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What makes a successful family office CEO?

By Edward V. Marshall, Director, Global Family Office Group, Citi Private Bank

September 25, 2018Posted InFamily Office

The family office chief executive officer (CEO) is the leader and the face of the organization. Because of this, they are ultimately held responsible for all the family office services and operations – in good times and in bad.  

The CEO role is also extremely challenging because of its unique blend of strategic, operational, and interpersonal requirements. Having the right experience and qualifications is crucial, but often this is not what sets an excellent CEO apart from his or her peers; it is the relationship and dynamic they have with the family principal – based on mutual trust, respect of qualifications and experience, and shared values.

The skillset expectations for family office CEOs has also developed. Previously CEOs came from very technical disciplines – such as accounting, law, and banking – but today’s wealthy families are increasingly valuing broad managerial and leadership experience for their office’s CEO.

How a CEO is judged is largely dependent on the family office’s mission – which is an extension of the principal’s mission. Therefore, it is important a family office CEO understands fully the family’s values and plans – then sets the family office strategy and hires and manages the right people accordingly.

Strong relationship with the principal

A successful family office CEO understands they are comfortable acting as a ‘servant leader’ and they ultimately report to the family principal. This means they need a lack of pride or ego to modify their strategy when it does not align with the principal’s, sometimes for reasons the CEO believes are unnecessary or impractical.  

A strong family CEO develops a good relationship with the principal built on frequent, honest, and respectful conversations. An effective family office CEO must be able to educate while they lead, acting as counsellor as well as executor of the principal’s commands. It can often be difficult to get this balance right, and is largely dependent on how and how frequently involved the principal wants to be in the family office’s various matters.

Knowing what you don’t know

Another important consideration for both newer and experience CEOs is to ‘know what they don’t know’ in terms of the myriad of new issues that come with running a family office.

As family offices become increasingly professionalized, with their responsibilities and remits growing, CEOs have to understand how they can take on more services. For example, we are now starting to see some family offices hire cybersecurity directors or chief technology officers.

It is vital a family office CEO keeps up-to-date on industry developments and opportunities, but is also honest about their own skillset and what they need to delegate to others with more experience.

Also, traditionally family offices have been inclined for reasons of privacy and security to manage all core activities in-house. However, as their remits expand, they should outsource non-core expertise and hand over inefficient activities, especially where cost-efficient. Family office CEOs must rigorously oversee these third party relationships – as it will be they who are judged on any potential issues.

Different success definitions

A great family office CEO understands that their success metrics are very different to that of their principal.

Often CEOs come out of an industry where revenue, growth rates and profit margins are some of the most important metrics by which they are judged.  However, family offices are different from commercial businesses in that non-financial concerns often take precedent. Even though they have many of the same requirements in terms of reporting - staffing, managing the needs of multiple stakeholders – success is often defined in other manners.

Rather ‘success’ is often evaluated based on a different set of criteria, including: quality of life, investment returns, legacy, convenience, acclimating children to growing up with wealth, and philanthropy. An effective family office CEO will avoid the mistake of focusing on what they believe ‘should be’ important to a principal, to learning what is actually important and dedicating time to those objectives.

Fit and function

Ultimately, what makes a successful family office CEO is a combination of fit and function.  Hiring for functional expertise is apparent, but finding personnel that are a good ‘fit’ for life within a family office can be an entire other skill set.  Interpersonal skills can be often overlooked – but the ability to have the ear of the principal is highly valuable.

Family office CEOs have an exhaustive list of responsibilities, but should always keep their mission and values in line with the principal to ensure they are seen as an integral and critical member of the family enterprise.

To find out more about the senior leadership positions within a family office, read our white paper: Organizational design, strategic leadership, and governance insights for family offices.