As wealthy families become more globally dispersed, Eastern Family Offices are now accelerating in numbers. Family Offices in Eastern and Western cultures have distinct characteristics and are influenced by different values. As a recruitment consultancy specialising in working with Family Offices globally, we believe that it is important to understand the role of culture in shaping a Family Office and the differences between Eastern and Western cultural norms when working with different clients.
According to the report ‘The Family Office boom: Contrasts between East and West’ released by The Economist Intelligence and DBS Private Bank, culture plays a crucial role in determining the operation of Family Offices. Family Offices can be defined by different cultural models, an “individualist” model is commonly found in Western cultures, such as the United States (US) and Europe. This model emphasises individual achievement and autonomy. It also promotes democracy, meritocracy and accountability, which resonates with Western values. The communication in a Family Office with an individualist culture is direct, transparent and explicit. On the other hand, the “harmony” model is commonly found in Eastern Culture, especially in China and Japan. This model places emphasis on respect. This is rooted in their pursuit of traditions and filial piety – a Confucian concept derived from Chinese culture that advocates respect for one’s elders and ancestors. As a result, communication is circumspect in nature and orientated to sustaining relationships.
Culture plays an important role in shaping the structure of a Family Office. Respect for authority is the backbone of Eastern Culture. This leads to a general preference for a hierarchical structure with different management levels and a chain of command. Besides, family systems tend to be more patriarchal in the East, and this may be reflected in the structure of their Family Offices. Contrarily, a flatter organisational structure is prevalent in Western culture. In this instance, younger family members or junior staff are more involved in the decision-making process alongside senior family members and executive staff compared to the Eastern Family Offices.
Investment is one of the core functions of a Family Office. The report stated that Western Family Offices often focus on portfolio diversification while Eastern Family Offices are more growth-oriented when it comes to investing. Family Offices in the West value meritocracy and tend to delegate their investment decisions to non-family professionals with a discretionary mandate. While the same practices can be found in the East, investment decision-making power mainly lies in the hands of the family. Eastern Family Offices are also found to be more discreet and less demonstrative about philanthropic work compared to their Western counterparts.
It is worth noting that, the use of external professionals is not common in Eastern Family Offices. Family Offices are discrete and private in nature, therefore it may seem ideal to only work with trusted friends and family members. However, this is not a sustainable practice as the Family Office is at risk of placing unqualified people in important roles. Putting exceptional wealth and sensitive matters into the hands of an incompetent person is precarious. In this regard, we encourage Eastern Family Offices to adopt a structure consisting of a mix of second-generation and external talent.
From organisational structure, decision-making and operation to communication style, culture plays a significant role in shaping and differentiating Eastern and Western Family Offices. Agreus is an established full-service resources and recruitment consultancy dedicated to working exclusively with Family Offices. We have worked with Family Offices from both the East and the West and have established a global presence. We understand the importance of culture for your Family Office. For a more tailored conversation about hiring the right cultural fit for your Family Office, please do not hesitate to get in touch.