A Proven Process for Recruiting and Retaining Top Family Enterprise Leadership Talent

There is a strong consensus among Family Enterprises that successfully attracting and retaining the right leadership talent to enable them to achieve their long-term goals and objectives and to strengthen family sustainability is critical. However, in the absence of a proven process, many recruiting efforts fail.

Increased access to information and an intensified competitive market are two key drivers requiring family enterprises to implement more formalized, clearly defined strategies in recruiting and retaining key talent. Leaders who align with a family office culture are poised to shape and set the stage for future generations. In fact, most family enterprises seek relationships with their executive spanning 15-20 years. What are the ingredients to getting it “right” and avoiding costly mistakes?

There are six steps that when performed sequentially and consistently, are proven to clearly define the role, the ideal candidate profile and ultimately attract and retain the perfect C-suite. They are as follows:

• Foundations for Success
• Strategic Human Capital Plan
• Assessment Process Design
• Executive Search Process
• Onboarding/Performance Management Plan
• Retention Plan

Foundations for Success

Every successful process begins with laying the proper foundations. These foundations need to be clearly defined, and family consensus and alignment around them achieved before the family proceeds to develop their strategic human capital plan and begin recruiting.

It is important that the family first take the time to define their overarching vision for the future and the mission, purpose, goals, and objectives for both the family and family enterprise. Some families think in terms of a generation or multiple generations; others take a long-range view of 50 to 100 years and some plan for perpetuity.

The family must define the clients to be served by the office, the scope of services to be offered and the services to be delivered in house versus outsourced. These factors have a significant impact on the business plan, organization structure, staffing, and cost of the office. Cost is not always the primary consideration. Some families may decide not to provide concierge or lifestyle services to family members for philosophical reasons (e.g., they prefer to help family members learn to “fish for themselves” versus fishing for them). Other families may decide that the family office should provide bill pay and other similar services in order to help teach family members about financial planning and budgeting. The magnitude of these decisions can be considerable if structure, scope, and size are not tightly defined.

Another critical point – there must be clarity, consensus, and alignment around all of the foundations amongst the family constituents to be served by the family office. Any gaps or differences in opinion must be addressed at this stage before moving forward. Failure to solicit input and feedback from all constituents and gain consensus can lead to a number of negative consequences in the future.

Once these foundations are in place, the family is prepared to design and execute the remaining steps of the process. The family enterprise, like the family, is dynamic versus static. The foundations for the office should be revisited on a regular basis as the family evolves.

Human Capital Plan: Position Description and Ideal Candidate Profile

The human capital plan specifically defines each position in the organization structure. The definition of each position includes the following two essential components—position specification and culture fit. Position specifications involve scope, reporting structure, responsibilities and accountabilities, performance expectations and metrics to measure success. Only then can the family determine the skill, knowledge, experience, and competency requirements as well as the education, certifications/designations required for each role.

Yet, finding a candidate with the requisite experience and qualifications for a position is the only the “first cut” on a search – 95% of the search is culture fit. If the culture fit is not on target, neither the candidate nor the family will be successful. Defining the personal characteristics and attributes, values, behavioral characteristics, leadership, decision making and interpersonal style, and other motivators needed to ensure a good “culture fit” with the family are equally essential as part of this process.

While it is tempting to shortcut or skip this part of the process, investing the time to carefully define the position AND culture fit requirements will help avoid the two primary causes for the failure of family office searches–

• Hiring an individual who is known and trusted but lacks the requisite skills and experience to perform the job
• Hiring someone who has the requisite skills and experience but is not a culture fit

Two other reasons for failed searches are:

• Lack of an effective search process
• Ineffective onboarding, compensation, performance management and/or retention strategies and processes

In the family office world, culture fit will always trump technical fit.

Compensation philosophy is an important dimension of culture fit and may differ significantly from family to family. Some families may choose to compensate their C-suite with salary and a bonus. Others may offer co-investment opportunities and/or carried interest along with other forms of long-term incentives as part of the compensation package. Compensation is driven by competitive market conditions and must also be in alignment with family goals and objectives.

Assessment Process

If you do not know what you are looking for or how to assess whether you have found it, you cannot succeed. If you do succeed, it is only a fluke and not repeatable. A family cannot rely on a miracle to occur. They need a process that can produce a reliable, consistent, and successful outcome.
Once the family has completed the human capital planning process, they have the information needed to develop a comprehensive assessment process that will be used to identify and select candidates. Each family is unique, so the criteria for fit will be unique to each family.
The first step is to define selection criteria consistent with the position description, ideal candidate profile and culture fit requirements. The criteria will also enable candidates to be consistently assessed both in an absolute sense against the requirements as well as in a relative sense – benchmarked to one another. For consistency and to identify the best candidate, it is important to use the same criteria and process to evaluate all candidates – this includes internal and external candidates as well as family and outside candidates.

