Things to Know Before Putting Your Kids on the Payroll

Americans like the idea of starting a family business. According to the US Small Business Administration, 90% of the 21 million small businesses in the US are family owned—and 62% of employed Americans work for family owned companies. The success rate of family owned small businesses, however, is amazingly low: 7 out of 10 of family owned businesses fail before the second generation gets a chance to take over.

There are many complex reasons behind the family business’ low success rate—and so there is no simple (the-one-thing-to-do) solution. One of the common traps that family businesses fall into, however, is thinking of themselves as, well, as family businesses and ignoring the importance of hiring the right people—and not hanging on to the wrong ones.

The Wrong Help is Worse than no Help

You need a top-notch team to do your best work, and so the most important thing you decide is who to hire and who to fire. Making good decisions about who is and who is not on the payroll is critical to your company’s success—and your own success. The wrong help is worse than no help—and hiring the wrong person is costly. You need to take time to really think about each and every hire you make and not settle for a warm body—not even if it is a family member. In hiring any employee, whether family or not, the goal is the same: a high performing employee who meets your needs and is a good fit for your company and team.

Family First?

Some parents make their children feel obligated to join the company, and then automatically put their offspring in important positions even though they have no interest in being there.Some children and siblings feel entitled to a position in the company—and to a position at a level that reflects their status as family members—regardless of their experience, skills and abilities. Sometimes a position in the family business is a fallback solution for family members who have failed in other business ventures or who have spent their 20s and 30s as aspiring athletes or musicians before settling into the family business as unprepared 40-somethings. Because of their family connections, these family members often rise to leadership positions despite their lack of interest, experience or skill. A crop of managers and decision-makers who are either not interested in (much less enthusiastic about) the success of your company or who lack the ability to succeed in leadership positions only increases the chances of your company failing.

Neither an Obligation nor an Entitlement

In a family business, it is normal to want family members to join. But a job in the family company should be neither a requirement nor an entitlement. It is a good idea to expose young family members to the company at an early age so that they can make their own decisions about whether or not to pursue a career there—but then those who do want to join your company should receive no special accommodations.

Identify your need. Don’t create a position around your desire to bring a family member into the company or because a family member wants to join the company. Bring family members into the company based upon their ability to meet your company’s needs, not based on familial relationship.
Put it in writing. Once you identify your needs, write a job description with desired qualifications with as much detail as possible. A family member who wants to work in your company should meet the same requirements for education, experience and skills as a non-family member applying for that position.
Standardize you application process. Family members should follow the same process of applying for open positions as non-family applicants—and in competition with non-family applicants. And if a non-family member proves to be the better candidate? Hire the non-family member.
Develop a formal and rigorous employee development process. And implement it—for everyone—family and non-family—at all levels in the company. No matter how big or small your company is one of your critical tasks (and biggest challenges) as a leader is to nurture and grow talent within your company. But let’s face it: even when we have a formal development process in place, we tend to avoid doing it. And we certainly don’t like doing it with family members. But your family members are no different from other people in the company. They have talents that need to be developed and gaps in their skills and experience that need to be filled. You do them and your company a disservice when you ignore that.

Never lose sight of the ultimate goal: a high performing employee who meets your needs and is a good fit for your company and team. Don’t ignore the importance of hiring the right people (and not hanging on to the wrong ones). Not even when it involves family members.

Author

Kevin Dincher is an organization development consultant, professional development coach and educator with 30 years of experience that includes not only OD consulting but also work in adult education, counseling psychology and crisis management, program and operations management, and human resources.