Business Information

Hiring the family in a family business

Many family businesses employ only members of the same family. Going outside the family means hiring a stranger; staying inside the family means hiring ‘the devil you know’.

Family members help most small businesses get established, and as the business grows their roles expand. Family members can be helpful in reducing the costs of putting on extra staff in busy periods, and are much less likely to get the business involved in costly industrial relations problems.

It’s estimated that about half of all spouses play some part in a family business, from sharing management responsibilities to just filling in on a part-time basis.

Why it’s good to employ family members

Family members are likely to have an emotional and personal relationship to the business that will encourage them to do that extra bit for its success. They’re not going to steal from themselves, and nor are they as likely to look around for another job.

Family members know each other well enough to be aware of things they can and cannot do. They share knowledge of what makes each other happy and of the basic rules of behaviour; they are part of the same culture.

When Ann Rhoades was in HR with Doubletree Hotels she became convinced that family ties make for closer ties between people and the company. "If you have several family members at a company, and they're all happy there, then those positive feelings build on one another," she argues.

"Family members don't want to leave an organization if other family members are there. So it becomes a retention advantage."

The dynamics of a family can make the business welcoming and friendly, less impersonal than another type of enterprise. It can be so good that employees who aren’t in the immediate family work harder to be accepted into the clan.

And why it’s not so good

Families have their weaknesses too. A family dispute can quickly move from the home to the business and affect things there. A family member can easily feel slighted if a non-member is given a pay increase or a promotion, and it’s more difficult to get rid of a family member who’s not doing well in their job.

"Hiring, managing and paying family members is one of the most difficult issues that a business owner can deal with because family relationships can inappropriately influence business decision-making," says Mae Lon Ding, president of Anaheim-based Personnel Systems Associates.

Non-members of the family will often feel they’re disadvantaged in decision making, and whether it’s true or not they’ll believe they’re less likely to have their requests granted for things like time away from work to take care of personal matters.

Owners often forget that members of their family are subject to the same industrial relations legislation and other conditions of work as any other employee and can find themselves in a situation where they are penalized for non-compliance.

The best way

You might think you’re helping your cousin or sister or uncle by giving them a job in your business, but if you don’t apply the same rules when hiring them as you would to any other employee you can find yourself with serious problems.

First, be sure they have the right qualifications for the job. They might have worked in the business before in a part-time position but that doesn’t necessarily mean they’ll be suitable for a full-time role.

Have them complete the same paperwork, including an application for the position, as any other candidate. It’s advisable to conduct the same reference check on them as you would for someone you don’t know; just because they’re in your family doesn’t guarantee they’ll work as hard as you.

If their only work experience has been with your business you might encourage them to work somewhere else for a period of time so they have a better understanding of what it feels like to be an unrelated employee.

Quentin Fleming of Santa Monica, author of ‘Keep the Family Baggage Out of the Family Business’, says this is a really good idea.

"Working elsewhere provides family members with an education in how other companies think and operate," he says. "When the kids do enter the family business, they'll bring with them different perspectives."

Give a family member the same induction process as you would for anyone else who just joined the business. They’ll also have to understand that their relationship doesn’t mean any special privileges during working hours.

Family members should have specific goals to accomplish and be given tasks with measurable outcomes. They’ll need a clear description of their job and details of their responsibilities.

Promote only on merit. This is essential to keeping your business running well and growing. Never promote someone just because they’re related to you and they’ve worked in the business for a few years. If it’s necessary to fill a key position and no family member is suitable, go outside to get the right talent.

When more than one family member is an employee in the business it might be helpful to form an outside ‘board’ or council of non-family members to make evaluations of candidates for promotions or salary increases. These outside advisers can also be invaluable when making selections for new positions in the company.

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Business Roadmap provides practical business advice for small to medium sized businesses that are trying to overcome problems, or are trying to achieve their vision and full potential. Visit the Business Roadmap website for further information.

Disclaimer: While every effort has been made to provide valuable, useful information, Blue Mountains Web Pty Ltd. (trading as Stralia Web), Business Roadmap Pty Ltd. and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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