Of all the ways we know to ensure the survival of a company, the most radical was developed by the Geneva wealth and asset management group Pictet. It combines family and business structural principles, in a unique – perhaps even ideal – way. Yet, over the past 200 years or so, the organizational structure of Pictet has been constantly refined on the basis of tried-and-tested practice, after originally evolving in an unplanned way. What makes the Pictet model so appealing is that it seems to have succeeded in finding a way to exploit the advantages of family-type structures to the maximum, while at the same time reducing the associated risks to the minimum.
The partners of Pictet. Top row, left to right: Marc Pictet, Bertrand Demole, Renaud de Planta (Senior Partner), Rémy Best, Elif Aktuğ, Laurent Ramsey. Bottom row, left to right: Sébastien Eisinger, François Pictet.
How it started
The formal history of Pictet begins in Geneva on 23 July 1805. On that day, Jacob-Michel-François de Candolle and Jacques-Henry Mallet sign, with three limited partners, the scripte de société that creates the original partnership of de Candolle, Mallet & Cie. Thus begins the history of the company. It was only in 1841 that a member of the Pictet family became one of the bank’s General Partners.
Apart from Pictet, other Partners’ names also appeared regularly throughout the bank’s history, who came from the same circle of families in the city of Geneva. In 1909, Jacques Marion, a loyal employee, was appointed as a Partner, creating a precedent for the integration of non-family members, which was to continue in the succeeding generations, with many non-family members playing a significant role as Partners in the 20th century. Here we can already see the particular Pictet paradigm: the business does not pass down by linear descent through one family, as traditionally defined; instead, members of selected families acting as Partners have developed its model over several generations. Since it was founded, the company has always been owned by several managing partners. The business established an ownership structure in accordance with its own particular continuity objectives, developing a system of management by Partners which governs its own cooperation and self-renewal. The result is a social entity with many of the characteristics – and therefore the functions – of a nuclear family, while at the same time demonstrating many of the features of a management team.
A unique succession pattern
One similarity to the rules and social forms of nuclear families may be seen in the three-generation formula: the Pictet Group strives to appoint new Partners roughly every five to ten years. This accession pattern usually means that the youngest Partners are in their early 40s, there are two or three Partners aged between 45 and 55, while the most experienced Partners are generally aged between 55 and 65. The movement through the generations is therefore not unpredictable, but is institutionalised and regulated as a foreseeable aspect of the team's life cycle.
Once they leave the Group, the Partners have no further claims on the business (though the custom is that they remain available to offer advice to their successors, and may continue to look after selected clients). They keep only the capital they have generated for themselves in the course of their career and are bought out at book value by existing and new Partners. Thus, although a Partner generally remains an owner throughout his career, it is a temporary position that is associated with the individual and his management function, not his family, and cannot be passed on to his children.
The Partners’ Committee generally consists of about six to nine Partners (currently there are eight*), who jointly own and manage the business, and decisions are made by all the Partners jointly. The “Senior Partner” has a special role to play. This role and function is more like that of a referee than a chairman of the board.
The Partners have morning meetings in the “Salon” several times a week. This allows current matters to be discussed and decided as necessary, quickly and informally. Meanwhile, longer meetings are scheduled to deal with strategic planning and more complex subjects. In the management of Pictet, a culture of communication and consensus has thus become established over the decades.
It is in this room that the Partners meet every week to discuss current matters.
An evolving model
Against a background of tradition and consistency, Pictet has always enjoyed the ability to adapt to a changing environment. For the first time, in 2006, Pictet gave a select circle of top managers the opportunity to participate with a small share in the business. Today, there are around 40 equity partners. Furthermore, on 1 January 2014, Pictet & Cie, which had been run as a partnership for over 200 years, became a limited company called Banque Pictet & Cie SA. A partnership limited by shares was founded, bringing together all Pictet Group entities.
Both these steps should be seen in the context of the huge growth achieved in recent decades. Whereas Pictet had 300 employees in 1980, it now employs more than 5,000 in 30 locations. It was necessary to make changes to the legal form in order to facilitate the creation of foreign subsidiaries, and with a view to the growing number of international, institutional clients who welcome transparency in the accounts. However, Pictet tries to balance the opposition between tradition and innovation in a manner that is suitable to a family company. The legal form has been altered and annual reports are now published, but the principles governing succession planning and transfer of ownership – in other words the core components of the unique Pictet model – have been retained.
In all this time, the organisational structures have obviously evolved, with a greater understanding of the co-evolutionary unit of a family-like partnership and a business. The model that has emerged and survived to this day is one that almost perfectly resolves the paradox that arises from the different rules of play associated with a family and a business organisation.
The unanimous objective
An unwritten but unanimous objective among the Partners is to constantly improve the Group and to pass it on to the next generation of Partners in the best possible condition. Just like many other heads of families, the Partners see themselves as custodians of wealth.
This objective has clearly been met over the past two hundred years, with a semi-open partnership structure that offers talented and motivated individuals from outside the family an opportunity to contribute to the Group ’s leading position. Meanwhile, continuity has been assured by consistently focusing on the Group’s core business – wealth and asset management – and resisting the temptation to make short-term gains in investment banking. Lastly, what makes this model so unique and successful is the manner in which it combines experience with youthful energy, continuity with a spirit of innovation, and a family environment with external influences. As a consequence, Pictet is today one of the world’s leading wealth and asset managers.
Excerpted from “The Pictet model - A company that continuously reinvents its family ownership”, a case study by Torsten Groth and Fritz B. Simon, Witten Institute for Family Business.