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Change management for family offices: 5 key considerations

Defining success helps family offices evolve toward their goals


Authored by RSM US LLP

For a family office intent on applying lessons and seizing opportunities to improve the enterprise, it is only natural to embrace change. The benefits of digital transformation, in particular, seem straightforward and usually align with the family office’s mission statement.

Implement new software to enhance financial reporting? Of course, let’s put our data to work for us.

Automate manual tasks to free employees to add value elsewhere? Yes, let’s create efficiencies and a more rewarding experience for our staff.

Strengthen cybersecurity controls and protections? A no-brainer!

Change, however, is easier said than done, and the special traits of a family office underscore that truth. Family dynamics, complex wealth and lean staffs can challenge a family office on top of standard change management issues such as systems training and workplace culture.

“With families and family offices, it’s a bit different from a typical corporation. For any type of change, working through the family dynamics is a very important consideration. But even if there is resistance at the beginning, once they start using their new processes or systems, it becomes the normal way of life—and it becomes so much easier.”

—Christina Churchill, RSM’s national family office consulting leader

Indeed, change can be beneficial without being painful. As your family office evolves toward its goals, consider these five change management issues.

1. Defining success

Just as it is critical for a family office to anchor itself by defining an overall mission and corresponding objectives, defining success for any change helps incentivize new behaviors, clarify tactical focus and alleviate potential conflicts among stakeholders. This applies to any type of transition, from implementing new technology to changing people’s roles and responsibilities.

Tom Kane, RSM’s organizational performance and change management leader, equates change to negotiation—and the definition of success guides the related thought processes.

“Most people do not change something unless there’s a value proposition they are trying to achieve,” Kane says. “What is going to be the value created for the family office, what behaviors does it need to get there, and then what should the plan be for establishing those behaviors?

2. Aligning stakeholders

When a family office uses input from a comprehensive group of family members to define a successful change, it erects guardrails for the transition.

“It takes away the passion of human behavior,” Kane says. “It enables you to say, ‘We agreed that this is what success looks like, and what you are suggesting does not fit into our road map.’”

Those conversations are not necessarily easy, though. Churchill recalled a family office in which the second generation sought technology to facilitate mobile operations, which was not a priority for the first generation. In another family office, a sister’s desire to use family funds to start a restaurant, despite her inexperience in that regard, ran contrary to the family’s investment objectives.

“With family offices, the work element and the personal element can be so intermingled—there can be some conflict,” Churchill said. “Sometimes it’s big dollars, sometimes it’s an emotional investment. A lot of it requires negotiation."

3. Managing relationships

Technology that alters the roles or responsibilities of family office employees often challenges relationships built on trust and loyalty. Single family offices, in particular, commonly face this issue because of a small staff or employees who have served the family for many years.

Churchill worked with a single family office whose controller had access to all of the patriarch’s passwords. As the second generation assumed leadership roles within the family office, members sought to strengthen controls for data access, but the patriarch was worried that the controller would interpret a change as a sign of distrust.

“If my controller feels I don’t trust her, then she is not going to trust me,” Churchill recalled the patriarch saying.

In that case, facilitating change required a shift in perspective. Churchill encouraged the patriarch to think of the strengthened controls as reducing risk for the employee; under the status quo, a data breach would have resulted in an unpleasant narrowly focused investigation.

“It’s not just about protecting your family,” Churchill said. “It’s about protecting your people. Thinking through change in that way—the emotional ties you have in a family versus a corporation—is very different.”

4. Setting expectations and updating processes

Kane’s four decades of helping businesses improve organizational performance have taught him that resistance to change stems from three factors: fear, uncertainty and doubt. And the biggest driver of those? “Misaligned expectations,” he says.

This is another benefit to clearly defining success for any type of change. Without that, Kane says, employees tend not to relinquish processes that the change is designed to upgrade. For example, a family office employee might cling to managing investment data with spreadsheets instead of embracing the new automated and integrated finance and accounting platform.

“Then five years from now,” Kane said, “the family office realizes they paid for a more expensive engine but put it in the same old car.”

Effective change also requires adapting to new capabilities. For example, if a family office implements a new finance and accounting platform to enhance reporting and scenario planning, then employees and the investment committee must evolve accordingly.

“There may be a set of reports that the family is used to seeing,” Churchill said, “But with all the available real-time data, their needs and wants are going to change. The family office needs to match the tool to the new processes.”

5.  Training and education

Education programs in family offices vary in quality, and many family offices lack the learning and professional development opportunities of typical corporations. It is also common for family office employees to remain with the same enterprise for long periods, which limits the variety of their professional experiences.

“These shortcomings inspire a greater fear factor in employees about a new system being implemented, as they are afraid no one is going to show them how to use it,” Churchill said. “All they know is what they have seen.”

A family office that trains and educates stakeholders about new tools—not just about how to use them but also the purpose for implementing them—invests in the logistical success and cultural adoption of change. Being realistic about growing pains during the transition helps to set expectations and maintain focus on long-term objectives.

Training could also help the family office and an employee when new technology automates or reduces the employee’s tasks. For example, consider someone who handles accounts payable and human resources, someone the family appreciates for their organizational skills, interpersonal flexibility, situational awareness and trustworthy character.

“Don’t you have another job she can do?” Kane says. “Does she want to learn something new? Does she want to advance her skills? Those are questions you have to ask.”

The takeaway

Progress and change often go hand in hand. When your family office understands how its unique circumstances affect the ease at which it evolves, you can proactively address challenges. Effective communication between family members and family office executives always helps to crystallize objectives and set expectations. When that occurs, a family office positions itself to pursue its mission and strengthen the family’s legacy.

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This article was written by Christina Churchill, Tom Kane and originally appeared on 2021-09-17.
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