6 Tips For Managing The Family Business

Family owned small business are the engine of our economy and are an important part of our culture.

There are 5.5 million family businesses in the United States.  And, these family owned companies, contribute 57% of the GDP and employ 63% of the workforce.

That means family owned businesses employ over 98 million people and are responsible for 78% of all new job creation.

Most businesses are birthed out of an idea someone had who possessed the drive and determination to make it a reality.

As a business begins to gain a bit of momentum and success, there becomes a need to recruit others to help with the business endeavors.

This need creates the challenge of identifying someone who has the passion for the business and who is trustworthy in this fragile phase of a business start-up.

This is when an entrepreneur might recruit a family member to help.

Of course they can trust family and of course family will work as hard as them and be as committed to the cause of the business – right?  Well maybe.

Think About Why You Want To Hire Family

When a family member is hired, business owners need to think about the goal of hiring this person.

Is it to provide an income for this individual or is it to provide an opportunity for someone to help the organization achieve objectives?

The answer to this questions sets the stage for the success or failure of this employment relationship. 

When family members get intertwined into the operations of a business, issues and conflict can arise.

And, if there is not strong governance, and good management practices, it can impact the long-term health of the organization.

Not to mention those important family relationships.

This can be particularly difficult when business owners feel obliged to employ family members that may or may not be qualified candidates for the job.

The interesting thing about this family business model is there are some very successful family run businesses.

And some that allow these relationships to negatively impact the health and well being of the business.

When it comes to hiring family, there are some things business owners can do to help make this employment relationship successful.

6 Tips for Managing the Family Business

1. Hire For the Position – Not the Person

A big mistake many family operated businesses make is forcing a family member into a role that they don’t have the desire, qualifications or interest in performing. This model typically doesn’t work.

Job openings should be filled with people who have the credentials, skill set and demonstrated performance to do the job.

Tip: If you have a family member who is interested in the family business, bring them into an entry level position and have them work their way up the ladder by demonstrating their eagerness to learn and value to the organization.

2. Set Clear Expectations

Always communicate job expectations at the beginning of the employment relationship to ensure a successful work experience.

All employees (regardless of relationship) need to understand what is expected of them and what the consequences will be for not meeting those expectations.

This should be done when the employee is first hired and then there should be ongoing conversations throughout the employment relationship.

Tip: Use non-family members to oversee family members. This practice will create a barrier between those who manage, instruct and correct family members and the business owner.

3. Provide a Detailed Job Description

Family members, like any other employee, need to have a detailed job description that articulates key responsibilities, job tasks and employee goals.  

This description should layout reporting relationships and purpose of the position.

When the employee begins they should have someone review the job description with them and provide any necessary training on office equipment or other job functions to ensure they are equipped and prepared to perform job duties.

Tip: Don’t assume that because someone is a family member that they have a working knowledge of how the office functions or its culture.

4. Orientation to the Organization

Whether an organization is large or small there is a defined culture and new employees should be given a new employee orientation and information on the “unwritten” rules of the work environment.

For example, help the employee understand office norms, dos and don’ts and cultural expectations. This will prepare the employee for a positive work experience.

Tip: Encourage the family new hire to spend time in each department to get a working knowledge of how each area of the business supports overall business results.

5. Create A Process To Manage Employee Performance

Create a process to manage employee performance and incorporate it into all business functions. Use objective data to evaluate employee performance.

Support the process by creating job descriptions and employee goals that support business objectives.

If family members don’t meet performance objectives they should be dealt with the same as any other employee.

When performance does not improve, these family employees should be transitioned out – regardless of whether or not that person happens to have the same last name as the owner.

Tip: Sometimes a third party coach or mentor can help these family employees improve their performance though direct, results based conversations.

6. Make The Tough Call

Sometimes you need to be make the tough call and put business objectives over family relationships. This can be difficult but is critical to the long term success of the business.

Business owners should never forsake the mission of the organization because they feel obligated to carry the dead weight of under-performing family members.

Tip: Once you make the decision to let a family member go, do it. Waiting only delays the inevitable and robs that person of the ability to move on.

When family members are not required to carry their own weight, are unproductive or given special privileges, it can affect the morale of the entire work group.

Employees are very observant and this kind of management practice can undermine employee engagement and work against achieving business results.

Under-performing employees can and do impact the bottom line. When organizations carry unproductive employees on their payroll (whether family members or not) they are wasting valuable resources that could be better used to move the organization closer to achieving its mission and business objectives.

What does your organization do to ensure family member employees are successful?