When family is involved in your business it can be a wonderful thing. However, the lines between professional and personal can blur if relationships are not managed properly.
“When you have family in the business you’re going to multiply the complication factor by 10,” says Ricci M. Victorio, CSP, CPCC, managing partner at Mosaic Family Business Center.
“You’re walking a very thin wire between being deliriously happy working together and causing tremendous grief in the business or with the family,” she says. “I truly feel there is no business gain worth a family loss.”
Smart Business spoke with Victorio about ways to work with family to the benefit of the company and with as little animosity as possible.
How can a family member be brought on without creating a rift?
For example, your nephew graduates from college and your brother calls to ask if you can find a job for him in your company. This puts a lot of pressure on that relationship, as well as the managers in your company who will be responsible for your nephew. This is why it’s important to have a family member employment policy in place before young family members are ready to enter the work force, such as when they’re in high school or college. The policy establishes the criteria for a family member to qualify for a job at the company. It sets the level or type of education, the desired skill set, mandates that no job will be invented for a family member unless it’s needed by the company and determines that pay scales will be commiserate with those of non-family members.
Your managers should appreciate your family employment policy, as it will address the complicated family issues before they happen. It also clarifies with family the qualifications and the experience they’ll need to work at your company.
How can you gauge a family member’s work performance objectively?
Develop an additional policy called a performance expectations agreement. It outlines, with the help of managers, a successor development program, which is important especially if you have a vision for the next generation of ownership.
Through the development program, managers are assigned to mentor the family member and help prepare them to be the next generation manager. It also identifies behaviors that, if unchecked, could lead to significant problems, such as tardiness, a bad attitude or producing sloppy work.
The agreement of behavioral and performance expectations should include regular reviews that allow a manager the opportunity to offer ongoing feedback in an organized way.
How should the firing of a family member be handled?
Very delicately! Generally, you fire a family member for doing something really bad — stealing from the company, coming to work drunk or even worse, violent behavior — because you would never allow any other employee to stay on with that extreme behavior.
But before you fire a family member, look to see if this person is in the right job. Perhaps you have an introverted person who is being asked to do extroverted sales work when he or she would be better analyzing data. If this is the job they have to do and they’re not performing well, they’re probably not happy and are left struggling to please the family. If they’re not well suited, where do they belong? And if it’s not in the family business, provide an educational or transitional plan to get them in the right career. This will go far in preserving the most precious asset — family harmony.
How should stock ownership be handled in a family business?
Stock ownership qualifications can be built into a stock ownership policy — just because you’re a family member and in the business doesn’t mean you’re qualified to own stock.
Those in the business should have controlling or voting stock, while those not in the business can own non-voting or restricted stock because they likely won’t understand the decisions that need to be made. Having a stock ownership qualification policy can include provisions to prevent unnecessary battles between active and nonactive shareholders.
How should these policies be created?
Your attorney will draft the legal language of these policies, but the family, owners and your succession adviser determine the intentions or principals of the policy. You’ll determine the intention, how it will work in certain scenarios and talk through topics in an open way to get an outline. Your attorney will confirm the principals, point out the ramifications of certain provisions and formalize the language. The outline typically becomes an addendum in the shareholders agreement and is presented to the next generation family member, along with the family employment policy and expectation agreement.
How are personal and professional relationships best maintained?
As in any partnership, clarifying your vision, objectives, expectations and measurable outcomes is fundamentally important. As you’re determining an equitable workload, the functions can be so different that one can feel as if one is getting the mine and the other is getting the shaft. Determine the best way to work together, how often you’ll meet to talk about the business, how you’ll support your personal relationship and handle differences of opinion. Talk about both business and life objectives so you can support each other in life and work.
It’s important to establish boundaries. One couple working together determined that at the end of the day they would meet, review the day and set up for the next, then stop talking about business. It changed their relationship. Family business coaching can help establish these boundaries.
Ricci M. Victorio, CSP, CPCC, is managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952 or email@example.com