One of the Family Charter policies that next generation family members need to consider is the question of family member employment in the business. It is usually not an issue for founders. As far as that entrepreneur is concerned, she or he started the business to benefit the family and one advantage of owning the business is that the children will have a desk on which to put a plaque. After all, the business needs all the hands it can get and why not family members who will inherit someday?
The founder believes that they will bring interest, hard work, and continuity to the business. Plus, why did the founder devote so much time, energy, and angst if not to have his children grow the business and enjoy the fruits of their joint labour and continue the family dynasty? The parent/founder often applies some forceful persuasion to get his children to join the business, even as they claim no such tactic.
Square Pegs in Round Holes
Founders learnt the business from the foundation up and often expect that their children would learn from the parent either around the dinner table or by going to the office on school holidays. As a consequence, I have many clients where most if not all of the second generation work in the business. At times, this results in the pounding of a square peg into a round hole. Yet, families often tolerate this even if it may not yield the best economic output. Family businesses do not measure success only by profits.
They are also interested in what researchers term the “socio-emotional” wealth of the family. Family members need to feel a part of the family business and employment seems the most obvious way of achieving this. However, as the family adds spouses and a next generation, the sibling team seeks guidelines to determine family member employment in the business. The question becomes more pressing when the founder is no longer involved in the business. Does the next generation blindly follow the path set by their parents or do they reframe the family employment practice? .
Opportunity vs. Birthright
Owning families acknowledge the privileges of heritage and struggle with the balance between viewing family member employment in the business as a birth right or as an opportunity. On one end of the spectrum, there are those who implement what one of my clients calls “The Seepaul Solution” as in what is good for Gopaul is good for Seepaul. He maintains that family members must be accorded no preference and be treated just like anyone else applying for employment. Then there are those who treat the business like a welfare program and they create positions for any and every family member. Neither position is sustainable and may redound upon both the economic and socio-emotional health of the family.
Family members need to dispassionately discuss and document the requirements for employment of family in the business. The implementation of a formal policy does not negate the family’s interest in the socio-emotional health of its members but it does define specific conditions under which family members join the business. Families must first decide where along the spectrum they wish to position themselves and the extent to which they welcome family member employees as having an inalienable right to be there or as applicants who not only meet the job requirements but bring the additional family interest and input.
Even as they struggle with that underlying question, the family needs to set out guidelines for family member employment, starting with who is family? Does the policy cover the family- member CEO ‘s sister in law? What about spouses? Are they welcome to join the business? The issue of in-law involvement in the business, whether by employment, shareholding or even knowledge dissemination is one of the most contentious issues that families face. Once “family” is defined, what about level of employment? Do we limit family members to joining only at a certain level? Some families institute a rule that family members can only join if they are management material as indicated by their educational background and work experience.
This is to forestall the difficulties that could occur when a family member works as a delivery driver and reports to the warehouse supervisor while his younger cousin is the company’s Chief Operating Officer. There are complications that could arise when non-family employees supervise family members and some families prefer to deal with these by having family members not serve in non- supervisory positions.
The Family Business literature is replete with advice that family members should work outside of the business before joining. The prevailing view is that this introduces the heirs apparent to the world of work in a setting where their family name is not the same as that of the CEO and it also adds to the next generation member’s own sense of self-esteem. It is a recommendation which many take on board to the extent that I read recently of a case where a family member took on a pseudonym and moved hundreds of miles away to work incognito in a branch of the family business.
While that option is not available to those in smaller locales and there are sometimes obstacles when the scion of an owing family goes job seeking in a limited market, there are creative ways of making this happen. What is often lacking is the will to implement, even as families give lip service to the suggestion. Yet, almost without fail, those who do work in businesses other than the family business speak of the benefits; and those who do not, lament the lost opportunity.
Then there are the matters of family member compensation and perks, supervision, performance appraisal, accountability, mentoring, career path, to name some of the topics that need be addressed. Like many of the other Family Business Charter policies that need to be defined, family member employment is emotive and requires that family members do not adhere slavishly to past practices but embrace new possibilities. It is an attitude that will serve both the business and the family well.