"Successful enterprises are making an effort to truly focus on the family..."
Chicago, Il (PRWEB) November 4, 2015 (PRWEB) November 05, 2015
Linda Mack, Founder and President of Mack International LLC, recently co-presented a session on challenges family offices face in designing compensations programs for family members at the Family Firm Institute’s 2015 Global Conference in London. Ms. Mack was joined by Trish Botoff, principal of Botoff Consulting, LLC and Christopher Scott, a 4th generation family business owner and Non-Executive Director, Sand Aire. Over 400 advisors and consultants, academics and researchers and family enterprise members from over 40 countries were in attendance at this premier event.
The presentation, entitled: Myths, Realities, Challenges and Trends in Compensating Family Members sparked a lively discussion about the mutual challenges many family business enterprises and family offices face regarding the subject of compensating family members. According to Linda Mack, “Many attendees identified immediately with some of the myths which often contradicted one another including the notion that family members should be paid more than other staff versus others who believed family members should consider it a privilege to be paid at all. In reality, compensation of family members is not much different than any other enterprise. It is a combination of the market, the scope of the role, individual performance and family philosophy.” The trio offered details as to how family offices should approach designing compensation programs in alignment with the values, culture and needs of the family while successfully motivating and retaining key family executives for the long term. Linda explains the importance of a thoughtful approach with guidelines can mitigate potential misunderstandings when family members are not paid competitively—either too much or too little. “A family member working in the family business may feel undervalued. Conversely siblings who are watching from a distance might think he or she is overpaid. When you leave the perception in the eye of the beholder versus benchmarking to the market, you are asking for trouble.” Another consideration is the economic advantage of having an equity position. In older generations, equity in the business might have more than made up for a lower salary, however newer generations may not have that benefit as part of their package.
Best practices involve determining the family philosophy regarding compensation for both family and non-family members, clearly defining the position, benchmarking to the market and assessing performance in the role. Bonuses, long term incentives and family benefits should also be predetermined and devoid of surprises. Christopher Scott shared a successful remuneration structure with the audience that has worked for Sand Aire.
Two of the trends discussed by the panel was an increasingly competitive market and increased access to information. Both of these are significant factors requiring family businesses to take a closer look at compensation.
A comprehensive survey of executive compensation in single US family offices was recently compiled in part by Botoff Consulting. Over 216 offices participated and the data suggests that discrepancies do indeed abound. The session closed with real life examples of the precarious position some family offices are in when the idea of establishing compensation philosophies and guidelines are ignored.
“It is simply good professional governance,” says Linda Mack. “Successful enterprises are making an effort to truly focus on the family by carefully reviewing compensation, developing an approach that reflects their philosophy, defining roles and benchmarking. It’s the best practice toward positive results.”
About the Family Firm Institute
Family Firm Institute (http://www.ffi.org), an international professional membership organization of over 1800 individuals and organizations across 88 countries, is dedicated to providing interdisciplinary education and networking opportunities for family business and family wealth advisors, consultants, educators and researchers. It works to increase public awareness and broaden the understanding of trends and developments in the family business and family wealth fields. As the dominant form of business organization worldwide, family businesses make a unique contribution to the social vitality and economic wealth of communities. FFI seeks to increase the understanding of the family enterprise as a fundamental driver of global economic growth and prosperity.
In 2014 Linda Mack was presented with the designation of ACFWA– Advanced Certificate in Family Wealth Advising. FFI Fellow status signifies that Linda Mack has completed an extensive program of study as part of the Family Firm Institute’s Global Education Network, presented at FFI annual conferences, has published in FFI publications and has been a member of FFI for more than 10 years.
About Mack International LLC
Mack International, LLC, is the premier retained executive search and strategic management/human capital consulting firm serving clients in the family office, family business enterprise and wealth management industries. Mack develops close consultative partnerships with clients and candidates and has achieved an exceptional track record of success as evidenced by consistent referrals, repeat engagements and long tenures of candidates placed. For more information, visit http://www.mackinternational.com or call 800.976.0015.