Whose Values & Culture? The Interdependence of a Family and Its Family Office

Family offices don't just enact a family's values and culture, they shape and influence them. This interdependence is critical to understanding family enterprise systems.
Culture and Structure, the Independence of Family and its Family Office

In a simple world, causation is linear and moves in one direction: X causes Y; Y is the result of X. For example, “rain causes the grass to grow.” In the family enterprise world, this story goes as follows: A family has and articulates a set of values, priorities, and interests; it creates a family office to help it manifest those in the world; the family office professionals execute on the family’s desires. The family sets the direction; the family office makes it happen.

In the world as it is, causation is often more non-linear and interdependent. X causes Y; but Y also feeds back into and influences X; ultimately it can be hard to distinguish which causes which. As an example, rain does cause the grass to grow, but healthy grass (or other flora) also influences temperature and micro-climate, sometimes causing more or less precipitation to occur. In the family enterprise world, this suggests that a family office is not always just the embodiment of the family’s goals and interests. It may not merely be the means that executes on the family’s ends. Instead, the family office–as well as the trustees, advisors, and others working in the structures around a family–may influence and even create the family’s values, priorities, culture, and desires. Each influences the other in a complex web of interdependencies that may not always be visible or obvious.

Sometimes this interdependence creates positive feedback loops that benefit the family and the system as a whole. But … not always. Understanding how a family both influences and is influenced by its structures (or context) is fundamental to working effectively in these systems, whether as a family member or a professional.

Making Interdependence Visible: Who Ordered These Swag Bags, Anyway?

To begin to see such interdependence, let’s start with an example. At their initial family meeting, the Smith family’s office staff provided a small amount of standard corporate swag: a binder with materials and a Moleskine notebook for notes. Everyone seemed pleased. The next year, an embroidered vest was added, along with another Moleskine (this time customized with a family business logo) and a custom water bottle. The third year, sweatshirts, another Moleskine (bigger, bound in leather, again customized), and so on. None of it was extravagant. And, as the years went on, it piled up.

Families often spend a great deal of time articulating their values and priorities–in mission statements, family constitutions, and letters of wishes, but also in annual goal-setting discussions, strategic plans, and other expressions of the family’s interests. In general, family office professionals try to follow such guidance. They may start each meeting referring back to such statements, structure their annual goals by them, and help the family keep them current and top of mind. I am not suggesting that family office staff consciously seek to ignore or undermine the values of the families they work for.

And yet, in practice sometimes they do exactly that. For example, a professional family office staff may have embedded assumptions about what it means to provide “excellent service” to the family. The family may espouse teaching its members resilience and avoiding dependence or entitlement, and the staff may diligently work to help the family learn such values (through sessions on “grit” at a family meeting, etc.). But the family office may also provide a level of service and assistance to the family that works against such self-reliance. Young family members may begin to call on office staff for help with a variety of problems that they could–and probably should–figure out for themselves. Office staff may begin to anticipate problems and head them off, perhaps without the family even knowing (thereby eliminating any opportunity for learning). Expectations may creep towards the more luxurious and perfect, as staff–trying to do their jobs well–begin to arrange travel, household management, event planning, and other services in increasingly attentive ways: making sure each family member’s preferred beverage is available at every meeting, even if they haven’t asked; anxiously checking and double-checking that each hotel room is confirmed and has the right pillows or amenities, and so on. Family members may naturally get used to this escalating standard of care, until it fades into the background and becomes invisible to them. Their espoused values may gradually shift as the family office influences their family culture and expectations.

This process may take years, or even generations. Family office professionals may, for example, become accustomed to meeting the needs of a senior generation in a certain manner, and then uncritically or unconsciously transfer those embedded norms and assumptions down to a younger family cohort. This can take many forms: the graphs and reports used to share financial information (which may take days of preparation time to customize in a certain way, even though that format is not really something that a younger generation cares about); the amenities at a family meeting (which may include flowers, food, or decorations that a younger generation accepts but doesn’t really care about); and so on. These myriad decisions made around a family have meaning and import. Over time, context influences character as much as character influences context.

The point is not merely that the structures around a family may enact practices at odds with the family’s stated values and interests, but that the interdependent system of relationships, work flows, assumptions, and processes may actually change the family’s needs and priorities over time. The family may end up being a different family because of this complex inter-causation between it and the structures around it.

Swag may seem too obvious an example–if the family doesn’t want it, then speak up or don’t take it!  The point is not swag per se, but the many small choices that create the context around a family: about hotels, transportation, meeting venues, food and drink, entertainment, facilitation, and on and on.  Beyond the event planning context, there are myriad others:  how information is aggregated and presented; how meetings are held; the physical architecture and design of office spaces; levels of formality in staff and family interactions; how mistakes are handled; how distribution and other financial decisions are made and communicated; what implicit and explicit status signals are sent about different family members (e.g., different generations; in-laws versus direct descendants; etc.), and so on. All of these decisions can subtly alter the family’s sense of itself over time.

To make this one degree more complicated, the choices made by family office professionals are seldom random: they will typically embody a subterranean set of “values in practice” that the family has, which may differ markedly from the stated values that the family espouses. The family constitution may prioritize transparency, but senior family members may in practice instruct family office staff to keep certain information opaque (often for “good” reasons, such as “they’re just not ready for that information yet”). Over time, the family office professionals will learn that “transparency” actually has unwritten exceptions and caveats. They will be enacting the family’s values–just not the set that the family claims to care about.

