Business

Tensions between families and their own family offices are rife – could a chief learning & development office help? 

Nearly two thousand years ago, Juvenal, the Roman satirist, queried the governance of a household guard: Quis custodiet ipsos custodes? Who will guard the guards themselves?

He said guards could not be trusted to stop acts of depravity if they were also corrupt. He added: Crimen commune tacetur. The common crime keeps its silence. 

You get branches of a family who can’t agree on return targets, sparking resignations from the family office. Disputes over succession are legendary

The suspicion, and silences, which can lead to tensions between families and their own family offices continue to this day.

You get branches of a family who can’t agree on return targets, sparking resignations from the family office. Disputes over succession are legendary. Around 92% of families are likely to impair their wealth and wellness after they reach the third generation, according to Crysalia. 

More recently we have seen workplace misconduct allegations against Michael Larson, Bill Gates’ legendary investment chief, as reported in The New York Times. 

It doesn’t need to be that way. Mark Auger, an expert in dynastic advice, believes enterprising family principals can reset relationships by sharing the governance burden with their successors.

Former operations chief to the Savoie real estate family, Auger is chief executive of Crysalia, a Montreal-based consultant which started up in May. He has joined forces with Patricia Saputo, finance director of family office Italcan, a 10% shareholder in the Sapuro, a multi-billion dollar Canadian dairy firm.  Auger’s other partner is organisational psychologist Jean Phaneuf, founder of Analys Leadership.

They want Crysalia to bridge the generations, through the creation of a Chief Learning and Development Officer which Saputo compares to a new member of the corporate C-Suite. 

Crysalia acts as an adviser, or fiduciary, using its third-party experience to shape the new governance structure. Its debut reflects a changing of the guard at family offices which, for better or worse, will lead to the increasing use of consultants by a new generation desperate to avoid being part of the 92%.

The Development Office is core to Crysalia advice package, recognising that the relationship between principals, family offices and the Next Gen needs a new narrative.

It believes it should work with the heads of family legal and accounting services along with the family office. The principals, and their successors, need to be involved – the extent of their involvement would be subject to negotiation.

Saputo is confident of finding members of a Development Office: “There’s always somebody in the family who is ready to begin and once you have that one person, that gets a snowball effect.”

Auger argues the attempt to drive returns from financial capital has come at the expense of human capital. The next generation needs to harness it: “They need insight, and foresight, to recognise the value of social capital and extract opportunities out of their network of relationships.”

Auger recalls advising on a situation where one branch of a family wanted a high dividend from a family business for their lifestyle, while another was happy with a low one. The dispute was so serious that a financial institution threatened to pull the plug on their funding.

A Chief Learning & Development Officer could broker an honest compromise in situations like that, rather than leaving it to others to knock heads together. 

To replace a blocking pattern between principals and Next Gen, Auger says new narratives are needed: “If the family as individuals, or a unit, can close the information gap between themselves, they will be better enablers.”

A new generation particularly needs to know how to get the most out of their family office. Saputo says: “Sometimes a family office tries to put in estate-planning techniques that might not necessarily meet the needs of the family.  They say that’s what’s done. They don’t ask the family: What do you want? There’s great people out there that can manage a family office, but they don’t always have the same skill in using social capital.” 

But a family office can also find it daunting to deal with a time-poor principal. Negotiations with a Development Office should be more effective, as long as the principal is kept completely in the loop.

Families need to agree on financial targets. But Crysalia would not want to undermine family office professionals. Auger stresses: “Our focus is not KPI outputs, it’s the behaviour and processes that create them.” 

Saputo points out a family office can buy, and own, a jet: “But you will want to retain the right professional mechanic to service it and the right pilot to fly it.” 

Auger favours “stakeholder mapping” to make sure the behaviour of executives and investors comply with best practice. He says Crystalia looks out for “tension points” as part of its risk management role.

He can’t comment on Bill Gates and the Larson affair but he said Crysalia works with enterprising families to mitigate such events. For the record, Larson has denied much of his alleged wrongdoing. But the damage has been done. 

Auger warned events which damage a brand had several consequences, including problems in recruiting quality talent: “It’s best to nip problems in the bud.” 

Auger points out families “have an incredibly high impact, socially.” They need to live up to that status. A Development Office should ensure any family business reflects its values, even if the two have grown apart.  

Saputo is aware of this. Her own family is multi-generational, and divided between 100 family members, not all of whom are involved in the Saputo dairy business. She is currently assisting with decision making at Italcan.

“We’re now in our third and fourth generations. That’s why we brought Crysalia in to advise us on the best decisions we could make.”  

She liked Auger’s advice so much, she agreed to back  Crysalia, as well as his ideas. She sees her involvement as long term: “A learning journey will always be in progress because the life of an individual never ends until the final date.”

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