By and large, the very wealthy establish single-family offices to ensure they receive the kind of services and personalized attention they want. Running a single-family office can be a costly endeavor, but if the organization is meeting its goals and fulfilling its intended function, expenses are usually not a concern.

Unfortunately, across the globe, only about 20% of single-family offices are meeting or exceeding their predetermined criteria for success (see sidebar). For example, the investment performance of a single-family office must meet or exceed its benchmarks or targets to be deemed high functioning.

While many family offices provide similar functions, such as investment management or tax preparation, each single-family office is unique to the family it serves and, therefore, so is the criteria for its success. While less than 20% of single-family offices can be described as high functioning, three-quarters of them are meeting or exceeding at least one predetermined criteria.

When comparing the high-functioning single-family offices to less effective organizations, we’re able to identify activities that can help families and their family offices meet or exceed their goals. Let’s consider some examples of these best practices.

Run The Numbers
While many single-family offices are not designed to make a profit, it’s still important to understand the office’s finances and, moreover, to make decisions that acknowledge costs. This does not mean that financial considerations will supersede family matters, personal preferences or the like. It’s just that by being attuned to the costs and projected outcomes, better informed decisions can be made.

The senior management and key family principals of high-functioning single-family offices are very much aware of the financials. They may not always have explicit numerical details, but the decision-makers always have a solid understanding of benefits and costs—if nothing else, an intuitive understanding born from extensive experience, which leads to better, more informed decisions and more effective negotiations with vendors and employees.

Networking Strategically
The senior executive and members of the wealthy family are likely to be well connected. Moreover, by being very attuned to their networks and focused on capitalizing on them, they can use these relationships to create extensive opportunities for their single-family office, which results in an ability to exceed predetermined criteria for success.

Networking at this level of proficiency and focus enables single-family offices to source the best talent, create astounding investment possibilities and learn from the mistakes of their peers. These single-family offices use their networks to attain more information, providing them with greater negotiating leverage.

Pay For Performance
Most everyone wants value, and high-functioning single-family offices are willing to pay for it. They want results and will often structure engagements—with staff and outside experts—that include a pay-for-performance component.

Performance, of course, can be measured in many ways. Sometimes it’s quantitative, as is the case with investment management. But many times, performance is harder to measure. One of the hallmarks of high-functioning family offices is great clarity about the meaning of success. In cases where success and performance aren’t easily quantified, they can be linked to milestone achievements or priorities such as timeliness, accuracy or quality. This is useful when setting expectations with service providers and governance bodies and makes it much easier to evaluate effectiveness.

Learning From Failures
In every endeavor and every business, there are failures—courses of action that did not deliver the desired or anticipated results. High-functioning single-family offices are not immune to mistakes and failure. However, what differentiates high-functioning single-family offices from their peers is a desire and intent to understand the etiology of their failures and to learn from them.

Senior management, sometimes in conjunction with family members, carefully dissects the failures of its single-family office. Although this can be a painful process, the lessons learned can be invaluable. The objective is to avoid making the same errors again and thereby contributing consistent, incremental improvement in decision-making and operations.

The mindset and capabilities that make a single-family office high functioning are the same qualities that enable people to become very wealthy in the first place. By applying the same approaches that produce great wealth, wealthy families and their senior executives are ensuring that their single-family offices are operating efffectively.

As the operational methodologies embraced by high-functioning single-family offices are predicated on extreme wealth creation, they are all learnable. Consequently, any single-family office that is not presently functioning at a high level can do so.

Richard j. Flynn is the managing partner of Flynn Family Office. He works with families, entrepreneurs, executives, athletes, artists and entertainers to create customized financial strategies. He can be reached at