Measuring the success of your family office

By Charlie Carr

The definition of family office success will vary, depending on the family and the office. Most often, the purpose of the family office is to promote the family’s legacy. How well does the family office support the family’s vision and hopes for the future, in addition to supporting their financial ability to pursue these dreams? This likely has more to do with maintaining family unity and cohesion, maximizing the family’s human capital (rather than financial capital) or seeing an entrepreneurial spirit and passion persist in future generations.

Once you identify how you will define success, you need a reporting dashboard to track it. This should be a one-page report that tracks what will make the family office a success, as well as factors that could prod the family to say it is a failure. The measures should be both short-term (current year) as well as long-term (five years).

The easy metrics are typically total expense, investment returns, tax liability and fraud. How do you measure family members’ entrepreneurial spirit and passion? One family decided that a partial answer was to track the percentage of family members whose earned income is at least as much as the distributions they receive. Another family tracks level of academic degrees earned and ongoing educational efforts.

Once you understand the vision and desired legacy for the family, the office leadership can help them move toward that vision. If education is a big part of that, the family office can help each family member find ways to further their education or participate in relevant conferences or seminars. If entrepreneurship is important, the office might find relevant speakers for the family retreat as well as provide one-on-one coaching.

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