EP 08: Growing the Family’s Human Capital

08: Growing the Family’s Human Capital

Let’s Talk Family Enterprise Business


Welcome to Let’s Talk Family Enterprise, a podcast that explores the ideas, concepts and models that best serve Family Enterprise Advisors in supporting their clients.


Steve Legler is our guest host today and he welcomes Mary Duke, Independent Family Advisor based in New York City to talk about human capital and the emergence of the Chief Learning Officer role for families.

Guest bio

Mary Duke is an internationally recognized advisor to families navigating the complexities of substantial wealth. Her work is anchored in the facilitation of family meetings, strategic planning for owned businesses, private trust companies and family offices and the education and mentoring of family members around the world.

She is known for her deep expertise on the impact of trusts on families and her work in generational transition in family enterprises, and she is a licensed attorney and accountant. She has served in private client law and business consulting.

family enterprise exchange.

Hello, and welcome to the let’s talk family enterprise podcast. My name is Steve Legler. And I’m excited to be your guest host for today’s episode. Today I’m joined by Mary Duke who isn’t an independent adviser to families based in New York City. She has been doing this kind of work for a long time and has experience with many, many families. And she’s brought up a subject that I hope you’ll all be intrigued by, and it’s the subject of human capital. And the emergence of the chief learning officer role for families. So let me introduce our guest, Mary Duke. Hi, Mary.

Hey, glad to be here.

Well, thanks. Thanks for joining us today. Mary from New York. As I talked about at the off the top we’re talking about human capital. Our audience today is family enterprise advisors. There’s about 400 of us so far across Canada who’ve done the family enterprise advisor degree. We work with families in all sorts of capacities from a whole variety of multidisciplinary backgrounds. You call yourself an advisor to families as opposed to family businesses or family enterprises. Do you want to just give us a little background on the kind of work that you do?

Sure, and and, you know, like your listeners, I too, come from sort of a diverse background. I’ve worn several hats during the course of a rather lengthy career. So my field of origin was actually accounting. I then went into business consulting, I practice private client law, ran a couple family offices, ran a big banking, private banking and trusts and and then went independent. So the families I’m working with and you point out that I do work with the family members themselves. I’m dealing with them in sort of grappling with the challenges of generational transition, especially when they own a significant enterprise and that enterprise might be an operating company, or it might be an entire network of different industries and companies. So you know, my work is directly with a family members but invariably interfaces back into the business. There’s a lot of coordination and collaboration between the business components, but really making sure that the family has the place the forum, the disciplines to create their voice. So that voice gets fed into the business as you start to move down generations. It’s it’s pretty easy to lose the family voice or to distill the family voice, so making sure that it’s created somewhere and then there’s a real clear mechanism for getting it fed back into the business. So the business, both the board of directors and the lead management, know and understand the expectations of the family.

Okay, so there’s one word that you use there that I jotted down and it’s the word forum and we’re gonna get back to that because I love that word. And I wanted to go back though, and something that you said to me in an email about navigating the predictable challenges that families have ahead, and that you always like to scan the horizon. To see some other things that might not be predictable. And so what are you seeing when you look out on the horizon of what families should be looking out for?

Yeah, you know, I think we all probably can predict certain events in a family that are pretty easy to anticipate and sometimes even time you know, the passing of a patriarch, the transition to another generation as they mature and rise into majority. Divorces might not be predictable, but that type of disruption of the family is anticipated. So those are the predictable so the the unknowns are actually more intriguing to me. And where do they come from? So searching the horizon always for what’s coming ahead? And how can we prepare families for them and the one thing I kept picking up on and certainly it’s been flagged up in the economic world if things really are shifting the question of are things different this time, economists are largely agreed that there’s something very fundamental shifting in our world. They can’t agree on what to call it. I think each of them has their own pet name. But one of the terms often used is the intangible economy, you might hear the fourth economy or you might hear the experience economy. But this idea of the intangibility the rise of the intangible asset in our current economic situation is so fundamentally different from where we were in the information age, that the expectation is things will be really, really different in it. The other thing that’s sort of typical of it is communications and change, and even the definition of family are are evolving. So so rapidly, things are happening at such an incredibly quick pace. The question is, how can families adapt to that? What can they do to be prepared for it and not just be prepared, but actually to leverage it and use it to their advantage? That’s what I’m trying to do with families.