The next step is to determine which tools will be used in the assessment process. There are numerous tools available, and they are often used in combination. Tools that are most effective include structured interviews, behavioral interviews, open ended questions, behavioral assessments, evaluation forms and case studies or presentations. None of these is a “silver bullet”, but in thoughtful combination can reveal a candidate’s behavior, critical thinking, motivation, and communication style.

Recruiting Process

Whether the family decides to recruit internally or externally, the same assessment criteria should apply to everyone. The search process must be well-defined and structured in terms of timeline, milestones, and deliverables. The individuals involved in the process and their accountabilities and responsibilities should also be clearly laid out.

An effective search process includes a formal targeted search strategy and candidate engagement process. Once candidates have been sufficiently screened, it is time to implement the formal interview and selection process described above.

In defining the ideal candidate, the expectation that there is an individual who will be a “perfect 10” on all criteria is not realistic. In actuality, they will likely be a 12 in one or more areas and an 8 in one or more. The family will select the individual who represents the best “composite” fit for the position. If there are any gaps in the candidate’s technical knowledge or skills, a development plan should be established and implemented to ensure the success of the new hire. The individual(s) responsible for implementing the plan and evaluating progress toward completion should be clearly designated.

Once the final candidate has been selected and compensation and other employment terms agreed upon, an employment offer is typically made contingent upon satisfactory professional reference and background checks. Some families may do preliminary referencing prior to the offer being made, but it is crucial that the candidate’s current employment situation never be compromised. If preliminary referencing is desired, it is best to ask the candidate for the names of references with whom they would be comfortable having the family or search consultant speak. When conducting background checks it is important to use an outside firm that specializes in doing this work.

Onboarding/Performance Management Plan

The onboarding plan is designed to help the new leader become acclimated to their new role, to the family and family office culture, and to the family’s advisors. The goal is to help the new family office leader build relationships and achieve results quickly and effectively. Creating early wins for the new hire promotes credibility. Commitment to the success of the new leader and to creating an environment to foster success is critical.

An effective performance management plan defines expectations and metrics to be used to evaluate success that are objective, results driven, quantitative and qualitative. Performance expectations and metrics must be aligned with family philosophies, values, and objectives. They must also be mutually agreed upon and clearly communicated. Ongoing, open communication and feedback regarding performance and achievement of goals and objectives is also critical. Solving an issue and getting back on track quickly is the best way to avoid creating a chronic issue that could result in failure.

Compensation and reward systems also need to be designed and structured in alignment with family values, philosophies, goals, and objectives. Incentives absolutely drive behavior. The family needs to be sure that compensation and incentive plans will drive the behavior that leads to desired results.

Testing incentive plans against various scenarios is important to prevent unintended outcomes. Careful design and thorough testing of compensation plans are essential to prevent unfortunate incidents that trigger resentment, or worse.

Retention Plan

The importance of a retention plan cannot be underestimated. Retention does not just happen and should never be taken for granted. A carefully designed strategy and plan are essential to retain high performing talent. An incredible amount of time and effort has been spent to identify and recruit a talented executive. It would be a catastrophe to lose the executive for lack of an effective retention plan.

There are several best practice components of an effective retention plan. The absence of one or more of these components is often the reason(s) an executive may be receptive to considering another position.

A clear business mandate combined with the authority and resources to achieve the mandate are essential. A nebulous mandate or frequently changing objectives will cause a high level of frustration that may lead an individual to consider leaving. Lack of authority or resources commensurate with accountability also create a retention risk.

Retaining a high performing executive requires providing learning and growth opportunities. While this can be a challenge for family offices, it is important to invest the time to create development opportunities that will keep the executive stimulated and enthused. Many family offices, for example, have placed executives on boards or have involved them in strategic philanthropic initiatives. The key is to understand what motivates the executive personally and professionally, and to be creative about developing initiatives to successfully engage them.

Smooth family and family office transitions and succession combined with sound governance are also essential for retention. When a family structures a transition plan with specific milestones and time frames and that plan is communicated and adhered to by all parties involved, a happy ending is probable.

The process described in this paper has been proven to work and will ensure the family’s success. But the process will only work when followed completely and sequentially. Taking short cuts or cutting corners will not produce success and in fact may lead to very costly failures. Following the process consistently as prescribed will ensure the family can indeed get it right the first time, every time.

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