Culture Eats Structure, and Structure Consumes Culture

To return to the Smith family, the office’s concerns around excellence and service, which led to the swag in the first place, clearly conflicted with the rising generation’s environmental priorities and desire not to be coddled. And, it wasn’t as simple as just reorienting the family office–because these decisions about swag (and many other things) had become invisible to the next generation. The family members barely noticed the hotel venues they had grown accustomed to, or the “hop to” responsiveness in the staff when they made requests, or how rarely staff really challenged family members or provided difficult feedback. Their structures and systems were changing their family culture.

All of this takes place through complex and interdependent processes. Family office staff are forced to interpret family edicts, prioritize between conflicting desires, resolve ambiguous polarities that do not succumb to easy solutions, and make an array of small decisions that in combination can profoundly influence a family. It is in these interstices that the family office’s culture is created, which in turn influences the family’s culture.   Matt Wesley has long argued that a family’s culture will eat the structures it creates: that no matter how good the family’s trusts and policies and estate plans are, the family’s culture will determine whether it can work together and how it develops over time. This is absolutely right, and critical for families (and their advisors) to understand. And, that culture is influenced by the structures the family creates, as those structures (e.g., the family office, the trustees, the committees, etc.) interpret, enact, and alter that culture in an iterative, interdependent process of cultural co-creation.

Put simply, “structure” and “culture” are not two separate things. Each expresses, shapes, and inhibits the other in various ways. Like most seeming opposites, there is no real duality between them: a family’s culture is as influenced over time by its structures as those structures are by the family’s culture. Like Ouroboros, the snake eating its tail, the culture-structure “system” in a family is constantly both creating and consuming.

Structure/Culture Interdependence Can Help a Family to Flourish

Happily, there can be upsides to this interdependence. The structures around a family may exert a positive influence on the family’s evolution. I have argued elsewhere, for example, for “family-focused offices” that prioritize a family’s human capital, not just its financial capital. For a family to flourish, it must focus on family learning and the human development of each individual family member across an array of areas. How is their physical, mental, and emotional health (Human Capital)? How strong are their relationships and communication skills (Social Capital)? Are they learning and growing over time (Learning Capital)? Are they engaged with their community and the broader world in ways that have impact and meaning (Legacy Capital)?  These intangible capitals are as important for the family’s well-being as the investment of its financial capital.

A true family-focused office that stewards the family’s human capital as well as its financial capital can sometimes help the family to become and stay focused on such growth. Such learning initiatives do not always originate in the family as an aside to the financial work of the family office; instead, the family office may be the genesis or champion of such efforts. The family’s structures–such as the family office–may be better able than the family to further the family’s learning and growth. The family office may hire a Chief Learning Officer, create learning materials and experiences that benefit the family, and generally sustain a focus on human development that might be difficult for the family to manage alone. In such cases, the professional structures around the family may draw out and amplify the family’s best tendencies and desires by adding operational capacity to support the family.

Similarly, professional structures–trustees, family offices, advisors, etc.–can sometimes manage family conflict and help to repair or maintain family relationships. Many family office leaders spend a great deal of time on such relational issues within the families they serve. (These professionals often have too little training in this work and too little coaching or support for how to do it well–it is time to see this as a foundational part of the family office role, rather than merely a “sideshow” to the “main” work of investing and risk mitigation.) Healthy, aware, conscientious professionals in the structures around a family can greatly aid with interpersonal, mental health, and other issues that may be difficult for the family to manage on its own.

Again, the point is that over time, this structural support may fundamentally change the family’s identity, in this case for the better.

Structure/Culture Interdependence Can Complicate Personal Sovereignty

There are potential costs as well, however. As already discussed, the structures around a family may erode the family’s stated values, interests, goals, and culture. This is an obvious problem. More subtle, perhaps, are the ways in which such interdependence can make true agency, ownership, or sovereignty–all words that I use interchangeably–extremely difficult for family members.

Family members grow up inside of a context and architecture that is largely invisible to them, and that is often designed to fade into the background. That architecture includes the family office, with its staff, processes, and governance. It also includes other aspects of the “system” in which the family lives, including trustees, family committees and councils, family foundations, and family businesses. All of this structure comes with assumptions, and all of it influences the family. In theory, each rising generation must shape that architecture to suit its needs and values, so that it reflects what that generation wants to effect in the world.  This is the simple causal story, again:  the new generation determines its values, and the family office (and other aspects of the system) respond to those values.  And yet … if the rising generation’s values were themselves influenced by the family office as that generation matured, whose values and culture is it, exactly?  What invisible assumptions, beliefs, needs, and expectations have become embedded and submerged in the family–invisible but very present–through the family office’s work over time?

We are each shaped by the context around us. This includes being shaped by the attitudes and culture of our family, but also includes the structural architectures of our lives. In enterprising families, those architectures can be intensely influential.

This complexity should be a warning to those setting up or growing a family office: beware of the unintended consequences of what you are creating. Look for hidden feedback loops that may amplify ambiguities in the family’s values or culture and play out in unexpected ways over time. Try to anticipate how the family’s culture might be warped by the family office’s professionalism. Don’t assume that the simple causal story will hold; look for ways in which the family is influencing the family office, but also ways in which the family office is shaping the family. Then, with eyes open and awareness of these interdependencies, act together–family and professionals–to co-create the values and culture you really want to embody.

Similarly, for those that find themselves inside a family enterprise system, work hard to surface the ways in which the structures, system, or architecture around you are shaping your assumptions, beliefs, needs, and desires. Pay attention to these interdependencies. As paradoxical as it may sound, look for the invisible influences that you have previously ignored. Only then can a family or individual family member hope for true sovereignty over their lives.

Scott Peppet

Scott Peppet is striving to create the enlightened family office. He writes about the challenges and joys of managing the family enterprise with the hope of sharing ideas with like minded people

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