To Hire Or Not To Hire: Bringing Children Into the Family Business

Sep 10, 2013

The Dunbars are an extremely close-knit Canadian family that runs a successful business in plastics. The family patriarch/CEO recently hired two siblings with the firm understanding that they would be treated as non-family employees. When the son made a minor customer service mistake one day, the father snapped at him.  As the son described the incident: "My name seems to be a liability here in the company. My dad and I are extremely close, but now that I work in the family business, he’s so afraid of showing favoritism that he has less patience for me than for other employees.” What’s more, the son noted that entering the family business had put pressure on his relationship with his older sister – to whom he now reports.

One of the more critical and challenging decisions you are called upon to make in a family business is whether or not to hire your children or nephews/nieces – a decision that requires you to wear three hats simultaneously: one as business owner, one as executive, another as parent.

That’s no easy trick. Clearly, the roles bleed into each other, and the situation is rife with opportunity for bitter feelings and damaged relations. Essentially, family business owners must be able to keep business matters in the business and family issues in the family. And this requires both a mastery of emotions and a situation that is well-structured.

And that’s really the difficult part. As an owner/boss, a parent must be in control of his or her own feelings and able to hold the family employee up to high standards. But as a parent, an owner must give the next generation family employee the love and nurturing he or she needs to succeed – even if this means firing the family member, should that become necessary. This clear-headed thinking and feeling means adhering to a robust process for the hiring decision, one that continues through career development and into retirement.

If done well, hiring your children can be the best decision you ever make for your business and your family. We generally recommend that young family members first get some experience outside the family business. That said, by being fully developed in the business, the next generation can continue the family legacy and provide stability for non-family employees. However, bad hiring decisions can negatively affect the company – and can also destroy family and business relationships.  So before hiring your children, you should consider a number of factors both as business owners and as parents:

  • What position are your children qualified for? Young adults can be hired into training positions, but college graduates with no experience should not immediately be put into roles of significant authority. One important goal should be to teach the next generation the skills needed to be successful in the business over the long-term. That starts with putting them into jobs where they can learn and grow – and also feel like they have earned their position.  You are doing your children and the business a great disservice by hiring them into positions for which they are unqualified.
  • What job do they want? This job consideration may sound obvious, but business owners quite often put members of the next generation into company positions without giving any thought to the “child’s” passions or interests. Before hiring your children, talk to them about what aspects of the company’s business most interest them. Look at their college coursework or volunteer positions for evidence of the particular passions they may have. Empowering members of the next generation to choose their area of focus can make them more committed to the opportunity and less likely to blame others for the failures and disappointments that are an inevitable part of all new jobs.
  • How will you prepare the family and the business? Employing someone in the next generation affects the individual – and it has ripple effects throughout the entire family business system. Non-family employees, especially those that have been with you for a long time, need to know that your son or daughter is going to be held to the same standards as everybody else in the company. Siblings can be quite envious of a brother or sister entering the business, and their feelings must be managed. The greatest impact is typically on the parents. Think hard about how you’re going to set boundaries between your role as a parent and your role as a boss. Employment opportunities can come and go, but the relationship you have with your children is lifelong.  
  •  What are the future ownership implications? Do your kids know the principles by which you will transfer ownership to the next generation? Will the next generation working in the business receive more ownership or more voting rights than their siblings not working in the business? Be as clear as you can be about this upfront.
  • How will they get feedback, and what happens if they don’t do well? Employment should not be a birthright, which is important for both the family and the employees to understand. Yet getting useful feedback is hard in a family business, and it will be important to identify professional development processes and mentors (maybe from outside or from the board). Firing a family member can be traumatic in many ways, so setting the conditions of employment before a family member joins helps to make the firing decision easier and less personal if it must be carried out.

A final recommendation: Try practicing these principles in live situations. Engage your child in a non-work related project to see how you partner with them. Try making decisions together in low-risk situations. Examples of such projects include organizing a local charity event, remodeling a summer home (deciding on the budget, selecting vendors, and so on), or doing odd jobs around the company. This may feel a little awkward or forced at first, but it is helpful to see how you and your family member will partner together short-term before committing to a lifetime of employment in the family business.

Devin Bird is a Principal, and Omar Romman is a Senior Advisor, at Banyan Family Business Advisors. They can be reached at dbird@banyan-fba.com or oromman@banyan-fba.com.

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