Family-Owned Businesses: How to Successfully Include Your Children

family-owned business

The idea of bringing the next generation into a family-owned business can often seem like the fulfillment of a dream.  The satisfaction of having a daughter, a son or even a nephew or niece embrace the enterprise you’ve devoted a large chunk of your lifetime to nurturing seems hard to beat, especially when the arrangement helps to ensure that the fruits of your hard work continue in your family’s hands and to their benefit after you’ve left the scene.  But like that dream family vacation that crumbles under the weight of competing agendas and too much time spent together, there can often be a disconnect between this particular fantasy and the reality that actually unfolds.  After all, you are trying to blend the two things about which you care most in life, your family and your business, and understandably, the passions attached to each may at times collide.  It’s not always a recipe for unalloyed happiness.

There are a few things you can do, however, to minimize the friction and increase the odds of success.  First of all, understand that you are not alone.  A sizable majority of American businesses are family owned, up to 90% by some calculations, and most of these include multiple family members.  There is a lot of experience to draw on.  The two things that most experts seem to agree on is that, first, the addition of family members to any business needs to be done in an orderly and defined way, with a clear understanding of their roles and responsibilities.  Some even suggest creating a special employee handbook just for family employees.  Secondly, family employees cannot be treated with any favoritism.  Decisions about their ideas and performance should be weighed with the same impartial business sense that you would apply to non-family employees.  The flip side of this is that non-family employees need to feel that their input and authority are valued as highly as that of any employee who happens to be related to you.

Wayne Rivers, president of the Family Business Institute, who as his title suggests, focuses on nothing else, offered up these tips last year in The Wall Street Journal.

  1. Have family members work elsewhere for at least five years before bringing them on.
  2. Don’t assume the next generation shares your values. Anticipate that they will have a different approach to the work-life balance than you have.
  3. Consider using psycho-metric testing to make sure that family hires are assigned duties compatible with their skills and personalities.
  4. Make sure you hold them accountable for their performance in just the same way you would with a non-family member. (See above.)
  5. Use a third-party “facilitator” to resolve disagreements. (i.e. Wayne Rivers)
  6. Don’t assume they want to work in your business.
  7. Don’t hire them just because they need the job.
  8. Don’t pay all family members the same. Pay them on a scale based on their positions and talents.
  9. Don’t treat in-law employees differently than you treat your immediate family.
  10. Don’t be afraid to fire family members who don’t work out. Keeping them around can be a “morale killer.”

Having successfully integrated your family into your business, you will also want to work out in careful detail an exit strategy that allows them to keep your life’s work going after you have left the business.  A good, well-organized succession plan is essential if you want your dear family and your business to coexist in productive form for the next generation.  Have you successfully navigated the passing of the torch or been able to seamlessly integrate family members into your plan? Share your tips and tricks!

Dave Sinclair, CEO The WorkPlace Solution

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About the author

David Sinclair is the CEO of The WorkPlace Solutions and Sinclair Risk & Financial Management.

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