The family business can be one of the best generational wealth builders you can embark upon. It can also rip a family apart. I’ve had a number of family businesses as clients, and several members of my family own businesses, so I fancy I have learned something about the unique situation inherent in working for a family instead of a person. I’d like to speak to those of you who own businesses which include other family members in an effort to voice what I hear from employees of these businesses.

It is very different working for a sole proprietor or small company where there is a single owner-entity versus working for a company which employs relatives of the owner. Some of the situations I’ve encountered are outlined below:

Time to start looking for a new job…

Employees understand that the top management will be selected from family members and, therefore, their own advancement is limited. The people who are building a career in the industry are likely to move on as soon as possible.

A common practice is putting younger relatives in low level positions and allowing them to learn the business from the “bottom up”. Other employees will treat the young scion entirely differently – whether for good or bad – because everyone understands that the young man at the next machine or desk is also likely the next boss.

Did you hear dad and daughter fight?

Dragging family issues in a family businessIssues within the family are brought into the workplace whether you realize it or not. Your argument with your daughter/marketing person will affect the whole office. The other employees will theorize about what’s going on and gossip is likely to dominate the break room. One memorable project I had was a family manufacturing business co-owned by a husband and wife team who were in the midst of an acrimonious divorce. The couple insisted they would continue to work together after the divorce since neither was willing to give up their stake in a growing company. Morale was dreadful and every employee had started interviewing.

In a distribution firm of my acquaintance, one son was warehouse manager, the other office manager. The first resented the second for receiving the “better” office job and fist fight ensued one afternoon, whereupon brother #1 ran off with the wife of brother #2. The employees just shook their heads and went back to their job searches.

Why can’t I leave early just like the boss’ daughter?

Relatives with meagre skills may be promoted over better qualified personnel creating resentment and undermining the employee’s commitment to the firm. Special privileges accorded to family members create resentment among other employees. It may be something apparently minor: Niece leaves at 2:00 on Wednesdays to collect children from school. Son takes a (presumably paid) month off after wedding. The other employees have had weddings and children and received no such benefits. They understand, they say nothing, but it irks them.

Boss who?

Ghost executives are a specialty of family businesses and a headache for a consultant coming in. They no picnic for employees, either. Examples I’ve encountered:

1. Mom, who has never worked for the company but who now owns controlling share of the stock since Dad’s death, has taken to “helping” run the company from the comfort of her home.

2. The uncle who put up the original money to buy the dealership controls the current management from 2000 miles away.

3. I’ve had a couple of clients who rely on God to make important decisions. This is a convenient dodge for an indecisive owner. It also has the benefit of protecting the decision from dissent by virtue of having been delivered by the Supreme Being. I’ve found this management style is not widely embraced by the employees. Pray on it, by all means, but make a reasoned judgement – and take the responsibility, don’t blame it on God.

Family Business Management4. And the most common situation: Retired CEO keeps his/her “hand in” by making key management decisions.

Why are these unseen people a problem? For the consultant it interferes with a critical function: you must be able to answer two key questions correctly if the consultancy is to be successful: Who is the client? What does the client want? Typically the person who hired you and signed the contract is the client in a small company. In the examples above, you may be unaware that the outside people even exist as a force and, therefore, have no understanding of what they want or how they impact the business. Big problem.

Employees are usually aware of the unseen executive, but have no way to influence a person who may hold considerable authority over their work lives.

Please understand that I am not contending that the owner of a family business is not at liberty to offer relatives whatever jobs or perks s/he wishes. I am merely pointing out how that special treatment may affect others employed by the firm.

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