Do I Let My Company CFO Into My Family Office?

“Badges; we don’t need no stinkin’ badges.” – quote from “Blazing Saddles” by Mel Brooks. (Believe it or not, this is a “misquote” from a 1948 movie.)

There is no doubt that in any business a CFO can be a very valuable asset. The ability to translate the vast array of data into understandable, user-friendly and actionable information for both internal and external stakeholders is truly a highly-valued capability. In most cases, there is an unwavering trust in the CFO and having him or her in the Family Office just seems like an extension of their fiduciary responsibility. In addition, in many cases the CFO believes they have earned the right to take on this responsibility – that in fact they “don’t need no stinkin’ badge” to assume this role.

However, the position specification for a financial/operating leader in a Family Office is much broader than what is normally found for a CFO of an operating family business. When there is an operating entity, the focus is on the mechanics of that business – pricing, people, profitability and cash flow. This is a playing field where most CFOs are very comfortable and where they have gained the bulk of their life experience. But in the Family Office, the CFO has to deal at a much more personal level with individual family members. The CFO may be seen as the older generations’ “person” and may find themselves catering more to the needs of that older generation when the real needs may be those of the next generation. The CFO may have little patience for those with limited financial experience and may not be able to provide the guidance required to all family members. The requisite tasks also become much more “treasurer” based, investment performance, dividend yields, capital markets, etc., versus operating profits. This experience may not be in their “bailiwick,” and while they may be able to provide some guidance, they actually may be somewhat lost in that environment. The need to understand taxes; estate planning and wealth management may be foreign to them and simple tasks such as paying family members’ bills or providing appropriate financial education can become a bit of a challenge.

So, if you are going to consider allowing your company CFO into your Family Office, you or an advisor should assess the overall skillset, including the interpersonal capabilities and the trust and confidence that various family members have in that individual. It is not a standard “rite of passage” that you allow your Company CFO into your Family Office. I had the honor of working with several CFOs as the NY Managing Partner of Tatum and I can tell you not all would fit in with what I envision as the CFO in a Family Office. Make sure you consider the real DNA of your CFO before making this decision. In the end, if there is a match, he or she does not need a “stinkin’ badge” to be a valuable and integral part of your Family Office.


Kids in the business- Can it work?

“Kids suck” quote from James Beaudette – my very close friend

Jim and I have been friends for over 30 years. We first got to know each other when we began coaching our sons in soccer and our relationship has grown since then. We each had three children and many conversations would inevitably turn to something one of our children had done, which we would both find hard to fathom. The conversation would usually end with Jim stating his conclusion which we both share.

After 40+ years of consulting with family businesses, I could tell you stories about children in my clients’ businesses that would make your head spin. Some had unbelievable success; some abject failure; some were responsible young adults and others entitled brats, I have seen it all. I would almost be embarrassed to tell you how many times I had to lean in to a parent or parents and confide what Jim had taught me long ago.

But out of these experiences came some valuable advice on how to handle kids in the business. Now some of this will sound like motherhood and apple pie, but I have found that it does work. So here are three pointers.

The first is, family is family and business is business. I watched a young son take a $20 million business to over $1 billion in 20 years. Two young brothers who had worked part time in a business stepped up when their father passed away and turned it into one of the leaders in their industry. I also watched two brothers who were in dispute over leadership resolve their differences by craftily splitting the business resulting in two household name consumer products companies. The common theme here is while they shared that important bond of family, they never let family issues blur what they had to do for the business. It was appropriately striking this balance that resulted in each of their successes.

The next is when kids are in the business, be honest with yourself and your children. This is most important when you face major milestones and one that comes to mind is succession planning. I have done more than one succession plan where the end result of my work was that the oldest sibling did not become the heir apparent. They all ended with both successful transitions and with all talking to one another at Thanksgiving. I would love to take credit but it was the direct result of honest dialogue about the objectivity of the process and the importance of keeping the business sustainable. I have also walked away from assignments where the parents wanted me to “anoint” a family member as the next leader. To quote “In Living Color“, “Homey don’t play that.”

Finally, know the difference between being a mentor and being a parent. This is perhaps the toughest task of all. Too many parents make decisions as a supervisor (in one case to support the project a daughter was proposing that had little merit) with their parent hat on versus their mentor cap. This can enable bad behavior, lead to the ill-fated “bosses kid” syndrome and doom your child to failure. So while I am sure that on occasion you will reach Jim’s conclusion about your kids, try to be disciplined and follow some simple rules and you will find kids in the business can work and your family business will beat the odds of next generation success.

It’s Just Personal; Nothing Business – A Lesson for Family Business Owners

Quote: “No good deed goes unpunished”  – Clare Booth Luce

In the “typical family business,” many of the issues which arise appear to be centered on one common thread; a lack of clear communication.  To illustrate this, I will recall one of the more unique family business problems I was asked to help resolve.

IThe-Godfather-marlon-brando-9109847-1191-842 assume most of you will recognize my “twist” on the famous line from The Godfather.  I must admit, I struggled between this and the famous quote from Clare Booth Luce and decided to sight both.  The relevant background (modified to protect the innocent) is a parent of a very prosperous family-owned business who decided at the end of one particularly successful year to bestow upon his four children an equal and substantial amount of money.  It should be noted that all four were shareholders as well as employees in that business.  So far, so good; so what can go wrong?

The answer is misconception due to poor communication.  While each of the siblings was involved in the business, they all played significantly different roles.  So, immediately, each sibling reflected on what they received and each thought they were entitled to more because they felt their contribution to the business was more substantial than any of their siblings. The infighting began, became very intense and eventually led to the inclusion of the second parent who began chastising the first parent for being insensitive.  (Booth Luce was right!)

Astonished, the parent who gave the money could not believe what was happening and asked me to intervene” to straighten things out as they’re getting worse by the day.”  The solution, though relatively simple, took a bit of time to communicate.  Each of the siblings had interpreted the amount received as a “bonus” for a job-well-done when in fact, it was nothing more than a gift from a thoughtful parent.  While their roles may have been different within the company, as siblings they were on equal footing and thus were given an equal amount of money.  It was personal; nothing business.

In a typical job environment, employees and their bosses are communicating in a bit more of a structured fashion and it is usually clear when conversation is drifting from business to personal topics.  This is not the same in a family business.  It is not unusual for business to work its way into discussions at family events and soon lines get blurred between what is business and what is family.  I think the average family-owned business has to concentrate a bit more to ensure that business communications remain just that and that it is clear when the conversation is drifting to the personal side.  All that was required here was to state the reason the sibling was receiving their money – – it was a gift and this never would have been an issue.  Interestingly, this did have a happy outcome.  The client subsequently put in place some simple position descriptions that helped each sibling better understand their role in the business and so far, that seems to have worked just fine.