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Hiring In-Laws: The Kiss of Death

Hiring in-laws into a family business can lead to company-threatening disasters. The reason? They'll try to prove their value to the company by changing the way it's run.
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No wonder in-laws sometimes foment dissent in a family business. They'd rather fight for an active role than feel like pampered pets living off someone else's largesse

Because so many entrepreneurial businesses begin as mom-and-pop ventures, they often neglect to establish policies about nepotism. No matter that "family-business therapists" are likely to outnumber certified public accountants before we know it; big-hearted business builders continue to be blind to the potential danger that exists when they impose the concept of "one happy family" on their for-profit enterprises.

Succession problems, of course, are well known to any founder who has more than one child hoping to take the helm of the business someday. What concerns me, however, is how regularly chief executives assume that in-laws will be grateful to benefit from the opportunities and profits generated by the business.

If you even entertain the thought that a cousin-in-law, brother-in-law, or niece-in-law of a principal in your business can work for you without bringing twice the emotional baggage that your siblings and children bring to the table, you do so at your peril. Even in-laws with terrific ideas for the company will disrupt the business, the family, or both.

The O'Shea family--the name, the industry, and other identifying details have been changed--had been suppliers of clothing to the military since World War II. Daniel O'Shea, whose father, Patrick, founded the business, was earning what he called "a comfortable living" in 1970, when he began making succession plans. Daniel's two daughters had no interest in the day-to-day operations of the business--so it was easy for Daniel to pass control to his son, Sean, a levelheaded recent M.B.A.

After Sean had been running the business for roughly five years, his sister Jean asked if there was a place in the company for her CPA husband, Rich. Sean gave the go-ahead to bring Rich into the accounting department. In addition to working well with numbers, Rich brought something that had been missing for three generations: an eye for new markets.

The problem began when, at a family dinner, Rich commented on how lucrative the Levi's blue-jeans business was becoming since young people had adopted jeans as the basic element of their wardrobe--along with the olive-drab jackets and camouflage clothing that the O'Sheas manufactured for the military. As Rich saw it, the O'Sheas were sitting atop a potential gold mine if--and it was a big if--they'd be willing to develop markets other than the military.

Given Sean's belief that he was the conservator of a resource developed by his grandfather--and not, as he later put it, "some wild-eyed, iconoclastic entrepreneur out of graduate school, finding fault with the status quo just to prove his worth"--he was immediately hostile to Rich's proposal. After several acrimonious meetings between the two, it became obvious that neither side would budge. Within six months of the fateful remark, Sean fired him. Soon after, Rich and Jean--with counsel--tried to persuade the third O'Shea sibling, Marie, to join them in their efforts to wrest control of the business from Sean. Sean sold the business within 20 months of Rich's firing.

In my consulting career I've come across more than 20 family-business "disasters" that were driven, fueled, or initiated by in-laws. In each case, I am certain that, left to themselves, members of the nuclear family would not have let matters get out of hand. Although it's a small consolation to people who have suffered because of in-law interference, the psychological discomfort that prompts in-laws to foment dissent is easy to understand.

The primary concern of in-laws who join established family businesses is, typically, "earning their keep." That healthy drive stems from the discomfort brought on by receiving what psychologists call noncontingent rewards. In contrast to rewards that are contingent on people's own behavior and are, hence, under their control, noncontingent outcomes are the result of either good (or bad) fortune or the behaviors of others. "Marrying money," or marrying into a moneymaking business, is an example of a noncontingent success, because the "success" one receives is wholly dependent upon whom one has married. Children of business builders who are heirs to a family fortune are also subject to noncontingent rewards, and the problems associated with inherited wealth are testimony to the fact that unearned rewards can have an unfortunate impact. But it is far easier to rationalize a noncontingent success that you attribute to your bloodline (it is, after all, part of you) than to find comfort in other people's money that you hadn't grown up expecting to receive.

The consequence of noncontingent outcomes that people find hardest to accept is that the "good" outcomes are as psychologically disruptive as the "bad" ones. Jonah's getting swallowed by a whale or someone's winning a lottery will, I swear, ultimately evoke the same plaint: "Why did this happen to me?" The psychological literature is teeming with accounts of instant heroes and state-sponsored lottery winners, who, after "lucking into" far more than their allotted 15 minutes of fame, succumbed to alcoholism, depression, and even suicide. One cause of those psychological disorders is the frenetic change in a person's life that follows instant success, riches, or fame. Marrying into a family with money, as Rich did, can result in similar changes. Another disruptive effect comes from the expectations associated with "making it." If people discover that you are wealthy, they care less about how or why you are wealthy; their concern is that you act the part.

Many of those who have married into family businesses find that their friends look to them for jobs, loans, referrals, and so on, and the prospect of saying, "Look, I'm where I am because of my wife's brother. I'm really a nothing in the family business," is an untenable response. For that reason, many victims of noncontingent success seek to establish a "postfacto contingency" between their behavior and their good fortune by trying to add something to the business, as Rich did. That alone is not always the problem, since, on occasion, the contributions are valuable. The problem arises when family members who control the business rebuff the suggestions--good or bad--of in-laws looking to establish their worth. When that occurs, the in-laws feel as though they are being permanently relegated to "hanger-on" status, which places them at risk for continual embarrassment and self-doubt. For many, it's preferable to fight for an active role and lose the business than to feel like a pampered pet living on the largesse of in-laws.

As with all problems that arise in family businesses, planning ahead to avoid this particular issue is much less costly than spending huge amounts of cash on therapy after the fact. You need to assume that one day you will find yourself with a family member suggesting that an in-law like Rich join your business. Here's what you should realize:

* The primary need of job-seeking in-laws is self-esteem, and the best way you can help them earn it is to open doors, call in IOUs, or engage in creative horse trading to help them find work anyplace but within your business. That will give the "Riches" of the world an opportunity to manifest their competence, and they will owe only their head start to their in-laws.

* Assuming that strategy fails, you still need to recognize that a job-seeking in-law needs self-esteem. You should quell the cries for help by offering a job with both a limited scope and rigid criteria--say, making a new division profitable in two years. Then, in the presence of the blood relative who lobbied to have the in-law brought into the business, have the in-law sign an undated letter of resignation. Tell them both that the first time the in-law behaves in a manner that would get any other employee fired, the letter will be dated.

Remember, there's no panacea for controlling in-laws who work for you--only philosophies to guide you in your management efforts. The kiss of death in in-law involvements happens when you don't put a boundary around what you'll tolerate from in-laws.

Dr. Steven Berglas is a management consultant and a psychologist on the faculty of Harvard Medical School.

Last updated: Nov 1, 1998




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