Protecting your business when employing family members

Family businesses by their very definition will have different members and potentially different generations of the same family working to grow the business, but there can be significant challenges and dangers when employing your own flesh and blood.

This article explores what issues you need to consider to avoid the challenges that can arise, threatening not just the family business, but the family itself.

Blurred Lines

One of the primary dangers of employing family members is the potential for blurred lines between personal and professional relationships. In a traditional workplace, professional boundaries are easier to establish and maintain. However, when family members work together, the risk of mixing personal and professional matters increases significantly. Disagreements at the office can spill over into family gatherings, creating tension and resentment that can strain both personal and professional relationships. Having really clear contracts of employment and job descriptions will help. Making sure that there is clear objectives being set for the family members also allows the performance to be monitored, exactly as you would for other members of staff. Ensuring that everyone has to commit to the same set of standards is also a useful way to prevent challenges.

Stay Objective

Objectivity is a necessity when making important strategic business decisions. When family members are involved, however, emotions and personal history can cloud judgment, leading to biased decision-making. Objective evaluations of performance, promotions, and disciplinary actions may be compromised by familial relationships. It can also lead to other members of staff feeling undervalued, because a family members is treated more favourably simply because they are family. The situation can become more challenging as the next generation come into the business and people begin to look selfishly at their own position, rather than the greater good of the business. One of the simply steps that you can consider is a Family Charter, which makes it clear who is in charge; what direction the company is going; who will get a say in the more important decisions and also what is the entry requirements for the next generation to join the business.

Succession Planning

Succession planning is a critical aspect of long-term family business sustainability While the intention is often to pass the business down through generations, the assumption that family members are automatically the best candidates for leadership roles can be detrimental. Competency and skill should be the primary criteria for succession, but family dynamics can complicate this process. Choosing the wrong successor based on family ties rather than merit can jeopardise the business. Again, having a Family Charter in place will help, as perhaps before the next generation are allowed to join the business, they will require to have gained experience from another company, or gone to University or College to pick up the technical skills required. Setting the right entry levels for family members will ensure that everyone

is there on merit, rather than because of their surname.

Keep Innovating

Family businesses may face challenges in fostering innovation and embracing diversity if the decision makers in the business remain within the same family. Every business needs fresh ideas and looking outside the company for inspiration. Again, ensuring that the next generation are required to spend some time outside the business before they join is something that can be contained within the Family Charter. This should ensure that there are new ideas coming into the business, with each new generation.

Deal with Conflict

Conflict is an inevitable aspect of any workplace, but it becomes even more challenging when family is involved. Disagreements among family members can escalate quickly, causing long-lasting rifts that extend beyond the workplace. This can result in a toxic work environment and ultimately wider issues about the future of the business.

Consistency and fairness are essential to build into all policies, procedures and practices, but it is even more important to ensure that these are applied universally, regardless of family status.

Keep Going

While you may think that your family is different and your family business is also different, there are a few steps that you need to take to ensure the harmony both within the board room and the living room are maintained.

Establishing clear boundaries, implementing professional practices and maintaining objectivity are all essential steps that you need to take when employing family members.

Documenting all of that into a Family Charter allows everyone to understand their own responsibility to growing and developing the family business (and the family).

To discuss what your Family Charter might look like, or how to implement fair policies and procedures, please contact Graham Millar of our Employment Law Team on gmillar@gilsongray.co.uk