Okay, so we’re you’re talking about how things are changing so quickly, and that families are trying to come to grips with what’s coming ahead and how as advisors to such families, we can hopefully see over the hills and around the corners a little bit for them and help them get things on the right track.

Right. And, you know, I think that as you and I were growing up and probably most of the people listening, if there was an expectation that you could sort of want to be something when you grew up the idea that you would, you know, aspire to something and go to school and study and get degrees and specialized education and experience and do it for a long time was a pretty normal expectation today. You know, the statistics are staggering about how few of the jobs that will exist in the future are even known today. So the idea that you could actually study to prepare for those jobs is a fantasy. So and the idea that the jobs that we have relied on traditionally will be there in the future is also a bit of a fantasy. So what has come up again and again, is this ability to learn the ability to adapt, learn and and integrate new ideas and concepts. And the really important piece of this learning is not just cramming your head full of facts or data. In fact, that kind of traditional learning is less and less valuable as machines become quicker and quicker and better and better at it. But the learning has to also be integrated into your life. So you have to actually start using the learning and that’s the real gist of things. It’s one thing to, to hear a lecture and take some notes. It’s another thing to create some practices and start living the things you’ve just learned. That’s the hard stuff. And that’s the thing that really requires some some concerted effort and work and engagement by the family members. Sounds like

you’re leaning towards that old. Well, I don’t know if it’s an old expression or maybe it’s a newer expression, experiential learning,

absolutely experiential learning and so one of the points I make with families is unlike most of the advisors in their world, they can’t delegate to me this kind of work has to be done by the family members themselves. They have to grapple with the decisions they have to prepare to communicate with each other and explore issues and expose themselves in terms of what their expectations and desires are. I can’t do that for them. It’s not like I’m a lawyer that you tell me a few things and I go off and draft it and bring it back. The work that has to be done is really with the families and it’s that experiential piece that they have to do it with each other and over a period of time to get good at it.

They have to do it together. I like to say, by the by the family for the family. Yeah, but you’re saying they can’t just delegate it to you. You can’t do it for them. They have to do it and it’s by doing it, that they experience the learning that you’re talking about.

Absolutely not just experience it but they start to integrate it they start to form habits. You know, some of the work we’re doing with these families is helping them build new healthier habits or the way they they make decisions the way they communicate the way they move around the world. I

had mentioned the word forum before. And so you’re talking about the fact that families need to do things together. And I’m gonna guess that you’re not talking about just having one family meeting but that you’re talking more about a series of family meetings, or are a series of meetings with different groups of different family members for different purposes. Oh, yeah. And

you know, sort of creating patterns of behavior that bring people together. It’s easy for families to grow apart and it’s easy for families to get frozen. And I always caution families not to assume that just because they’re warm and cordial and they get together on the holidays and they all have a wonderful time that their family that can actually communicate well with each other about serious things and make good decisions together. They’re very different things. And so starting to test the hypothesis around decision making and communicating about important things, is done in in, in forums with families brought together it’s also really important to create that safe space where everyone comes in as an equal which you know, is part of the art of facilitation, the ability to inspire the quiet voices in the room to be heard and then also helping to sort of moderate the people who are accustomed to always holding the floor. I’m sure you’ve seen some of this,

though. I’ve seen it and I’m sure that all of the people listening have seen this. And in fact, most of the people listening will be you know, more or less used to listening to only one of the family members and I think that’s one of the things that working with families what makes it so interesting is that they typically have one way of working with one key person that’s typically a patriarch, and most of the advisors are used to taking all their instructions from that patriarch. Then when it comes time to do things with the family. The Outs of the advisor is sort of Well yeah, but this who’s my client, is it this person here or is it all of those people that I think in the family enterprise advisor program we are taught that the family is the client but then to turn that into well wait a sec, the boss, the guy who signs my check and can fire me is that one person but there’s these other 10 people that are saying something else? How do we adapt to that kind of a role? Well, and

