Feb 11, 2011

How to Hire Family Members

 

How to Hire Family Members: Define Roles and Responsibilities

The job description for most family businesses is to do whatever it takes. In the early stages of the family business, there is a tendency to have everyone pitching in, says Rivers. "You might be meeting with bankers one day and scrubbing toilets the next day. This is a recipe for confusion."

There must be written job descriptions, defined roles, rules for compensation, performance reviews, long-term and short-term goals or objectives, so that decisions are not based on family relationships. "There shouldn't be any surprises; family members should know if they are not reaching their goals or if they are on the right track for whatever position they are in line for," says Hilburt-Davis.

Is there a place for family members when there is no real role for them in the business? Some companies have set up an account or fund to help them start their own businesses, says Marchisio. They make investments in these family members' personal passions. Just be sure to establish guidelines for applying for such funds that could be gifts or loans. Others have set up a family foundation or community-based initiatives, such as a scholarship program, to which non-employee members can get involved. They coordinate and do the charitable work of the family business.

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How to Hire Family Members: Groom the Next Generation

Establish formal or informal programs. For instance, in addition to giving teenage family members opportunities to work in the business after school, you could actually create summer internships. Set up some type of mentoring program, suggests Marchisio. Young people can become apprentices to their older relatives and learn the inner workings of the business. Mentors should also include people from outside of the family, she advises.

The conventional wisdom is that family members should spend two to five years working outside of the family business at another company in the same industry. "Insider training is excellent," says Rivers. "It is not always a good idea to bring someone into the family business right away, especially right after college, who is going to be over paid and over scrutinized." Having a family member work outside of the company for a few years will not only help to build up his or her confidence but it will allow that individual to "make mistakes on someone else's nickel," Rivers adds.

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How to Hire Family Members: Don't Rely on Post-Graduate Education

Some family business consultants say to be skeptical of traditional post-graduate education, such as MBA schools. "The needs of your business are narrow and unique," explains Rivers, "an MBA education is very broad." Meaning, your son or daughter will learn how to work for Fortune 500 companies whereas you are running a manufacturing plant. So, "they are spending 90 percent of their time learning things that won't have any real life application to the family business."

That's not to say that you don't provide training and education. Rivers says that there are great resources out there for industry specific education, starting with trade associations as well as local community colleges. Of course, if the job description calls for an MBA or JD then family members can't forgo getting the proper background or credentials.

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How to Hire Family Members: Avoid the Sense of Favoritism or Nepotism

A clear line of communication between the head office and the field is crucial. Hold regular forums or meetings. Get key personnel together and do a focus group; use them to help integrate family members into the business. "If the work environment is professional and all employees are treated fairly, you won't get accused of nepotism," says Hilburt-Davis.

Rivers suggests you set some boundaries between family members and the family business by considering joining a peer group. "This will allow you to have other non-competing industry people looking over your shoulder and helping you find that balance." Also, use your board of directors or a board of advisors to provide objectivity. A third alternative he says is to hire outside business consultants.

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How to Hire Family Members: Focus on the Business Not the Family

There are basically two distinct models: family first and business first. However, research shows that business-focused family businesses tend to create more generational fortunes—$7 of net worth for every $1 dollar that a family-focused family business has, says Rivers. By focusing on the business first, enough wealth was created to take care of family members for generations to come, he explains. Family first businesses ironically ended up taking less good care of family members in the long run.

With the businesses that focused on family, certain perks were doled out or personal expenses were passed through the business. Bloodline meant employment was virtually guaranteed; meaning, no family member ever got fired. But Rivers says, "the needs of the business and not the needs of individual family members should always come first."

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