Sunday, August 9, 2020
Helping Family Businesses succeed.
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Creating Law and Order in Family Business

When one thinks of a group of family members in a room together, one first thinks of relationships and emotions – not business. But it is true that family businesses bring to the table – whether the boardroom table or the kitchen table – a whole host of biases and subjective viewpoints that are unique to family businesses and that can make working in a family business both wonderful and precarious. For this reason, it is extremely important that family businesses establish specific, written rules and policies. Following these rules can help family business leaders and family employees maintain a sense of order and professionalism as well as squelch any ill-conceived notions that family members are being treated inequitably.

Without rules and policies in place, family businesses increase the risk of poor hiring practices, unfair compensation practices, non-family employee resentment and much more. Once these kinds of problems begin, it can adversely affect productivity, employee morale and, ultimately, your family business’s financial performance.

So even though your family business started with a natural grouping of related individuals, don’t make the mistake of thinking that these familial ties make adequate substitutes for business rules and policies like the following.

Employment Policies

Success comes from putting together the right team of people to offer the right products or services to the right market. Where it all begins is the team, so if your family business doesn’t have the right people on its team, it’s not likely to succeed. However, in family businesses, the assumption can often be that any family member, qualified or not, is entitled to a position in the business.

Let this not be the case. Even family businesses – or especially family businesses – have the right to put in place a set of criteria for employment. This can include:

  • Education – The family business should establish a minimum standard, such as a high school diploma or even a specific higher education degree, as is necessitated by individual positions.
  • Experience – Even family businesses want experienced employees. For some positions, especially those not considered entry level, it is reasonable for your family business to insist on previous experience.
  • Employee Relationships – The family business may even wish to restrict the hiring of extended family members and spouses to ensure objectivity.

Expectations and Performance

All employees are held to certain expectations, and in family businesses, those expectations should be just as high for family employees as for non-family employees. Expectations should be clearly explained right from the start, including responsibilities and goals each employee should reach.

Each employee should operate under a title that is appropriate for his or her position. For example, if a family employee and a non-family employee perform the same function and have the same responsibilities, they should have the same title. The family employee shouldn’t have a special title that connotes any entitlement or authority that is not inherent in the actual job description or employee performance and expectations.

Family employees should be subject to the same performance review processes as are non-family employees, and when the supervisor of the employee is a family member, it is often helpful to include a non-family manager or business leader in the review meeting. In this way, participants are more likely to keep the performance review purely business, rather than inject family emotions into the discussion. When family employee members fail to meet expectations, they should be subject to the same consequences as non-family employees as well.

Chain of Command

Because family relationships can otherwise obfuscate the nature of business relationships, family business leaders should establish a clear chain of command for the business with a written organizational chart. Regardless of family relationships, in their place of business family members should follow that organizational chart in reporting to supervisors regarding performance and tasks. Family business leaders should also establish rules by which employee issues are escalated through that chain of command.

Family Standards of Conduct

With all the above rules in place for everyone in the family business, family and non-family employees alike, there is an additional set of rules beneficial to any family business – those governing standards of conduct for family members alone. Because the business is family owned, the family members have an obligation to set an example to other employees, to represent the business in a positive manner with customers, and to behave in a way that does not compromise the interests of the business through family reputation. These kinds of rules seem to mix business with personal – and to a great extent they do. But they are a part of the privilege of working for a family business. The reason is that family employees should be the most productive, professional representatives of the family business.

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