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“People and money!” That’s the answer you’re likely to get if you ask the typical family business owner to name the two biggest problems in running a successful operation. You have an employee who is not carrying his weight. You have talked to the person about it, but nothing has changed. You know other employees see the problem, too, and you are hearing the rumor that they wonder if you are going to do anything about it. It is becoming as much of an embarrassment as it is a drain on the business. To make things worse, the employee in question is your son who you had hoped would be the next leader of the business.
No one really understands the inner turmoil this problem creates unless they have been through it. It could be a daughter, brother, nephew, sister or even a parent. As a family-business consultant, one of the most frequent and troublesome areas I am asked for help with has to do with family employee performance and accountability problems.
Accountability and criticism
Being held accountable for performance by another family member in the business is often experienced and interpreted as criticism, punishment or a personal attack. No wonder family members shy away from it.
We recently helped four second-generation siblings develop job descriptions and goals for their areas of responsibility. The oldest brother, Kent, the company president, ran into problems with his younger brother, Brad, at their first meeting to evaluate Brad’s progression on his goals.
Kent said, “We met to go over Brad’s accomplishments and he said he felt like I was beating up on him. When he got defensive and angry, I didn’t know what to do. As president of the company, my job is to handle this; but as brothers it felt like we were back in high school when he always felt I put him down.”
There are three distinct domains in every family business — the business domain, family domain and ownership domain — each with its own rules and objectives. Because of the intermingling of the three, there is a complexity in family businesses not found elsewhere. This shows up in spades around the question of how family members hold each other accountable for performance in the business.
A cardinal rule in business is that the individual serves the needs of the business. Continued employment depends on contributing to productivity and profitability. It is the boss’ job to make sure this happens, and failure can result in being fired.
In the family, on the other hand, a cardinal rule is that the family serves the health and well-being of the individual. Parents provide discipline for the safety and security of the child. A family member never can be permanently excluded from the family circle in the same way an employee can be fired from the business. In parent/child family-business relationships, a parent can be caught between what is required as the boss and what is expected as a parent.
Among siblings in the family business, there is a presumption of equality as family members. It is difficult to have one of the “equals” evaluating the performance of another “equal.” It quickly can become personalized depending on how good or bad their relationship as family members have been over the years.
Accountability and expectations
For accountability to work well, there must be clear and measurable expectations against which performance is measured. For example, to set the expectation “To do a better job handling order processing” makes it difficult to measure the desired outcome. Does this mean handling 50 percent more orders, handling orders in half the time it takes now, reducing errors on orders or something else? When unclear, it is subject to interpretation and assumptions.
A better way to state the expectation would be: “To make sure that a minimum of 80 percent of all orders are processed and delivered to the production manager within 48 hours from when they are received.” When a performance expectation is agreed to at the beginning, there is no question about whether it is accomplished or not.
It is also a good idea to agree to when the achievement target is to be completed. This approach does wonders for minimizing subjectivity, because it honors both the family cardinal rule for being fair with the individual and the business cardinal rule for looking after the needs of the company.
Confusing employment and ownership
Differences in the expectations and obligations of ownership vs. employment also can become confused. Employees in a business receive compensation. When an employee receives a paycheck in exchange for labor, the company in a sense owes them nothing more and vice versa. On the other hand, owners do not receive a paycheck. They get dividends, equity enhancement and other benefits, not for their labor, but for their willingness to risk capital.
In family businesses — where owners and employees are often the same people — this can be confusing for the first generation. In the second generation, it can, and often does, get worse. Sometimes, family employees, who are or will be owners, are paid less than comparable non-family employees; sometimes they are paid more. The rationale is that a family owner who is also an employee has ownership equity and, therefore, deserves less compensation. Alternatively, he or she has the responsibility of ownership and, therefore, deserves more. I strongly suggest that ownership and employment be thought of separately when it comes to financial rewards.
Standards of stewardship
Having values and a philosophy that are shared by family members is a major help in reducing the tension and confusion that develops in a family business. I recommend an orientation of stewardship as the best foundation for achieving shared family values.
Here is a list of attitudes that comprise Standards of Stewardship:
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Business ownership is a privilege, not a right.
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My business depends on me looking after its best interest, which means acknowledging when I am part of the problem.
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Every day is a new opportunity for me to do something good for my business; it is up to me whether this happens.
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I cannot let my own discomfort and fear cause me to avoid facing and resolving difficult family and business problems.
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To keep my business healthy, I, too, must be healthy through continual personal development in mind, body and spirit.
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As both an owner and employee, I will not knowingly abuse the privilege of business ownership, nor jeopardize the well-being of the whole for benefit of the individual, whether that is me or someone else.
Just remember, if it feels like holding family members accountable for their job performance is a monumental challenge, you are not alone. Putting the structures in place for managing the business is necessary. These include job descriptions, clear procedures, annual goal-setting and regular performance reviews.
Developing the right attitudes, as contained in the Standards of Stewardship, both in yourself and family members is also essential. It helps to remember that “accountability is the finest form of recognition.” Recognition in the business is something family members often forget to give to one another. |
