A number of years ago I had the pleasure of hearing Jay Hughes speak at a family office conference. Hughes, the author of a number of classics in the family office / family wealth realm, remarked offhandedly during Q&A period, a statement that has become one of my absolute favorite sayings in working with family businesses and family wealth. He said simply that in any effort a family undertakes, “If you are not the best, you are the worst, because it’s you.”
I have thought at length about that comment and I wanted to share 3 meanings / implications that come to mind.
First and perhaps most obviously, when the family chooses to do something, it should only do things where it has reasonable odds of being world class. In today’s modern economy, this is a reality that any organization should seriously wrestle with. If I am choosing to do something that is not my core competency, most often there is an organization that can be partnered with that has chosen to make that exact factor their core competence.
Families of wealth have access to a near limitless choice of partners. As such, any activity that is deemed to be core to the family, needs to be done in such away that the family can generate a materially different and better outcome than what is available in the marketplace.
I would caveat that by saying that there are times when you may consciously choose to engage in an activity where you are not world-class as part of a total value chain of activities that is world class in their entirety. In that instance, the sum of the parts will deliver an outcome that is far superior than the superiority of each individual link in the chain. For example, Wal-Mart may not be the world’s best run trucking company (this is an uneducated opinion – they could in fact be for all I know), but because of the integration of their supply chain, Wal-Mart’s choice to run their own trucking fleet enables them to run a supply chain that is better than every other retailer globally.
Second, there is value in having a scapegoat. When the family has chosen to engage in an activity, and then ultimately fails at it, there is only one person to blame – the person staring back at you in the mirror. At times and for many reasons, there are benefits to having a third party involved in certain critical matters.
It could be in making a trust distribution decision, having a third party who is able to weighs the facts and then deliver a potential negative message, is what makes the difference between a harmonious Thanksgiving dinner or one filled with discord.
Third, the family needs to have a sense of what it means to be the best. For a business, determining success can feel like an easier question to answer. There are easily quantifiable metrics around revenue growth, profitability and returns on capital that allow the management and ownership of the business to more easily determine how the business is doing if they are willing to look.
For a family itself though, there is not an easily identifiable family scoreboard. Many of the factors that drive a successful family over time are only identifiable after years and perhaps decades of work. But this challenge should not dissuade the family from attempting to answer the question. If the family is choosing to engage in a course of action, they should do so with a keen sense of what ‘best’ looks like for them and go in eyes wide open.
Family enterprises have a broad set of priorities and goals. As they pursue those, there is a constant question to determine whether the family should build or buy various capabilities the family may need. The mentality of “if you aren’t the best, you are the worst because its you” can help serve as an Occam’s Razor for families as they evaluate various paths of action.
About the Author
David Wells is the Founder and CEO of Family Capital Strategy, a strategy consultancy based in Nashville, TN. We help families stay invested together by collaborating with them to build world-class family offices. We provide objective, conflict free advice in a strategic, customized and multi-generational manner.