Inside Family Business: Are in-laws in family business really out-laws?

ACCORDING to Dr. Steven Berglas, management consultant, psychologist, faculty of Harvard Medical School and author of “The Success Syndrome,” hiring in-laws into the family business can be a “kiss of death.” The reason? They become too familiar to the point that they believe the business is their own. They then proceed to prove their value to the company by changing the way it’s run.

If you even entertain the thought that a cousin-in-law, brother-in-law or niece-in-law can work for you without bringing twice the emotional baggage that your siblings and children bring to the table, you do so at your peril. Even in-laws with terrific ideas for the company will disrupt the business, the family, or both.

No one knows who their sons and daughters will choose as life partners. Not even the most controlling family business owner can determine his children’s ultimate choices for mates. Even with all the advances in medical science and psychology, no one truly understands the chemistry and dynamics of love in choosing a spouse. In-laws, for good or ill, will have a tremendous effect on the way your children think about the family company and life in general.

Risk of escalating conflict

No matter how hard families try, real differences remain between in-laws and offspring, especially while the parents are still involved. Sometimes in-laws, quite unfairly, are the brunt of emotional conflict. The most common seems to be a conscientious in-law taking “too much” leadership in the eyes of the siblings.

Common examples of conflict

By virtue of marriage, in-laws may be given responsible positions without consideration of their character. There was a case of an employee who married the sister of the company’s owner. As he was intelligent and given his business exposure, he was entrusted with the management of the firm’s finances. The business did grow, along with his greed. On the side, he secretly established his own company, producing goods in competition with the goods produced by his brother-in-law and using the company’s money to purchase raw materials for his factory. Not long after, his cheating ways were discovered and he was fired. Now this brother-in-law is openly doing business in department stores with exactly the same merchandise line and the difference was only in design variations.

In another case, the entrepreneur-founder hired his lawyer son-in-law to become the company’s legal counsel. However, his daughter and son-in-law later filed for legal separation. The situation became problematic since the son-in-law knew the company’s trade secrets and could not be fired immediately. On the other hand, his daughter was pressuring his father to let go of the husband’s services. A long talk and some money exchanged hands and the son-in-law resigned.

Defining rules for in-law participation

In my consulting work in the Asean region, I’ve come across (intervened actually) many family business “disasters” that were driven, fueled, or initiated by in-laws. In each case, I am certain that, left to themselves, members of the nuclear family would not have let matters get out of hand. Planning ahead and defining business protocols to avoid this particular issue is much less costly than spending huge amounts of cash on therapy. Here’s what I usually initiate in my coaching work:

Rule No. 1 Employment outside: The primary need of ambitious in-laws is self-esteem, and the best way a family member can help them earn it is to open doors to help them find employment outside of your business. That will give them an opportunity to manifest their competence allowing you to consider a future integration of the in law in the family business.

Rule No. 2 Project-based employment: Should there be a desire to really work in the family business, the next step is to offer a job with both a limited scope and rigid criteria–say, creating or making a new division profitable in two years.

Rule No. 3 Full employment with accountability: Then, in the presence of the family members, I usually have the in-law sign an undated letter of resignation. Then articulate to everyone that the first time the in-law misbehaves in a manner that’s a ground for termination, the letter will be dated.

Clearly, there’s no magic formula for controlling in-laws who work for you–only philosophies to guide you in your management efforts. The kiss of death article I wrote a few months ago related to in-law involvement happens when the senior generation does not put in place governance protocols around for in law participation. In fact, when I do coaching intervention, these protocols apply to all family members working in the family business.

Given these boundaries, In-laws can be wonderful assets to family businesses. I have seen and advised several in laws doing a fantastic job initiating best practices for family owned businesses. So let’s not treat them as outlaws; properly handled, in-laws can add tremendous energy and zest to the family and business.

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