Family members can fill a number of roles in family offices: They may sit on the investment committee or the family office board, or in some cases may take an active role in the management of the office. But choosing family members for these roles — like assessing whether a family member is qualified to work in or lead a family business — can be fraught with emotional complexity and potential conflict.
Many families try to avoid these pitfalls by developing clear criteria for family members who want to serve in various roles — and then providing development paths that can help them meet those criteria.
Craig J. Duchossois, chair emeritus of Duchossois Capital Management, says his family has eligibility criteria for remaining a shareholder, working in the family business or serving as a board observer, which is a step toward being eligible to serve on the board. The governance and nominating committee, which includes independent members, evaluates potential board members’ qualifications. And the family provides opportunities for younger family members to gain experience.
“We encourage all next gens to participate in the family council and family foundation in an appropriate leadership role,” Duchossois says.
Choosing family members for family office roles starts with clarity about what is needed.
“High-performance family offices borrow tried and true practices for talent management from the boards of public companies,” says Scott Saslow, founder and CEO of ONE WORLD Investments. “To know who to hire, and what skills to develop in current and future leaders, one must take a strategic view toward talent management: understand and document the necessary capabilities of the leader to successfully execute their role, based on the organizational direction and realities of the family office.”
This list of capabilities can guide both the assessment of potential leaders and development plans for current or future leaders — with the understanding that the skills to be an owner or a leader in the family office can be gained in a variety of ways.
“Developing the ballast and wisdom of ownership can take many paths,” says Peter Begalla, founder of JPB Consulting Group. “There are a lot of different avenues by which to come to good judgment, good character, an understanding of the family values and an understanding of the tradeoffs that exist in a larger family enterprise.”
Checklists of technical skills may not always be the best way to assess whether a family member is the right fit, Begalla says.
“Even though the technical skills are important for many roles in the family enterprise, the real character elements you’re looking for are emotional intelligence, wisdom, good judgment, dealing with ambiguity and understanding risk,” Begalla says.
Even more important is to focus on the qualities needed, rather than the specific education or career path an individual used to acquire the skills.
For example, a position might require financial acumen, management training and the ability to manage a project and deal with urgency. The family member who worked for a consulting firm as a project manager could demonstrate those skills — but so could one who had been the president of the elementary school PTA.
“The pathways in can be multiple and varied, and you don’t necessarily want to police the development plans,” Begalla says. “But you do want the image of that good judgment, emotional intelligence and some technical facility, depending on the role. How people get to that picture is up to them.”
Begalla recommends a portfolio approach to assessing family members, evaluating them on mindset and temperament as well as on specific skills and knowledge. There are some risks to this approach — in particular, it requires more judgment calls than checking off items on a checklist.
“Technical skills may be part of the profile, and the person is going to acquire them in different ways,” Begalla says. “If you had somebody who had the technical skills but who did not exercise good judgment and was misaligned by 10 degrees from the family’s values, would they get the position? No. The most important thing is emotional intelligence, to navigate complex relationships.”