Cultural measures: emphasising the human factor
The EY organization recently explored the topic of family office culture in a virtual panel discussion attended by the EY NextGen network of family business leaders. Held in collaboration with the Hong Kong University of Science and Technology (HKUST), the discussion was hosted by Professor Roger King, Senior Advisor and Founding Director of the Tanoto Center for Asian Family Business and Entrepreneurship Studies at HKUST Business School. During the discussion, Professor King highlighted the importance of the 3Ps to family businesses: preservation of family wealth, preservation of family harmony, and preservation of family legacy and values.
As Professor King explained, the 3Ps are key to family offices because they act as a natural glue that keeps the family together, especially if the family no longer owns the business that originally generated its wealth. Yet the challenges persist.
A number of useful suggestions for integrating next-gen talent emerged during the discussion. By placing a strong emphasis on the human factor, these measures complement the harder structural measures outlined above in the four cornerstones:
Draw on the next-gen’s skills: The next generation of family members will have a wide variety of skills and experiences that can be tapped for the benefit of the family office. For example, they might have expertise in finance, enabling them to help manage the family’s assets. Alternatively, a legal skillset can be useful for formalizing the family office’s structure. And a family member who has studied environmental sciences could help the family office to pursue sustainability objectives through its philanthropy programs.
Offer internships: Internships allow the next generation to learn from existing family office managers – whether they happen to be other family members, third-party professionals, or a combination of the two. A well-planned internship will enable emerging leaders to better understand their family’s values, learn about investment and philanthropy and discover their personal motivations.
Integrate technology: Looking ahead, technology will be essential in enabling family offices to maintain the 3Ps. The next generation, which tends to have strong digital skills, can gain job satisfaction by using technological tools to help the family office achieve its goals.
Foster good communication: Good communication will help to bridge the gaps in thinking and working styles that can exist between different generations. All generations should be encouraged to listen to other generations with respect and to actively seek out their points of view.
Organize events: Events are a great way to bring together family members, especially when they are living, working and studying in different locations. They help to create an emotional bond, rallying the next generation around the family’s values and collective sense of purpose.
Guidance from peers
Overall, the next generation is likely to be more successful if its members have the support of a network of friends, peers, mentors and professional advisors.
As part of polling during our family enterprise and family office online seminar events, leadership succession was cited as the top challenge by nearly one-quarter (23%) of the next-gen respondents. However, another poll found that only 24% of family offices currently have a formal succession plan in place.
Peer groups can provide insights and guidance on how others have pushed forward these important conversations, while also providing insight on how others have depersonalized the selection process; ensuring rigorous yet sensitive planning and preparation; and keeping all family members in the loop through a detailed communications programme.
Many family offices are facing a period of significant change, which is being intensified by the fallout from the pandemic. Integrating the next generation of leaders is fundamental to negotiating the upcoming changes and preserving the family’s wealth, legacy and values. We recommend that a combination of hard and soft integration measures can make the difference between sustaining wealth or the start of less prosperous times.