RM Online - Putting first things first

One of the biggest problem areas a family business faces has to do with the dangers surrounding the entry of family members into the business. When it is done incorrectly, problems can erupt almost immediately. Even more typical are the problems that become more complicated because family members are afraid of hurting other family members. When the problem becomes an issue, it is because the business is somehow in trouble, or family relationships have become unbearably strained.

Most often the problems concentrate in one or more of the following areas:

· Compensation and benefits;

· Roles and responsibilities;

· Personal behavior; and

· Experience.

How family members get paid

Families - and the businesses they own and manage - have varying philosophies about how the company should support the lifestyles of family members in the business. Some will say that the business should provide all family members, active or not, with a "good and comfortable" lifestyle. This financial expectation is unrelated to the performance of duties that benefit the business.

In second and third generations, this can become a huge problem as siblings bring their children into the business with expectations for their children's compensation based on the family's historic - and perhaps highly inflated - entitlements. In other situations, it is believed that all family members in the business should be paid the same regardless of position. This is a practice often initiated by parents who don't want to show favoritism as they bring their children into the business.

Then there are those who view ownership, or even the appearance of ownership via the "right" surname, as carte blanche access to perks, even ones not given to other employees. I am referring here to the fancy cars, trips, club memberships, taking of company merchandise or commandeering of an employee's time for personal projects, just to mention a few.

As time go by, the company becomes larger and more complex and the second- or third-generation family is running things. Non-family managers become a vital force in the company and growth is stretching capital resources. This is when compensation can come to a head. After all those years, it is neither pleasant nor simple to resolve. A major fallout in the business and, inevitably, the family often occurs.

In a perfect world

As with compensation, family businesses have different philosophies about providing employment for family members. For some, there is always a place to put a family member. For others, there must be an available position to move a family member into.

In any case, specific job responsibilities and performance expectations along with a method of review and level of authority are not clarified. On the part of the family business employer, there is an assumption that family members will, out of loyalty and family obligation, do a good job. On the part of the family member employee, the lack of specifics and structure, while at first interpreted as trust and opportunity, can turn into a lackadaisical attitude or even the building of the family member's own fiefdom with its own rules.

Without clearly defined responsibilities there is no objective way to measure performance, and it all degenerates into purely subjective perceptions and emotional reactions.

How family members behave

Closely related to compensation and responsibilities are problems associated with the personal behaviors of family-member employees. Entitlement or lack of sensitivity can result in behaviors that are disruptive and would not be allowed with non-family employees.

I have seen the abuse of paid time off, lack of adherence to company work hours, inappropriate language or behavior with other employees, unacceptable personal dress and appearance, gossiping with employees about personal family issues and harmful representation of the company in the community. Family CEOs have often told me that in situations where they would fire other employees they feel stuck in dealing with family employees who ignore repeated warnings.

this can be especially painful when the personal behavior problems result from addiction to drugs, alcohol, gambling or mental illness. One reason for this particular difficulty is that the family itself is often involved through denial or protectiveness.

The family mandate to preserve its image and its members makes it very difficult, especially for the CEO, to objectively handle a work-related behavior problem with the family member who's affected.