Guest Post by Carol Frome (learn more about Carol at the end of this post)
Working with relatives has its appeal, especially for startups that may not have a lot of cash flow. No one other than a family member is more likely to work for future profits, rather than for immediate pay. But employing family members is a strategy that is also fraught with hazard.
For example, in one high-profile case, Chef Gordon Ramsay’s empire of restaurants rests not only on his shoulders, but until recently, it also rested on the shoulders of his father-in-law. Yet according to news on BigPond, an Australian news site, Ramsay recently fired his father-in-law. While firing someone is never pleasant, firing a family member can strain morale at work and relationships at home.
Here are the pros and cons to working with family and five strategies to make it work.
The Sweet Spots
Relatives bring a built-in support system, according to Carmen Bianchi, director of the EMC Business Forum of the Entrepreneurial Management Center at San Diego State University. They may also care about your business more than outsider ever will. They will have seen you struggle, make hard decisions and perhaps put your home and finances on the line.
They may also admire you for your courage. Drawing in one or more relatives will give them a chance to feel that they are part of something important. Because of their pre-existing familiarity with the business, including its staff and customers, the learning curve may also be considerably shorter than it would be for a complete stranger. Bianchi points out that family members are often willing to sacrifice for the business. She adds that family businesses can benefit from shared values, stability, loyalty, and family trust.
The Rough Spots
On the other hand, some of the same depth of emotion that might strengthen a family business can also weaken it. Relatives may feel more comfortable arguing and sniping at each other than they would if they worked for strangers. Bianchi says that control issues and generational differences are common in family-run businesses. So is a sense of entitlement.
Some family members may feel they deserve a position just because other relatives have them. But blood lines do not guarantee a good fit. But even non-family employees can feel that pinch. Because of the frustrations of working in a family-owned business where the odds may seem stacked against non-family members, turnover among regular employees is high in some businesses. In short, family businesses are not immune from power struggles and politics.
Five Strategies to Make It Work
In spite of the potential problems, some businesses make working with relatives work. Examples range from mom and pops to the chemical giant, duPont, and the garment company started by Levi Strauss. How do they do it? They acknowledge the shortcomings and head them off at the pass by establishing policies that work, even when Family members run into interpersonal trouble. Here are five tried-and-true policies and methods of family-run businesses.
Devise a Family Employment Policy. It should name the criteria that family members must meet to be hired into the business and what types of goals they should meet if they want to continue in the business. The duPont family gave members an entry-level position and five years to prove themselves before senior family members reviewed each member’s progress. Eventually, those deemed incapable of upper management were eased out.
Establish a Family Council. At family council meetings everyone gets to air ideas, concerns and grievances. Establish rules of conduct for meetings. Giving everyone a fair listen can help to prevent strife.
Succession Planning. Family businesses that plan ahead for change are more likely to have a smooth transition when the founder or founders are ready to retire. If you wait until the time comes, advises management expert Peter Drucker, it will be too late. He advises hiring an outsider to manage and plan succession. The family should agree ahead of time that this person will objectively evaluate and choose the most qualified candidate to take the wheel when the current chief officer is ready to hand it off.
Treat Family Respectfully. This needs to happen at work and at home. While you probably don’t want to conduct your home life as if it were unfolding in a professional setting, setting a tone that conveys respect to and among family members will pay off. For example, allowing siblings to bully each other will eventually play itself out in the business as well. Forbidding that kind of behavior fosters harmony.
Hire Outside Professionals and Specialists When Necessary. Family provides a limited pool of expertise, so the business will need to hire outside experts when necessary. To prevent turnover if they are upper managers, treat them as full citizens in the business, advises Peter Drucker.
About the Author
Carol Frome is a freelance writer and entrepreneur (www.benewords.com). She has written for many websites, including AT&T’s Yellow Pages, Business.com and the Australian news site BigPond.