3 min read

Does Your Family Need a Metric?

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By Tim Chase

If you are involved with running a business, you are more than familiar with the concept of metrics. They are these crafty things we managers like to use to track productivity and make sure that we are on track to meet our business goals. Well run businesses take the creation and monitoring of metrics to a whole different level by constantly resetting goals and evolving the metrics to weed out complacency and drive action toward strategic objectives.

Somehow, when we come home at night, that hard nosed, driven manager that creates value at work softens up around the family. Families have this funny habit of talking back the way an employee would never dream of. If your family is anything like mine, let's just say I don't have the same authority when I get home at night.

When it comes to managing the wealth of a family there are few things that could be more important than creating the right attitudes and skills around dealing with the issues of having money. Most of our clients grew up of modest means so building money skills was a very gradual process, but for our children and grandchildren, it won't be so simple. They won't witness the struggles that it took to create the wealth, but will mainly see the rewards from having access to it.

In business terms we often talk about "lagging" metrics versus "leading" metrics. For example, sales are a lagging metric in that they are the result of a whole pipeline of effort that leads to the eventual sale. On the other hand, the pace of proposals or prospecting calls is a great leading metric of future sales.

For a family, the lagging metric might be how well children/grandchildren function with money. Are they fully engaged with the dynamics of the family wealth? Do they view the family wealth as a dependency or as a source of independence to achieve greater goals?  Are they engaged in careers? Meaningful volunteer work?

To get control over these questions, it is best to focus on the leading metrics. Every family is different and the dynamics of that family will drive the metrics but here are some common ones I see often:

  • Set a family mission statement - let your family know what it took to build the wealth and what it means to possess that wealth. As the family matures the mission statement evolves from being about the originator of the wealth and more about what the family, as stewards of that wealth can do to enhance that legacy.
  • Conduct family business meetings - Treat the family's wealth like a business. Meet at least once a year to review the performance, allocation and strategic direction for the coming year. If the family isn't engaged now, they won't be later. If you can't drive any enthusiasm then think about how to take yourself out of the equation to force their engagement. The reality is that you WILL be out of the picture at some point and they will have to be engaged. If they are not engaged and become dependent on outside advisors for everything, that does not bode well as there are far more people out there looking to take advantage than there are honest advisors that will do the right thing for the family. Getting the family engaged in the decision making process is a MUST have metric for success.
  • Create Incentives - Every family has different values and if you want your children to mirror those values, you should create the right framework that makes that values choice easy. For example, if you want your family to always be employed, then trust distributions can be set up to match employment income in some way or could be dependent upon a minimal level of employment status. Incentives can be across the board and are only limited by your imagination.
  • Philanthropy- Giving is often at the core for many families. Creating family traditions and expectations around charitable involvement are grounding activities and give meaning to wealth. One family I know does a mission trip to a developing country every year for multiple generations of the family. The mission changes every year and the younger generations have significant input on the specific trip each year. The entire family has it marked off on the calendar and is so core to the family that no one misses the trip each year.  Philanthropy can take many forms but most successful families use it as a fundamental tool in driving home the mission of their wealth.

These are just a few ideas of some leading metrics. If the goal is to have children and grandchildren who are well adapted to wealth and prevent a situation (that we all see too often) where wealth becomes a liability to leading a meaningful life, then focus on the right metrics for your family.