The 7 Habits Of Highly Effective Family Offices

Stephen R. Covey’s best-selling book The 7 Habits of Highly Effective People was first published in 1989 and has gone on to sell over 40 million copies worldwide since, and continues to sell today for the simple reason that its content is built around timeless principles rather than trends.

Designed to help people achieve objectives in a manner that incorporates empathy for everything involved in the process, the combination of both personal and professional perspectives sees it equally positioned as a self-help and business book.

Forward-thinking for that period in time but equally as relevant today when one considers the moment in time that the private wealth industry faces. Principles like fairness and human dignity didn’t rank too highly on an investors priority list back then but today that’s changed and wealth management is about so much more than a rate of return.

So how exactly would a highly effective modern family office of today apply those 7 revered habits first published over 30 years ago?

Habit 1: Be proactive

It’s 2023 and the family office is part of an ecosystem that holds trillions of dollars of wealth. What can it do with it? The best answer is: whatever it can do for maximum positive global impact. A family office can’t control interest rates or volatile markets or management in direct investments or rising geopolitical uncertainties, but there is much it can achieve beyond financial returns.

Family offices represent a significant portion of the world’s capital and they have the power to shape the future by deciding how they allocate that capital. The old way is focused purely around shareholder value, the new way is focused around stakeholder value. This is why

The fact is, just having awareness of this, knowing the influence they can have through their wealth should stimulate family offices to be proactively focused on making a positive global impact and setting specific objectives it can achieve in this regard through the allocation of its capital. This should be a part of family office best practice.

Habit 2: Begin with the end in mind

What does success look like? Ultimately it’s the ‘family’ in ‘family office’ that matters the most, so perhaps we should ask: what does success look like for the next several generations? The future-focused family office doesn’t plan for an end as much as it plans to generate perpetual value, and this requires an effective wealth transfer plan with processes that manage risk.

This begins with a clearly defined set of values, not dreamt up by an individual but part of a crucial exercise that engages the next generation and aligns the family office around shared purpose. Only through that can a clear measure of multigenerational success be framed and thereafter a plan to achieve that with buy-in from all parties.

Habit 3: Put first things first

Perhaps the most obvious of the habits but no less important, and in effect it is taking the first steps to put those first two habits into practice. Having a clear vision and knowing the set objectives it wants to focus on achieving, a family office needs to manage time and resources optimally to prioritize and be efficient and effective.

As management theorist Peter Drucker said, “what gets measured gets managed,” thus the modern family office will embrace the burgeoning technologies aimed at the industry, from portfolio analysis and strategy to data aggregation and reporting, to ensure an informed and fully professionalized setup that works towards prioritized objectives together.

Habit 4: Think “Win-Win”

Nothing befits the modern family office more than the concept of “win win.” If a well-resourced, highly professional office with the right objectives achieves those, then that should mean value that is both financial and non-financial. The double bottom line is the difference between the past and the future, how performance must be measured beyond the balance sheet.

This goes beyond measurable returns to incorporate the dynamics within the office itself, to ensure a culture where team members are developed and the underlying motivation across the family office is the addition of value for all parties involved. This positive-sum game mentality is an asset that can help guide a modern family office through the numerous complexities it faces in operation.

This habit can be viewed from the perspective of the office and the family or the activities of the office and the impact on society and the environment even taking it one step further to the triple bottom line.

Habit 5: Seek first to understand…then to be understood

A family office is more than a purely investment operation and it’s that crossover between the financial and non-financial elements that makes it uniquely complex.

A large part of the work is to ensure that the investments made by the family office matches the intentions of the family. In order to do that it’s crucial for the office to understand what matters to the family on all levels. Having an organization that matches the family in terms of generational & gender make up can help build a deeper understanding.

But it doesn’t end with the family – the activities also impact the broader community and society and therefore it should simultaneously be an objective of the modern family office to actively seek out diversity when building a team.

Diversity within the team and its external partners will bring unique perspectives and added potential for new solutions, but it also brings with it the opportunity for conflict, Understanding everyone’s individual needs and frame of reference before attempting to understand and rally them around common goals might seem obvious, but taking the time to fully embrace this will result in the rewarding interaction that every team aspires for.

Habit 6: Synergize

By following the simple definition of synergy, a family office working together with the best-suited third-party service provider to create something of greater value than the sum of the individual parties. This habit is about innovation through cooperation, about fortifying an operation through the inclusion of all resources at hand and then sourcing ones that aren’t.

For family offices this means finding the service providers that fit, an often time-consuming and costly process that should be approached methodically, but when done effectively will build an authentic partnership that allows ongoing collaboration and brings value to all stakeholders.

Synergizing is also relevant for how the family and the family office work together synergistically to ensure there’s good alignment in terms of needs, expectations and when challenges arise, they are dealt with swiftly and openly. Covey claims that synergy creates the immune system – to develop antibodies to prevent a full-blown issue, and each problem is treated as a vaccination.

Habit 7: Sharpen the saw

The final habit and the most personal regardless of where it’s applied. Even though we may have just now reached an inflection point in the commercial application of artificial intelligence, this is about acknowledging that everything a family office undertakes it relies on people to achieve and people require both a work/life balance and time for renewing activities.

Therefore an awareness that if individuals aren’t given space and time to find balance both at work and outside of it, then their efforts will not be optimal. The modern family office needs to create traditions and routines that encourage individuals to be the healthiest version of themselves at any time in order to empower them to be motivated during working hours.

There are various perspectives when considering these habits depending on what a wealth owner, family, principal or management is trying to achieve and they can be interpreted in such a way that enables the organization to flourish.

Covey, S. R. (1989). The seven habits of highly effective people: restoring the character ethic. New York, Simon and Schuster.