Creating a family employment policy: a must! (part 2)

ACCORDING to an article published by the KBH Group, a full-service chartered accounting firm based in Canada, the best way to manage these expectations—and the ensuing family drama—is to create thoughtfully-written family employment policies. Having these policies in place lets all of the relatives know exactly how the company handles the employment of family members.

In my last column, I explained the first pre-employment condition and highlighted an important rule: the requirements for being accepted into a job post at entry level.

Are the expectations of family members clear, as far as attainment of certain degrees or certifications before they join the company? If so, this should be spelled out in the employment policies, along with a timeframe required for completing the education or training. How about investment of the family business on training for special or technical skills?

At the Ateneo Center for Continuing Education (CCE), short and diploma courses on practically everything about business are offered all year round and I must admit, part of my mentoring model is to encourage family members to enroll and further reinforce their business and management skills. So far, it’s worth every peso invested by family businesses!

In today’s column I will complete the governance aspect related to family employment policies, namely:

Shared vision and mission, participatory leadership and values for teamwork

A family business is strong when all who participate in its development shares a common vision and mission. In the succeeding generations, shared objectives and course of action should be kept in line. Even if changes are needed in the business in terms of direction and management, what is important is that everyone agrees for the better, especially the siblings. Participatory leadership allows the siblings to demonstrate their leadership potentials in specific areas from which each of them is assigned. This way, team effort is centralized in the realization of common goals.

Chain of command and reporting structure

The chain of command from top to bottom must be well-structured and recognized at all circumstances so that proper instructions and orders are communicated clearly. Siblings should comply with this, even if they need to receive orders from a non-family member who happens to be the manager. Surprisingly, a non-family member could be a better option compared to a sibling as someone to receive orders from or report to. Reporting to a brother or a sister may result in over-familiarity, leaving the report unaccomplished or unattended, thinking that the sibling would not reprimand or pose sanctions.

Remuneration and benefits

The remuneration and benefits have to be reasonably provided, making sure that it is adequate (covers basic remuneration rates) and market-related. Doing business for the sake of the family’s gains is good, but it is not an upright decision when work pay for siblings is too high. It will result to budget constraints in the family business. Underpayment, likewise, is detrimental, because it shows lack of fairness and loses the siblings’ right to receive adequate remuneration despite business entitlements.

Performance evaluation

The siblings should not be excluded and given special treatment at performance evaluations. All personnel should be evaluated objectively so that in the process, the quality of service is monitored and further developed; and the productivity of the family business is identified.

Recognitions and rewards

Careful attention must be made on determining who among the siblings has become outstandingly productive and who among the siblings has shown professional participation and significant contributions. Rewards could be a little tricky to determine but like remuneration, it has to be reasonably set. Rewards and recognitions are external motivations, but what is more important in this is that it fosters appreciation where credit is due, which gives more strength for the siblings to work and accomplish excellent results for the business.

Termination and/or retirement

A clear timeline will aid the siblings about when to prepare to take over the family business. Also, when the siblings have taken over, they will be guided in the future through the timeline in knowing when they will have to be terminated (when malpractice is done) or be retired (when their term is finished).

There are other indispensable elements where governance policies can further focus on. Some of these clarify issues related to training, experience, communication and code of conduct. In the end it all boils down to the primary objective of institutionalizing these policies so discretion and conflict of interest is mitigated.

Finally, compliance and consistent application is one major step in harmonizing relationships and at the same time address sustainable growth amidst a complex business environment.

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