. Compensation was clarified and separated from ownership distribution.
Outcome: The management team created a strategic plan, hired two new members, and the business continued to grow. It bought two other family businesses. Profits grew, and family members no longer fought about business issues.