Family members in the business

Thank you for making the time resources to get all the information and articles out here for us to benefit, and enhance our work positively.

I must let you know that the Readers’ Questions articles have been a direct answer to many of my questions too.

I wish to use this medium also to ask the question that bothers me presently. This is engaging family members in business, having engaged them and seen the management on their part. While I am restoring the business to get it on its feet again, it’s obvious the previous method shouldn’t be allowed or heard of again.

What structures can I put in place that will not be truncated by emotion and sentiment on my side and that of the management?

Answer

In many company’s nepotism, or the employment of family members, is very common, even encouraged, as it is often the planned succession for the business.

And there are many instances where this has worked very well, as it keeps the company within family ownership, everyone is motivated, and if the family is disciplined enough it works well.

There are other cases where there are not enough safeguards in place, where it is less successful. It sounds like this has been your experience.

If you are the owner of the company, you can put any structures you like in place, such as clauses in the memorandum of association, or partnership agreement, or simply record a Board decision.

But it may be that once things have calmed down a bit, and the situation is returned to something near normal, you decide that you do want to allow family members into the company but you need to put safeguards in place.

I think you need a process which allows family members to work in the firm, but ensures they are not given preferential treatment other than a chance to be considered. Anything more must be earned.

It is difficult for management who are outside the family to know how to handle potentially awkward situations that may arise when young or inexperienced family members exceed their brief or mismanage. So, you have to provide a framework to protect your managers.

Performance management is always a good way to formally manage staff, I have discussed this at length

Performance management and appraisals

Also, other employees may see the family members as a block to their advancement in the business, and the best ones may leave to seek opportunities elsewhere, where they will be promoted on merit.

You need to establish some rules around employing family members. your policies and practices need to make it clear that all employees, family or otherwise, will be recruited and rewarded based on merit. The only determinant in such decisions will be company success.

The company needs formal policies and guidelines for recruitment, reporting structure, training, responsibilities, and succession. If you don’t, you run the risk of serious problems with employee morale

Your policies could stipulate that recruits have an appropriate education and background for the roles they are given. This should prevent family members being given inappropriate roles

Ideally, they should also have some experience outside the business. The reason for this is that outside work experience is important for both the business and the individual. It ensures family and other candidates are equipped to deal with challenges, learn and make mistakes away from the view of the family. It makes family members appreciate the family business, see how other businesses are managed, and gives them an idea of their worth in the market.

in addition, you should have a strict “promotion by merit” policy, with all employees given an equal chance to compete for available promotions or new positions.

These policies would give the management team a framework to work within, which should prevent unwise decisions being taken, and family members being allowed to take up positions they don’t deserve, even if they are family.

But whatever policies and frameworks you set up, it is common sense and strong management that will prevent the situation re-occurring. You must encourage a culture that allows your management team to question decisions, not only concerning family, but on all aspects of management. Surround yourself with good people, strong managers and make it clear everyone has to earn their position on merit.