Employing Family Members

Most first generation family businesses are private businesses.  Their leaders are also their owners.  This gives them the ability to do (almost) whatever they like within the business, since said leaders are only accountable to themselves, as owners.

When there’s shared ownership, in any generation, things get more complicated, because  business leaders are accountable to a broader range of stakeholders.

Providing employment for family members (especially those with sub-par employment prospects, at least in the eyes of their parents), is often a key motivation for operating and maintaining a family business.  It’s also a common cause of conflict in family business.

Businesses that operate on a “Business-first” basis, only employ people when: (a) there’s a genuine job opening and, (b) appointees have the required qualifications, experience and skill to do the job properly.  In such businesses, employees are expected to perform reliably, to objective standards, just to keep their jobs.  Every role in the business is designed and operated to satisfy specific business needs.

When a busines operates on a “Family-first” basis, jobs may be made available to family members, whether or not they have relevant skills and adequate competencies.  Roles are designed around people, often with little regard for the real needs of the business.

Conflicts arise when the family, or some of its members, try to impose their family-oriented demands on a business that considers itself to be businesslike.  This can pit a nurturing and protective parent against a commercially-oriented parent; demanding parents against needy children; siblings with different skill levels against each other; and cousins against one another.

Non-family employees develop resentments, which can grow into conflicts in the workplace, when family members are installed in roles they’re not qualified to occupy – especially when this bumps worthy, non-family employees out of their expected career paths.  It’s seen as proof positive that a glass ceiling has been installed, or has been activated, and that non-family employees will always have lesser prospects in the business than family members, irrespective of merit.

When family members are employed purely because they are family members, and when their capabilities, personal style, work ethic or personality don’t gel, or actively clash with the rest of the team, good staff leave to get jobs elsewhere, while poor staff stay, because they don’t have great alternative employment prospects.

There’s no reasonable objection to family members taking on junior roles, temporarily or full time. But senior roles should always be allocated on merit – otherwise the business may suffer, and everyone’s future will be at risk.  Push back against unworthy family appointments is almost assured.

Solution

Ideally, well before there’s any likelihood of employing a family member, the business sets some ground rules:

  1. Decide whether the business operates on a “Business-first”, or “Family-first”, basis.
  2. Determine the values, and the rationale, that guided that decision.
  3. Update the business Organisation Chart to identify the functional roles required to operate the business, in order to achieve Strategy and Business Plan objectives.
  4. Create detailed job descriptions for all significant positions in the business, including: roles, responsibilities and accountabilities; specific tasks to be performed; relevant and measurable KPIs; required qualifications, training and experience; appropriate attitudes and attributes.
  5. Establish a business-specific performance management system to measure actual performance against specified KPIs, on a regular basis.

Create a family policy to cover family employment.  Note that all family policies should, eventually be included (or at least referred to), in a formal, written, Family Constitution.

Ensure that the family’s business employment policy is congruent with a similar policy in the business.

Establish a Family Council to enforce the family’s rule of engagement.

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