Turning Your Children Into Employees

Bringing a child into a family business can be the stuff of dreams — or nightmares. In the best-case scenario, a parent experiences the satisfaction of working alongside his hard-working, capable child to build the business together. But the process can go awry, too. Kids may not be ready for the responsibility they assume and can flounder in their jobs. They can resent being told what to do by Mom or Dad. Non-family managers and employees can also resent it when Junior joins the company, fearing that their hard work won’t be rewarded.

There is no magic formula that suits every family and every company, but families that have successfully turned children and grandchildren into employees do share some common practices. These practices help to facilitate the development of each child as a businessperson and tend to minimize the perception of unfair treatment among nonfamily managers and employees.

Be clear about your values

Best practices begin with a careful examination of family values. Most business owners — especially founders — have developed values and principles that are important to them, particularly where family employees are concerned. For example, business owners may wrestle with such questions as, should all children have an opportunity to work in the company, or will the company be more selective and seek to hire just the most promising? Does the founder or owner hope for a family enterprise led by descendants through the generations or does he have a shorter horizon in mind?

Sometimes founding values and mission statements are formalized in a written document, but if not, most families can quite easily articulate what is fundamentally important to them as a family and how that translates to their business. But it’s important to start with the essential step of self-examination. What do you want your company to do for your family, and vice versa?

Define what “family” means as applied to an employment policy

Without a definition of “family,” it is difficult for family enterprises to identify an employment policy. A clear definition of family enables the enterprise to set guidelines as to which, if any, family members can be employed: whether only direct descendants of the founders or a broader group of aunts, uncles and cousins are included as candidates for employment. Or perhaps the family prefers to limit hiring opportunities to blood relatives and make spouses ineligible for employment. Likewise, the family should consider how they feel about unmarried partners’ sharing in the family enterprise. Certainly, there is no right or wrong answer. The answers are unique to each family and firm and their circumstances, and should be driven by the thoughtful choices of the current generation based on who they are, what they believe in and the number of opportunities available in the company.

Develop a written policy

Some families choose to open employment opportunities to a broad set of constituents, not just managerial/professional-track candidates. For general hiring purposes, lower standards might be set — say, just a high school diploma.

For professional-track jobs it is a good practice to identify a clear set of educational requirements, specific skill sets and prior experience with which to qualify an individual for a given job. There is a growing trend toward more family-owned companies requiring family members to have up to five years of business experience elsewhere before joining the family firm. This approach benefits not just the individual but also the company, for a couple of reasons.

First, a family member with a track record of success at another company has proven his or her capabilities in an objective environment. Such an achievement will likely support the individual’s sense of self-worth as well as provide real-world business experience to draw upon.

Just as important, the family firm is gaining a competent, tested employee with a skill set honed in a business environment. Non-family employees and managers are likely to accept and value the family member’s ability and contribution if he or she has some successful employment history outside of the family firm.

Again, most of the long-lived firms we observe hire these family members for a specific job. The job has clear responsibilities and written expectations (just like other jobs in the company) so that the new employee has a clear notion of what exactly is expected and how performance will be measured. Telling a child “We all pitch in and do a little of everything here” is a recipe for disaster.

Avoid reporting to Dad

If the family enterprise is large enough, it makes good sense to have a family member report to an independent manager instead of a parent or other relative. If that is impossible, it is even more important to create a document outlining expectations and to conduct a regular schedule of performance reviews. At some family firms, performance evaluations of an owner’s child are conducted by a non-family manager who has solicited feedback from other employees in the company as well as clients and vendors with whom the employee regularly interacts. Whatever form it takes, any effort that provides a family member with objective feedback on his or her performance is productive on a number of levels.