as you’re describing it, it sounds as if someone is evolving from a role where they’ve been a close advisor to a CEO, Chairman president and then they are moving into that role of taking on on a deeper engagement with the full family. I think that’s actually a hard thing to do. If you’ve been in the system and you get affiliated with, you know, the power source. It can be hard to be the person to facilitate because and I’m very, very careful about how I enter a family. I’m very very careful never to prefer any one family member so no one gets an advance read of the agenda. No one gets an advanced read of the minutes no one you know, it’s it’s all very very, you know, in my forum, which is the family form, everyone is treated as an equal voice. And that means that the CEO who’s sitting there as well as the disenfranchised, you know, ex wife, everyone has an equal voice because every one is equally invested in the fact that they’ve got family members involved in all of this. So that’s the one thing that they hold in common. And in that context, no one is more important than the other.

Well, that’s certainly true. And that’s I think that’s one of the issues that people in our business sometimes face is we are we are, as I said, beholden maybe to one person and then we’re kind of expected to do something for the whole group. And it’s really, really hard to do that. And it’s almost the time to bring in a separate outside person when, when that’s what’s called for and not try to try to bridge both those roles as one person.

Yeah, it isn’t. It’s one of the conundrums of the space is you might be incredibly trusting in but it can be difficult to present that really independent, fair, unaffiliated voice that can see the system with fresh eyes and can sort of flag things up differently.

I’m looking now at an article that you sent me which we’re going to be sharing with with the listeners, called Growing your human capital 10 lessons from the emergence of the chief learning officer role. And you have a couple of these at number four and number five that talks about growing your intangibles. This one says grow your intangibles individually, and then the other one says grow your intent. Collectively. Yeah, I think that would be something that that we’d like to hear a little bit more about what you mean by first of all growing the intangibles, and then what are the differences between the individual version and the collective version?

Sure. I think that thanks for picking up on that. Let me just go back a little bit and make sure that we get the vernacular in place. This idea of the chief learning officer is an emerging role. It’s a C suite role. And it has really taken on a life of its own virtually all of the Fortune 500 companies now have one. And it’s more than just some some subsection of the HR function. This is an important role. And it came it was the original clo came out of GE when Jack Welch was there and we have a story leader of IBM back in the I’m sorry, GE back in the early 90s. He recognized that one of the most important assets in his organization was going up and down the elevators every day and could walk out the door and not return. It was his humans. It was the people the staff, the employees. And so he brought in a chief learning officer and named this person a chief learning officer and created this concept that growing and investing that asset that rides the elevators is as important as the physical assets on the balance sheet. And what has happened in the wake of that is this real uptake of the concept. Today, it’s resonating in a big way because companies realize that their employees are incredibly valuable. They actually sit as an intangible asset, I think when we talk about these intangible economy as I mentioned, the reason they refer to it as the intangible economy is that the balance sheets of companies are being dwarfed by the intangible assets. on them. So instead of physical assets, buildings, trucks, equipment, pipeline, whatever it might be, it’s actually things like brand and and the other intangibles that are taking the bulk of the financial statements. And this is true for all companies, not just a tech or you know, sort of New Age types of companies. So I think that we’ve seen that companies recognize the importance of intangibility are investing in it. And the really interesting parallel from my standpoint is the fact that Jay Hughes back in the early 90s, was also in our own space, dealing with families, really challenging all of us to look beyond the financial assets, the economic assets of the family, and begin working on investing and growing the human capital of the family. So so the two were really you know, there must have been something in the water time of economically that they both sort of recognize this and it has grown so dramatically. What I find interesting is the professionalization of this chiefs Chief Learning Officer role and some of the great information and thought leadership that is growing out of it is really useful and I think can inform the work we do with families because it’s one thing to say, oh, families need to focus on their human capital and grow it. It’s another thing to really know what that means. And that was why I wrote this. What does it mean to actually grow human capital?

So what you’re saying is that in the business world, the intangibles, which includes human capital, and they’ve they’ve been making advances lately and figuring out what a chief learning officer can do for a corporation. And whereas a family might know that they have some human capital because they see those people sitting around the table, but they’re not sure what to do with them. You’re, you’re saying, Well, hey, maybe we can learn from what they’re doing over here and apply it in the families.

