Unfortunately, some families fail at this strategy. Misguided family offices tend to hang onto internal staff members after they have outlived their effectiveness, out of a sense of loyalty. Such fidelity may seem admirable—until the family begins to overlook poor service and lagging sophistication in the way their affairs are managed. Conversely, some family offices are too quick to jettison their external money managers at the slightest hint of performance disappointment for the glint of more fruitful promises.

Robert Puck, CEO of WLD Enterprises, a single family office in Fort Lauderdale, Fla., stresses that too many families become complacent about managing both internal and external family office professionals. "Generally, while I don’t think families spend enough time on the selection process, they seem to spend even less on making their relationships work," says Puck, who oversees a staff of 19 and outsources investment and money management functions. He applies more rigor to managing his relationships than is typical for many family offices, and speaks frequently at wealth management conferences, where he meets many people who are concerned about whether their family office is serving them as well as they should expect.

The Insiders
Family office staff tend to become particularly entrenched when they reach 10 years of employment—although they do not carry all the blame for complacency. When executives have served a family for a decade, few family members will be inclined to make a change. But experts caution that the longer a family office exists, the more its requirements evolve, and its changing needs often require alterations to the composition of its staff.

TOP VIEW: Family offices expect loyalty from internal staff and tend to return the favor—although not always to their advantage. Too many ignore inadequate service from their family office staff, sometimes out of misplaced devotion. Conversely, many families jettison external investment managers too quickly, particularly those who base success solely on financial returns. For both internal and external professionals, family offices should think carefully before establishing, or terminating, a relationship.

Of course, those who serve in the family office often become like part of the family. And, employers wrestle with how to supervise—or even dismiss—staffers who may know things about them that even a spouse does not. In these cases, perhaps loyalty should prevail; the best solution may be to hire another professional who makes up for an existing staff member’s deficiencies. "Hiring and firing are emotionally draining and time-consuming activities for families—especially firing, which at this level is more like a divorce," says Scott Welch, managing director at Lydian Wealth Management in Rockville, Md., a family office advisory firm.

Regularly scheduled performance reviews—a fundamental management tool that family offices often overlook—are useful exercises. In the course of reviews, a family member or trusted executive can optimize the staff mix by suggesting to an employee who is becoming stagnant that he seek new training, or even a new career. At Pitcairn, the Philadelphia-based multifamily office that is now serving its sixth generation of the Pitcairn family, president and CEO Alvin Clay insists upon a formalized, annual review process. Having such procedures in place, he says, creates an agenda for discussion that can lead, if necessary, to termination. "When we hire, we’re assuming they will be staying for the rest of their career," Clay says. But like a prenuptial agreement, an annual performance review helps define the rules of engagement that can make separation less traumatic for both parties. Performance can be defined in any number of ways, but reviews should include aspects that can be measured objectively.

Clay believes that by quickly culling inappropriate hires, his family office maintains a winning team, while enduring an annual employee turnover of only about 6 percent. This ranks far below the average annual churn in the financial services industry of just over 25 percent, according to the Bureau of Labor Statistics.

"Letting people go is always a big deal," Clay says. "Obviously if someone steals, firing is an easy decision to make. It is much more difficult when someone just isn’t cutting it or when an upgrade in talent is needed. But that is not an excuse for shying away from doing it."

Puck’s WLD Enterprises does not use a formalized review process, but he does keep a close watch over day-to-day operations. "As an organization, we do not take a relaxed approach to staff management," he says. "This is a business. We take the time to develop initiatives for the coming year, and trickle these goals down to make sure everyone knows what role he will play in realizing them. I think you can accomplish more in the office when everyone knows what we are trying to achieve. If you don’t do annual reviews or annual compensation adjustments, you are sending the wrong message to the employees."