A Sure Thing
What’s to be avoided, say these consultants, is gratuitous assignment of a second generation sibling to a top post absent any meaningful preparation or vetting. “Just blindly assuming that a family member will be the best candidates for a managerial position is a bad idea,” says Aronoff.
There is certainly a temptation to set family members into high positions without sufficient preparation, since they are known quantities. “Family members have a great built-in advantage,” says Aronoff. “They grew up with the business. They heard it talked about over the dinner table and so they have 20 years of training before they come into the business. The deck is stacked for them. But to go further and say ‘I don’t care if so-and-so can perform or not’ is asking for more than trouble — it’s asking for the loss of your business.”
Why so? “It’s good for neither the family member nor the non-family employees when there is such special treatment,” says Aronoff. “It fails to encourage the best performance from family members, who know they will get good jobs no matter what their performance. And it demoralizes the non-family personnel who might otherwise compete for the positions.”
The problem gets more severe as the years pass and the second and third generation of the family begin to have a finger in the business, says Aronoff. “You start to have more people — cousins, uncles, and all sorts of folks — with stock in the business. You have a responsibility to all those people to run the business to its maximum potential. To do less because you want Junior to be the leader is to do a real disservice to all of your family — and ultimately to Junior as well.”
Tell It Straight
While a simple dichotomy between “family first” and “business first” is a convenient way to describe company styles, the fact is that most family organizations will lie along a continuum of family priorities. One company, for example, may assign department heads strictly by performance rather than by pedigree. The same firm, though, might put one of the founding family’s second generation siblings into all of the top management positions.
In such cases, non-family employees can become confused about their longterm opportunities. That can lead to frustration and poor morale. That’s why it is so important clearly communicate company promotion policies.
Related: Pitfalls and Profits of Working with Family, Friends
“You have to be straight and honest with folks and let them know what their possibilities are,” says Aronoff. “If it’s been decided up front that family members will lead the business, then that should be known by everyone. You should not send the wrong message by implying there is no limit to where non-family people can go when there is, in fact, a limit.”
Certainly, if there is a perception that there is a glass ceiling beyond which non-family employees can’t go, says Aronoff, then there will be a limit to the enthusiasms of non-family employees. In such a case, he says, the best of such workers might be offered good remunerative positions even if they are not given top management jobs.
Pay Up
Maintaining a healthy and happy non-family workforce means more than hiring and promoting well, says Rivers. It also means offering non-family workers a market rate pay scale that communicates a respect for individual talent.
“Many family business owners are exceedingly thrifty,” says Rivers. “They cannot bear the thought of paying people what the current market demands.” But that attitude can be penny wise and pound foolish. “If you pay people three-fourths of the market rate, that is no way to engender loyalty, trust and commitment.”
While tightwads exist throughout the business spectrum, they are more of an issue at family businesses, says Rivers, because public companies tend to gather and consider all the available market information before establishing pay scales. “Family first” businesses, in contrast, says Rivers, “tend to rationalize low pay rates it because they want more money for the family members. Such organizations end up with underperforming or non-performing people on the payroll and that is a drain on the ability to pay well.”
Avoid Micromanaging
“In family businesses, it’s often unclear where one family member’s interest starts and another ends,” says Rivers.
He gives an example: One brother, Sam, hires Andy for his department under the understanding that Sam will be his supervisor and evaluator. One day another brother, Bill, who owns an equal portion of the company, decides he does not like Andy and starts criticizing his performance. Now all of a sudden Andy, who expected a single avenue of supervision, finds himself whipsawed between two competing family members.
As this story suggests, it’s important to make sure that all family members in leadership positions recognize the boundaries of their management domains. When multiple supervisors are required for a position, make the chains of command explicit. Don’t let the non-family employee get confused.
Show Appreciation
Too often, family businesses give short shrift to civility and kindness. But it’s important to show appreciation to non-family workers.
“Family business owners tend to be very nice people, but they often do not cultivate appreciative cultures,” says Rivers. “One reason is that they typically work too hard, running from one meeting or one customer to the next. They get so harried that niceties go out the window.”
Why so busy? “Family businesses often look at hiring people as a cost rather than an investment,” says Rivers. “So they understaff. They cut payroll when things are down but are reluctant to add staff when things get busier because they do not want to have unproductive people.”
And there is also a psychological aspect. “Owners of family businesses typically want to control things,” says Rivers. “In most family businesses the owner is the general manager. He or she tries to control everything and has a finger in every pie. Shipments, production, selling. They may wear 20 hats every day.”
With all that activity there is just no time to be pleasant and hand out kudos.
Treat Them Well
If there’s any one glue that holds the parts of this story together, it’s the importance of making “outsiders” feel a home.
“I have seen two attitudes on the part of non-family employees at family businesses,” says Aronoff. “One is ‘I work for the So-and-so family.’ The other is ‘I work with the so-and-so family.’ The latter is a much more powerful environment because people are working together for the same end rather than being servants of the owner.”
Think of ways you can help non-family employees feel valued. Allow them equal access to any benefits that are enjoyed by family members. Include them in summer picnics, business luncheons, and social events.
It all starts with the attitude of the owners, says Rivers: “The most successful family businesses treat their non-family employees as associates rather than as outsiders, motivating them by responding enthusiastically to their ideas, involving them with leadership issues, and recognizing their achievements.”