Yeah. Absolutely. And and that is, you know, what, what I wrote about in the article is just some lessons learned and some some real, practical ways to start putting it to effect in our families that parallel what’s going on in corporations. So, so a couple of the things just from the top I’ll get to your specific question here. But the first is just one recognizing that you have that recognizing that you know, if you were to quantify it, and some families I work with actually do quantify their human capital and put it on their balance sheet. But it’s there. It’s important and it’s worthy of time and attention. And the second point would be it’s it’s worthy of investment. So the money you spend on growing your human capital is it should have a capital budget line item. This is this is the real deal. This shouldn’t be just inviting a guest speaker to your family meeting once in a while. This is real work. That should take time just like managing your investments. You’ll have lots of people looking at them and moving them and reallocating them and looking at what what new you might invest in. Same thing should be happening around people. It requires a budget line.

So you’re talking about investing, investing money in it and also investing time and effort?

Absolutely. Absolutely. It is both and both are indicative of the level of commitment a family makes, you know. If you’re serious about this, you’re going to invest real time you’re going to put real time aside lots and lots of time and meetings and attention on this stuff. And you’re going to put a lot of money into it too.

So families need to spend time as we were saying a few minutes ago, doing things together on experiential learning. So this comes back to the word Forum and the kinds of things that families need to spend time working on things together, and learning how to work together and then you even mentioned about making decisions together.

Well, and so to get back to the question you asked, which is what is that distinction? Between the growing intangible individually, and then collectively, so let’s start with the individuals. You know, the basic building block of the family is each individual family member and so if the line about the chain is as strong as its weakest link, every single family member needs to be flourishing individually. And that means understanding what each individual’s dreams are, what their developmental areas are, what their strengths and aptitudes are and really working with them for what’s directly relevant to them. I think one of the things I would caution against is coming up with a brilliant learning plan that comes off 80,000 things and finding out that the family member couldn’t care less about it. If you don’t engage deeply with each individual to find out what is directly relevant to them. What’s important what’s coming up for them. What would they like to get better? At? What are things that they could any and you can certainly open their eyes to things as well, which might, you know, help inform their decisions about what what is a priority to them, but it’s got it, it’s got to come from them. You can’t tell them what they need to know.

That’s one of those things that they can’t delegate to you. They need to be each person needs to be involved in and CO creating their own development plan based on what they want based on where they can fit in the whole family system.

Absolutely. And you know, getting to really know each individual and everyone knowing everyone, knowing what their gifts are knowing where their challenges lie, how else can you help grow them and support them, and also take advantage of those skills. You know, those are the things they can contribute to the family system. So knowing what their skills are is really important. So I’m a big believer in doing a lot of work around self assessments and you know, group group analytics and those types of things. You know, as a business person I was taught early on you get what you measure, and while returns on investment portfolios are much easier to measure. It’s not as easy to measure human capital, but that doesn’t make it any less important to measure. So they’re these are somewhat qualitative measures. They’re somewhat subjective, but it’s still very worthwhile to get in and start grappling with that. So that would be the growing the intangibles individually as getting to know each person understand their their strengths and development areas and helping them along their path. The collective bit then is the next step, which is sort of the mortar between all the bricks, how do the family members get along and collaborate? And you know, this is the dual challenge for families as they progressed down generations. Assets are normally left collectively so you’ve got assets held in trusts. You’ve got them in holding companies, you’ve got shared, you know, family retreats, you’ve got all kinds of things where one person doesn’t get to call the shots anymore. Or even if one person does get to call the shots. The reality is that decision impacts a bunch of their peers and there is nothing harder in the world than then having a authority over peers as you can imagine. I either the line I often hear is Who died and made him king. So you know the way you use authority that has been given to you rather than earned if your your parent has appointed you, the trustee of the trust for all your children are all their children, your siblings, how you exercise your authority in that capacity has to be so so different from the way that wealth creator may have exercise their authority, where they had complete autonomy, complete control, they earned it they got to say what happened to it. It’s a very different thing to exercise it when you’re working with your peers. So my point there is you need a forum where the person with the authority has the opportunity to offer up transparency to explain their reasoning, to hear their peers out to hear what’s important to them. People are handled things so much better when they’ve been heard, even if the decision goes against them. So again, we get back to your the word you like which is a forum you need a place where these discussions can take place and it’s it’s not the corporate boardroom it’s it’s not a shareholders meeting. This is this is family stuff.

