The First Thing to Remember when Working with Family

There’d better be a good reason to get involved in the business.

When family members come into a business, they need to be able to add value to it — and the business needs to add value to their lives. If that’s not the case, don’t risk jeopardizing your family’s economic security as well as ruining family relationships to get into a family-owned business.

Imagine taking this risk, and then failing to grow the business into a profitable, mature and sustainable organization. When you fail in a family-owned business, you take the family’s security with you.

It’s sad that after all the commitment and angst founders put into the business, only 12 percent of them (according to research at the Family Business Institute) make it to a third generation. A primary reason for this is often the poor selection and placement of family members.

The following story illustrates what can happen if a family-owned company doesn’t have a hiring process in place for family members:

Bringing his son, Billy, into his financial services firm seemed so wise to Drew. Billy was smart and had an MBA. Now that he was married, Billy was ready to settle down into a stable career that would give him financial security. It would be great for Drew to be able to eventually hand the business to his son. It would ensure that his clients had continuity when he retired. It would be especially wonderful, they both thought, because they had always gotten along so well together, sharing hobbies and family travel.

It had seemed like a no-brainer, but it turned into a nightmare.

It was predictable that Billy would not be a good fit for the role Drew wanted him to fill. Bringing Billy into the business ended up harming it and their relationship. A simple Reality Check, using key questions, could have prevented this from happening.

Do not hire a family member until you can answer “yes” to the following questions:

1. Does this family member share your work ethic and business values?
2. Can you commit to establishing boundaries where you keep business conversations at work and family conversations at home (e.g., not talking about business at the dinner table)?
3. Is there a path of success that fits the instinctive capabilities or natural strengths of this family member?
4. Would the family member be committed to the company mission?
5. Does the family member communicate well with relatives and others?
6. Does the family member understand that business is business, so family connections will not impact performance evaluations and rewards?
7. Do you have an “out” if it doesn’t work?

Answering “yes” to these questions improves the odds that it will work out to hire the family member you are considering. It’s a tried and true method with your kids, siblings, nieces and nephews — even parents.

Excerpted from Business is Business: Reality Checks for Family-Owned Companies. Available now.

Amy Bruske is the President of Kolbe Corp.