Family-owned businesses conjure up a wide variety of images, provocative thoughts, and emotions.

The dynamics of managing and/or owning a business with family members can be very challenging once you add any aspect of multi-generational, sibling, spousal or second generational partnership structures.

Emotions run strong. Entitlements can rule the day. Sound business practices are often ignored in favor of keeping peace in the family, and/or an unwillingness to face reality with family. While these symptoms are common, they should not be accepted as the norm.

Here is a short checklist to ensure your family-owned business avoids common pitfalls:

1. Job Descriptions

Every job position in your company should have a written job description. This is especially true for partners, owners, and all affiliated family members.

Each employee needs to know and understand their primary and secondary responsibilities to the organization. Written job descriptions create clarity, eliminate duplication and define roles and responsibilities.

2. Compensation

All compensation for family employees, be it salary, commissions, or performance bonus, must be commensurate with the job position and equitable to similar positions within the company.

Excessive compensation due to a position within the family breeds entitlement, poor performance and discontent. The principle of equal and fair compensation is a best practice towards effective personnel productivity.

3. Performance Review

As difficult as it may appear, it is imperative that all employees in the company receive an annual, formal job performance review.  It must be written, delivered face-to-face and signed off by the employee, direct superior and second level superior if appropriate. There are no free passes for family members.

There are many well designed performance review systems to make this an effective tool to increase job performance and establish a healthy, productive employee relationship. Most importantly, all affiliated family members are included in this performance review and treated with equality. All employees must be held to the same standards.

4. Accountability

Successful business planning has accountability as one of its core competencies. Family status must not grant a “bye” on accountability, as can often be found in multi-generational family business.

By implementing a written management by objective system with all employees, ownership is taking the right step towards accountability. If family member employees are not meeting objectives, they should not be treated any differently than other employees. Many successful family owned businesses hold family member employees to a higher standard of performance.

5. Fairness

Family members do not deserve special treatment. They must be treated as equal to all other company employees with respect to policies and practices. This includes personal time off, vacation days, sick days, benefits, and most importantly compensation and job promotion.

Any elevation in job title and/or responsibility must be measured and earned in equality with all other employees. Job entitlements due to family status are a breeding ground for poor performance, higher expectations, discontent and higher turnover among employees.

6. Independent Counsel

Every day we work with owners and executives who find it very difficult to enact these common sense business practices with their family members. That is why we highly recommend that companies operating with more than one family member in their company hire an outside, independent advisor to assist in building and developing effective human resource systems.

Objectivity in personnel management can be lost in the cloud of family emotions. With an outside advisor, it is far easier to develop and implement sound business practices while maintaining healthy family relationships.

For further information about these family business practices, please contact us.