By Bill Rudnick, Executive Managing Director, Chief Legal Officer; and Whitney Webb, Managing Director, Head of Family Governance
It’s the time of year for annual personnel reviews. While this year-end exercise is a common practice among public and private companies seeking to identify and reward high performers (as well as address remediation for underperformers), it’s not as common among family offices. It should be.
Why
Annual personnel reviews are essential to determine whether family office team members, which can include family members, employees, as well as third-party service providers (e.g. trustees), are successfully executing their assigned responsibilities. Without a formalized structure to track and measure performance, it can be difficult to identify (and reward) those family office team members who are performing well, as well as those who are acting as a drag on the office.
Additionally, in family office structures where roles and responsibilities are more informal than a traditional workplace, family members may have a nagging sense of guilt or uncertainty as to whether they are “pulling their weight.” The performance reviews can bring the formality and validation needed for them to spend less energy worrying about how they are perceived and more time creating value.
Setting up an annual personnel review program is in everyone’s best interest and is something every family office should implement.
Who
The first step is to identify and assign someone to own the process. Annual personnel reviews don’t just happen. The right person needs to manage and champion it, making it clear why it’s needed and what the expectations are. Taking ownership of a family office’s annual personnel review process can be a development opportunity in itself. For a younger family office employee or next-gen family member, it can be the ideal chance to demonstrate the ability to take on an important role within the office and the family, and engage in succession planning.
How
With the appropriate person leading the charge, the next step is to decide whom within the family office ecosystem requires an annual review. Not everyone does, at least not at the outset. Identify those critical people, as well as third-party vendors and service providers, for whom it is imperative to have visibility into how they are tracking toward their objectives.
If this is the first time your family office has conducted personnel reviews, you will likely need to establish benchmark goals for those being reviewed. Specifically, SMART goals (which stands for specific, measurable, achievable, relevant, and time-bound) can be particularly helpful. With goals established, consider setting up quarterly check-ins to see how the team members are doing in meeting their goals and whether any adjustments are needed. That can help mitigate any surprises at year end.
To be sure, when some of the personnel being reviewed are family members, that can add a tricky dynamic into the annual review conversation, particularly if there are tough conversations that need to take place. Don’t avoid those conversations, but rather enter into them equipped with best practices on how to broach challenging topics:
- Create the performance metrics and any self-evaluations alongside all family members or members of the family council to remove an appearance of subjectivity. This should be created well in advance of the actual performance review.
- Members of family offices often wear multiple “hats” in terms of their roles and responsibilities, so it is important that family members intentionally state at the beginning of formal meetings that they are solely wearing their employee/boss/chair hat. Even with informal family offices, choosing a more formal space to host your meeting and sticking to a predefined agenda will act as reminders of the lens to look through.
- Balancing the sometimes competing roles of family member and employee/leader can be challenging, isolating, and confusing, even without the direct feedback of others. So remember to acknowledge the fine line family members must walk and provide ample feedback on jobs well done.
Just as every family office is unique, so should be the approach to annual personnel reviews. What works for your family office may not work for another. Make your approach specific to your situation and family dynamics. The most important thing is to get started. As the saying goes, don’t let perfect be the enemy of good. The key is to commit to implementing ongoing personnel reviews that work for you. Your family and your team will both benefit from it.
Contact us to explore how to implement annual personnel reviews for your family office.
