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Hiring and Firing Family Members
Published Tuesday, September 19, 2017

On a crisp winter’s day this past February, the founder and CEO of a family business woke up with a feeling of dread. He knew by the time he went to bed that night, his business and his family would be in a state of turmoil. He had been avoiding making a hard choice but knew there was no other option.

Despite many conversations with his 30-year-old son and his son’s direct supervisor, as well as several reviews, there was really no change. During the past three years, the son had been given various positions. Nothing changed his poor job performance, gossiping about the family, after-hours smoking pot with various employees, coming in late and leaving early, or the constant questioning as to when he would be receiving a promotion and raise. He was drawing an annual salary of $95,000 plus benefits and a $6,000 “family bonus.”

During the last executive management team meeting, the non-family COO had bravely raised the issue with the CEO. The son’s behavior was taking a toll on morale. Lately, his father had offered him several other respectable possible positions outside of the company with suppliers and vendors, but the son refused them, stating that he wanted to ultimately run and own the company. The son’s mother and wife also shared his aspirations, even though the CEO had gently and carefully discussed with them the son’s “lack of progress” in the company.

This painfully awkward situation is all too typical. Firing a relative is one of the most difficult challenges a family business owner or manager will ever confront. The short and long term residual family and business repercussions can be devastating, potentially generating years of distress and alienation within the family.

A Framework for Management
There are three pillars any successful family business must possess to be successful. They are:

• Individual Well-being

• Business Prosperity

• Family Harmony.

The ability to accomplish all three of these goals requires all the compassion, objectivity, communication and understanding that the individuals, business and family can muster. Specifically, it requires individuals to have objectivity regarding their performance; it requires the business to use solid, on-going employee performance measures and feedback; and it requires the family to trust and to pledge to accept the difference between competence in the business and acceptance in the family.

Guidelines for Success

1. Develop a standardized way all family members will be considered, interviewed, evaluated, compensated and supervised.

2. Have a written, clear, specific, operationally defined job description with stated experience and education qualifications. Be sure the family member meets them.

3. Include more than one family member involved in the business in the interviewing process.

4. Include several non-family members in the formal hiring process.

5. During the onboarding of a family member, have a non-family member responsible for supervising and orienting them during the first three to six months.

6. Provide the family member employee with plenty of opportunity to give the family business leader and manager their feedback about their experience and development.

7. Consider receiving monthly progress reports from their supervisor, as well as written self-reports from the family member. Keep a detailed personnel file with their progress or any problems.

8. At the first sign of a work problem, have a meeting with the family member and their supervisor. Outline your concerns and listen to them carefully about their perspectives of the situation. Develop an action plan with them for remediation and set a specific date to reconnect and evaluate the employee’s performance.

9. Have a written “Hiring Family Members Policy” developed and approved by a family council that consists of various family members who may or may not own or work in the business. This council will help to facilitate communication between family members and the business. It is like a board of directors for the family.

10. Consider having family members who might want to work in the business, and who have the potential, credentials and experience, participate in a three-to-six month orientation to management program. This would expose them to the company from the bottom up. Finding their best fit in the company—or if they are a fit at all—will become clearer.

11. The family business owner or manager should semiannually report to the family council various business information and developments, including all family members working in the business. Develop a written family member code of conduct that includes both a family member’s expected conduct in the family business, but also in the family and the community as well.

12. If problems arise with a family member’s performance, attitude or behavior, evaluate if they are in the wrong position and consider moving them to another role or job in the company before termination.

13. The basic rule for the family business owner and manager is DON’T WAIT for things to get better. Act.

When Termination is Necessary
Sadly, not all family business hires within the family work out. When the decision is made to terminate a family member, taking the following steps can be valuable:

1. If you have endeavored to follow the guidelines outlined above, you have given the family member lots of feedback and the firing will not be a surprise. It may even be received with a sigh of relief.

2. Schedule a meeting with the family member’s direct supervisor/manager to be present during the firing. Preview with that supervisor the issues, the rationale and the next steps to take. Be sure to consult with your HR department about how the mechanics and finances of the termination process should occur. Remember, family members are accorded the same labor law rights and privileges as other employees.

3. During the actual meeting with the family member, outline the performance issues, complaints, attitude and behaviors that have gone into the decision to terminate them and how they are not meeting expectations. Have documentation in-hand about their performance, unmet goals for the job, attitude, tardiness, boundary issues with other employees, language or other issues.

4. Outline the actions the company has taken to remediate the performance issues and how all the company’s attempts have been exhausted and that this is the only remaining solution. Reassure them, nevertheless, that you are dedicated to helping them find a position in the world where they can be successful and fulfilled. Let them know that they are still a valued family member.

5. Allow them the opportunity to respond to the decision. Let them vent, but don’t allow any emotional outbursts or informal language because they are family. Try and calm them down, but if the meeting is spinning out of control, stand up, offer your hand and usher them to the door with the promise that you or HR will meet with them later to go over important specific issues, like severance and health insurance.

6. Offer a generous severance package that can help the family member financially until they find another job. Consider paying their COBRA and/or place them on paid leave for a specific period of time.

7. Offer out-placement assistance or the use of a recruiter or career counselor.

8. Understand family relationships may suffer temporarily or even for a long time. Nevertheless, do not discuss any details with other family members. Remember company confidentiality policies apply to all employees. One exception might be if other family members are owners or on the board of directors. If so, only show the performance documentation and resist further discussion or interpretation.

Having some simple yet definite procedures and processes in place when hiring, onboarding and managing a family member can make all the difference between a successful outcome and an unsuccessful termination. Communication, structure and early intervention are the best actions a family business owner and manager can take to avoid firing a family member. But when it occurs, it is inevitable that some degree of family and business distress will follow.

Managing that distress requires openness, gentleness and expressed compassion to all affected family members. Being able to manage these family and business dynamics often takes both psychological and business understanding that goes well beyond the experience and training of a family business owner or manager.

Using a professional consultant outside the family can be helpful in assessing, implementing and monitoring this potentially destructive event.

Everett Moitoza is a family business consultant in Rye.  For more information, visit moitoza.com or email moitoza@comcast.net

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