Business owners spend great amounts of time and energy building their companies, and it is only natural to want to see their children follow in their footsteps and take over the company. However, many family business owners struggle with how to integrate their children into the business. It becomes even more challenging when you consider a business that employs non-family members. Even if unstated there are bound to be thoughts of favouritism that can develop and serve to demotivate existing employees. In order to avoid this type of disharmony it is important to establish a set of general conditions, preferably in writing, that govern employment of family members.
Of course, every company has its own unique characteristics that have to be considered in drafting and implementing such a policy. In his book Leaving a Legacy, David Bentall provides a sample that one business owner used in his family business:
1. Family members must meet the same criteria for hiring as non family applicants.
2. Family members are expected to meet the same level of performance as required of non family employees. Like non family employees, they will be subject to performance reviews and to the same rules regarding firing.
3. As a general rule family members will be supervised by non family members.
4. Compensation will be at fair market value.
5. Family members are eligible for temporary, seasonal employment defined as 4 months or less per year. Family members may be re-employed for temporary employment on a as needed basis.
6. No family member may be employed in a permanent entry level position (that is, a position that requires no previous experience or training.)
The book also lists criteria regarding education and having to have a certain amount of successful employment outside of the family enterprise. The important point is to establish something that reflects your values and principles. Businesses that have multiple partners might find that formalizing something like this can avoid conflicts down the road as other family members transition into the business.
If you\’re a business owner the team at Beyond Wealth has strategies and expertise to help you maxmize your personal wealth and successfully transition or sell your business when it is time. We are always reading and growing our own expertise and recommend Leaving a Legacy by David Bentall to all business owners with children.