Giving Your Kids a Fair Shake in the Family Business

Don Moore
Posted: Wednesday Jun 21st, 2017

You have likely been careful throughout your children’s lives to treat them equally in terms of finances and opportunities. Perhaps, for instance, they had the same allowance. When older you likely gave them leeway in choosing the colleges best suited to their interests.

Now your children, and perhaps the children of other relatives, have careers in the family business. As family members, your instinct perhaps is to want to continue to treat them equally financially and professionally. After all, you want to give them every chance you can to forge a path to success.

But as a boss and business owner, you need to move forward in a measured way to best set the stage for your children and the company’s future success. Start with the expectation that each family member in the company should meet the same standards (and expect the same compensation) as other employees in similar positions within your company.

That means:

  • Hiring family based on meeting set job requirements;
  • Establishing family compensation at industry norms;
  • Measuring a family member’s success through review;
  • Promoting based on merit, rather than family lineage.

I have seen time and again the next generation thrives when they have earned a position that fits their career interests and capabilities and are not simply given a position because of their family connections. Be assured they will grow to their potential when they have the education, skills, and experience level needed to succeed.

Both your child and your business can suffer when parameters aren’t established in hiring, compensation and advancement. After all, your competitors are hiring based on merit rather than family connections and won’t hesitate to take advantage when they see the opportunity. I can share one real-life example in which a father’s two sons were brought on board at levels inconsistent with their skill-level. The young men developed a sense of entitlement, which they showed by not treating customers with respect, talking down to other employees, and flaunting company rules like showing up on time and meeting a dress code.

The father, when he was ready to retire, faced the unfortunate truth that his sons had failed to develop important customer relationships and had alienated employees — issues which didn’t bode well for the future of the business.

Starting the conversation

While it’s easy to see on paper why you shouldn’t treat children entering the family business any differently than any other employee hire, it might feel much more difficult to actually start the conversation around the subject.

Let me begin by setting your mind at ease: In my decades-long career, I have led families through this process dozens of times. I can tell you that nine times out of 10, the younger generation wants to prove themselves by being treated like employees rather than the children of the boss.

I can also tell you that your kids understand they shouldn’t be compensated at a rate higher than what their true value is to the company. Your son will likely understand, for instance, that if he is working an entry-level position in your marketing department than it’s only fair that he should be making less than his sister, who has years of experience and has worked her way up to sales manager.

Your children understand this because, after all, they have spent years in school being judged on the work they do and the grades they earn — not the last name they have. (It’s important to note that compensation is different and separate from profit distribution. Your children might very well be earning the same in profit distribution, but that doesn’t mean their paychecks should be the same.)

Despite those assurances, I know most families might not feel comfortable having these types of discussions. My experience has shown that most families benefit from having a trusted outsider help them navigate these conversations. That person can be a consultant, a lawyer, a trusted family friend, or even a family pastor.

I have found monthly family meetings in which everyone is free to add to the agenda and bring up any topic are the most beneficial. Having a trusted outsider build the agenda based on discussions with pertinent family members, and then facilitate meetings in a non-threatening and empathetic way encourages an environment where thoughtful, productive and honest conversations occur. That dynamic can go a long way in ensuring a successful future for the next generation of your family and for your company.

For more information on this article, contact Don Moore at 814-528-9403 or email him at DonMoore@DecisionAssociates.net.

“Being in a peer group is extremely valuable because it’s a place where you can speak confidentially to other business professionals who understand your business issues, and can help you develop a path forward to handling them. It has also fostered my professional growth and helped me to understand and implement a variety of management techniques and strategies through the analysis of several books and articles.”

~ Danielle Bates, CPA, Controller
Accudyn Products, Inc.

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