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On Leadership: Should you hire your family members to work in the family business?

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This column is part of a series on family-owned business issues.

Earlier in my career, I worked in wealth management and advised many clients who owned multi-generational family businesses. One story stands out – a client whose son wanted to move back home to work in the family business. It had been this client’s dream to have his child take over the company someday, but there was just one problem: The son had no skills and experience relevant to the organization. The client told his son he was welcome in the business, but to be fair to everyone, he had to start in an open position and work his way up.

“In the U.S., over 32 million family businesses employ 83 million people – 59% of the private-sector workforce,” says a recent study from Kellogg School of Management at Northwestern University. These organizations make a difference in our communities and enjoy unique opportunities to engage multiple generations, but also face unique challenges, including succession, communication and a staffing mix that includes both family members and non-family members.

Like my client, one question many family businesses have is how to engage family members in the business. The Kellogg study notes that one characteristic of a well-run family business is a family-employment policy that ensures that family members are qualified to do their jobs. That study says, “Family members should be subject to similar requirements to enter the business as non-family members.” It also notes that professional development plans should be in place to ensure that the next generation of family members are able to assume leadership roles when the time comes.

The author of a Harvard Business Review article called “Are the Family Employees Qualified?” suggests some helpful guidelines that his family business uses. First, after graduating from college or other post-high school education, their business requires the family member work outside the family business for at least five years to gain experience and perspective. Second, the family member must be a good fit for the business. The author states: “Family members must apply for an actual job that’s open, and be qualified for it.”

I turned to several family business expert and leaders for advice and best practices on engaging family members in the business:

Dan Beenken

Dan Beenken, director, UNI Family Business Center: Although it’s hard for some families to give the next generation some time to work elsewhere, it’s critical for many reasons. First, family members can bring back experiences and connections beyond the walls of the family firm. Secondly, and probably more importantly, is the credibility it builds between the next generation and the firm’s employees. A third and often overlooked – but equally critical –  aspect is the legitimacy it builds with other family members. Family shareholders who work in or out of the business as well as current generations and next generations use this as a platform to build trust with the family member. So with all of these stakeholders, it can really help the next generation to prove themselves and help establish their own identity. 

Peter Bratney

Peter Bratney, president and CEO, Bratney: In my experience, success in any business role requires a combination of the right attitude and aptitude for the role. This is especially true for family members in a family business. A positive attitude and willingness to learn goes a long way, but an educational or experiential background that allows the family member to contribute value to the company is equally important.  Co-workers and professional peers will want to see that a new family member employee brings something to the table beyond just their name.

In my own situation, my father and grandfather were both professional engineers. I have a great respect for that profession, but knew that it wasn’t the path for me. Instead, I pursued an education in business and law. I attended law school and practiced law for two years – focusing on corporate and transactional law – prior to coming to work at Bratney. For the first two years with the family business, I was on a series of rotations around the different departments within the company, including working out of our Boise, Idaho, office and managing a sales territory in Colorado. During this time, I was also using my professional background to redraft our contracts with customers, vendors and subcontractors, which helped to bring value to the business in a way for which I was uniquely qualified.

Emily Schmitt

Emily Schmitt, chief administrative officer and general counsel, Sukup Manufacturing Co.: In a family business, it is key that you have the right skills and education for your position. However, sometimes not taking other titles even when you are qualified is just as important. Throughout my career at Sukup, I have overseen multiple departments out of the need for developing and growing them. When supervising HR and finance, I never took any official titles because it’s also vital for non-family leaders in the organization to see their career advancement opportunities, and sometimes that’s even more crucial to the overall company’s best interests.


Advice on preparing family members to work in the business

Have a policy. “One way to ensure you are being fair and clear with family members working in the business is to have a policy,” Beenken says. He suggests that families specify that family must work elsewhere, perhaps earn a promotion working for someone else, or even earn a graduate degree. He notes, “The key is creating and communicating this policy well before anyone is impacted by it.”  

Have family members work outside the business. The HBR article suggests having a family member work in a different career or organization for at least five years. Beenken says working outside the family business enables a family member to say, “I’ve seen this before and have more to bring to the table than just my name,” a huge boost for their confidence as well as for getting buy-in from colleagues.  

Have family members work at another family-owned firm. Beenken suggests encouraging family members to seek employment at another family-owned business. “As non-family, they will have an amazing lens to see how another family approaches these dynamics,” he says, noting that they can also see what it’s like to be a non-family employee and have more awareness for that – which will build empathy and perspective that will help their leadership success down the road.  

Pass on respect for the roles of non-family team members. Bratney advises family business leaders to help the next generation develop respect for the roles and contributions of senior employees. “The long-term employees of your company are the possessors of the business’ institutional knowledge, which is the lifeblood of your company’s success – especially in a niche business,” he says. “If you get to know these employees and demonstrate a respect for their experience, they’ll stand by you through the generational transition, and help you to identify some key areas and opportunities for business improvement.”

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Suzanna de Baca

Suzanna de Baca is President and CEO of Business Publications Corp.

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