Different agendas

  • Author : Martyn Gowar
  • Date : April 2013
ABOUT THE AUTHOR: Martyn Gowar TEP is a Partner at McDermott Will & Emery UK LLP and an Editor of the STEP Journal

Do you remember that fallacy ‘All cows are animals, therefore all animals are cows'? I was musing about this the other day when I had two meetings with different family offices and was struck by the difference between them. In both cases, the wealth was similar, but in one there was a paterfamilias who was clearly the person setting the agenda, and the CEO of the family office was there to take orders and implement the strategy that was laid down, both in terms of family politics and in terms of investment management. This CEO is a wise and thoughtful advisor and shrewd in matters of investment, and it was for his skills in that area that he was brought in.

The other case was a family where the family business has been sold and there had been an agreement by the son and daughter of the founder that the funds would stay under central management because neither felt particularly comfortable with that amount of money being drip-fed out to the next generation. The son and daughter get on well, but they have families of different sizes, and marriages and other arrangements are now falling into place, and there are signs of frustration about not being able to get their hands on the money. I think the son and daughter chose the head of the family office to be the image of their strongminded but fair father, whose drive had led to the business being so successful. This CEO is certainly not a pushover, but he has a great drive and vision for what strength the family could derive from their assets. He is being an effective gatekeeper, and the young are beginning to learn how to appreciate him.

“The models are only as good as the strength of purpose that comes from where the control really is operated”

Two similar models of a family office, two very different ways they operate. I bet you could offer more types of approach, different models of breaking up the responsibilities and different timescales in which all these could work themselves out. But it seems to me that the models are only as good as the strength of purpose that comes from where the control really is operated. In my first example, the paterfamilias wields all the power and the CEO is there as a manager – and I say that with the greatest respect. In the second case, control is with the professional manager, and the family are falling in behind his vision.

But it will not have escaped your notice that, at some moment, the dynamic will change. The paterfamilias may die or become infirm, and the professional manager will retire. At that stage, maybe you will tell me that there is a family document that will tell you what will happen next. However, I think that what is most important is the personal dynamic of the next leader, and the problem there is that it depends on who chooses that leader. And don’t get me wrong; I am not suggesting that the choice should be a replica of what has gone before. How often do you see the choice of leader (maybe in your professional firm) being made to supplement a shortcoming in the person replaced, because ‘enough is enough’? A manager to replace a visionary, or vice versa, is so often the choice. It is no different from professional sport, where the captain or manager is rarely followed by the same success.


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