Scott Saslow, author of Building a Sustainable Family Office: An Insider’s Guide to What Works and What Doesn’t, is the founder and CEO of Palo Alto, California-based ONE WORLD Investments Inc., which provides investment capital and advisory services to help organizations scale social impact; manages an early stage impact investing fund; and manages his family office. He has identified five characteristics that high-functioning organizations tend to share, which he outlines here:
“I tried to outline in the book a new framework for family offices, one that certainly helped me think about the rebuilding that I did but was also borne out of 30-some interviews with other principals and service providers.
“The statistics aren’t necessarily in favor of family office principals transferring ownership and leadership to the next generation. So those families that have figured out how to pass to the third or fourth generation, that’s pretty magical.
“Are there some common things that the more highly functioning family offices — those that are reaching the third, fourth or fifth generation — are doing? I found five:
- Mindset. As a principal, how do you think about this? Is this something that’s going to become your life’s work now that the operating business has been sold? Or, on the other end of the spectrum, do you just think you need some sort of family office activity to take care of the required bills and taxes, and you try to minimize it?
- Mission. I think the more robust family offices have found and identified a mission that really resonates with the principals. That mission might be as narrow as, ‘We want a family office that protects and grows the capital so that the family members can enjoy their path in life.’ Some have chosen a much more explicit mission: ‘We believe in XYZ cause, and we’re really going to lean into that with all the resources of the family office.’
- Structure. Just like when you’re building a house — How many rooms? How many floors? What materials? — there are an infinite number of ways that a family office can be structured. And you want to make sure the tail is not wagging the dog – that you have a structure that is downstream from the mission and what you’re trying to achieve. When a subsequent generation inherits the family office leadership, that’s a very healthy and logical time to say, ‘If we were building this from scratch, would we build it the way it exists now?’
- Talent. I ran a leadership development consultancy for 12 years, and what I learned – and what I try to bring into the family office ecosystem — is that there are very strategic ways to think about talent. Family offices are very hard entities to create and run. What are the needs of the organization? Who has the right capabilities? Is so and so the next one to run it because he happens to be a warm body, or does he actually have the right skills? Succession planning is one aspect of talent that is paramount to having a successful and sustainable family office. So why do only about one-third of family offices have a true, up-to-date, widely communicated succession plan?
- Flexibility. The family offices that are nimble and able to change with the times are the ones that succeed and are the most sustainable. That’s because although family offices do deal with some events that are planned or at least foreseen — the sale of the business, or the death of a key family member — there are also so many unforeseen things that happen in family offices. All of a sudden a family member will decide they want to pull their capital out, or they want to make a huge investment, or there is a cyber hack or fraud. Those offices that can be most flexible are the most sustainable.”
