ENTER THE FAMILY CXO

by Holly Isdale

When businesses are surveyed about failures, studies have shown that 90% of business strategies fail because of a lack of execution.  A great strategic vision is only as good as the organization’s ability to execute on it. Businesses can recover from strategic failures through staffing changes, new product launches or even sales.  For families, however, the cost of failure can be catastrophic. Execution therefor is the missing link between a family’s aspirations and actual results.  Execution is not administrative action to ensure entities are formed or portfolios are rebalanced.  Rather it is the link between strategy and operations that ensures success. 

 

It is comparatively easy for a family to create a mission statement or a values proposition; it is simple to convene a governance body or to create a set of investment policy guidelines to govern portfolio management.  Often a family is able to create a top down “directed strategy,” setting forth its specific values, creating a mission statement or goals.  The family, or the family office, can then monitor the “emergent strategy” of the actual behaviors and decisions made by the family or its advisors. However, the disparity between what family thinks will be done and what actually happens is where families fail.  Taking an idea from the conceptual (“let’s have a mission statement”) to the practical (“how does that mission statement impact family educational decisions or investment policy, if at all”) requires constant focus and action. It requires a dedicated resource capable of making iterative changes to the strategy and ensuring a holistic solution touching all areas of a family.

 

For families of wealth, the evolution of the family “construct” remains one of the most challenging impediments to achieving long-term sustainability and development of that wealth.  The G9 Successful Legacy Family model is an elegant summation of the different areas of focus for families ranging from mission and family governance to selection of advisors, through asset management and family educational issues.  The underlying focus of the model is to encourage families to discuss issues within each sphere, on the theory that greater dialog will increase the likelihood of a family achieving its own vision of “legacy”.  However, model itself was created through the recognition that many families are simply unable to move their vision into a workable family construct for governance, investment and stewardship across all areas of family capital. This is due, in large part, to the complexity of choices they face at every turn.

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Enter the Family CXO or Chief Execution Officer. 

 

The role of a Family CXO is to help a family realize their vision for success by providing strategic integrity – blending the “directed” strategy of a family’s goals with the “emergent strategy” – the actions and decisions made by advisors throughout the process.  The role of the CXO is to help a family define its goals in a clear and actionable format.  A CXO works directly with the family’s leadership to drive a rigorous discussion, at a macro level, to define the “How’s or “What’s” of a family’s expectations.  The CXO should help the family question their assumptions and, where needed, correct the course of actions or set more effective timelines for achieving goals.  A good CXO should have sufficient knowledge in all areas to be able to identify issues, help families determine parameters (and costs) of action and then to oversee the project to fruition.  The CXO also drives further innovation in a family, the constant evolution of “what’s next” that is needed to ensure that the family continues to prosper through transitions.

 

The CXO acts as a quarterback, to employ a US sports metaphor, for coordinating the various activities within a family.  Success or failure of the family’s strategic vision resets upon the ability of the CXO to execute, directly or in partnership with special advisors, on all aspects of the family’s wealth. The CXO should ensure a match between providers and the family’s vision as well as collaboration among advisors to achieve the tasks at hand. Where needed, the CXO can assist the family in selecting and managing advisors as needed as well ensuring the coordinated execution of those advisors across platforms.  

 

The CXO can also help a family understand the relationships between the different aspects of their wealth – how their philanthropic vision interrelates with family educational initiatives; how investment policy guidelines in portfolios need to interplay with trust structure and distribution policies, or perhaps how addition of a buy-sell agreement or private trust company can ensure business and family succession goals.  In addition to substantive knowledge, strategic vision and significant subject matter expertise, a CXO also must have tenacious follow through to ensure accountability across all functions. 

 

For most families, the CXO becomes the lead trusted advisor, part of the family dialog on its continuing evolution.  For other families, a CXO is used to jumpstart a process that has stalled, performing a diagnostic evaluation of where the family could or must focus its energies and helping to prioritise competing demands.  Many families rely on their CXO as a second set of eyes and ears with advisors, ensuring that there is coordination on multiple levels, allowing the family to enjoy its wealth, rather than becoming burdened by the process of management.  

 

Families can spend significant time and money on the creation of estate and succession plans, values exercises, governance structures or manager selection.  However, the success of any plan lies in its execution.  A Family CXO can make the difference between merely spending a weekend in a family meeting or turning the family’s goals into reality. 

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