Specifically for the family stuff and they need to have a place where they discuss these things and make those decisions. And it goes back to another word that you use or another phrase, the safe space and they need to learn to act with each other in such a way that that does remain a safe space. So that all of the individual bricks of human capital, maximize themselves and then the mortar that holds them together is what what the family is working on and being able to work together. And there I use the word governance that I know nobody likes, but it sounds like this is where we’re going to but maybe we’re using better words like decision making and having forums that are things that people can relate to better.

Right and you know, it’s interesting governance. I don’t lead with governance that’s not a phrase I used to lead with, but it’s absolutely a tool I use. It’s a tool I work with. And, you know, realistically, governance spans a spectrum, from the very informal it’s just how things are done around here, up to highly organized with you know, terms of reference and charters and, and all kinds of rule sets and an incredibly sophisticated governance structure. So they’re all governance and they all work in their own ways. And quite honestly, I’m a believer in not over overcomplicating things and not over bureaucratized thing things that sometimes the way things work around here can just use a couple of tweaks and it works just fine.

Yeah, and so not overcomplicating things is definitely something I like to think about as well. But the chief learning officer aspect, does that make things more complicated it because it sounds like it might or is that person’s job to make it simple?

Well, their job is really to ensure that the system is growing and that the everyone is evolving. So it’s focusing on the individuals its focus, but focusing on creating that forum and, and the opportunities to engage collectively. It’s creating the thought leaders circles and the ways of getting out into the community. It’s helping the advisors grow in their own front. So it’s the chief learning officer is wearing multiple hats and delivering a lot and I think depending on the individual might, might tend towards more buttoned down governance and others might be more comfortable with with sort of an open architecture. I think that would be something to consider when you’re hiring one or you’re looking and and quite honestly, smaller families aren’t going to hire a chief learning officer but they might bring in a facilitator or learning specialist who can help their family you know, on a part time basis and on a contract fee basis with this, but they wouldn’t hire them necessarily full time. I do know several families who have hired them full time and actually have more than one person in this growing branch of their family office. But But not everyone does.

You know, it’s amazing that some of these families that are very large and complex and have a lot of wealth, they are doing things that most of us with the smaller families at lower levels of wealth, we look at them and go oh my god, this is a totally different world but in reality, there are some things we can learn from those people, if only, you know, to do parts of what they’re doing, or to do a little bit more concentrating on the human capital and helping our families that we work with to realize how important it is to invest.

It is a great opportunity. To to find ways and be creative and leverage the resources that are in your community and in your professional network. To get some of this done,

we’re running up against the clock fear, Mary. I was wondering if you had any parting thoughts or, or important lessons that you want to leave our audience with?

Like, thank you. It’s been fun chatting, it went very quickly. I think the one thing that I keep coming up against and I think it’s actually a fabulous message especially for the listeners is if we’re all advising families, and we’re advising them to go along this journey, it’s important that we are also on that journey and looking to grow ourselves as as professionals as individuals. And so I think you know, take some time to look at your own developmental journey and make sure that you’re investing in your own human capital as well so that you can be the type of advisor that you’re asking your family members to be.

So we don’t want to be telling them you should do this, but but we’re not doing it ourselves. I think that’s a great place to leave things off. Mary, this was great. Thank you very much. We’re very grateful to have you sharing your thoughts, your insights, your experience with our listeners with our membership for those of you listening if you haven’t subscribed already, make sure you don’t miss an episode, please subscribe. And with that, I will leave you and see you next time and thanks for listening.

If you enjoyed today’s episode, you can subscribe to us on iTunes or any other podcast apps. And don’t forget to share this podcast with family friends and colleagues. If you have feedback on this content or suggestions for future episodes, please email us at f e at family dash enterprise dash x change.com. We’d love to hear from you

This transcript was generated by https://otter.ai