I highlighted in my last column the word “elephant” suggesting that the issue or problem is so big and so heavy that no one wants to confront it or try to move it.
These “elephants” eventually become embedded in how the business operates and how family members interact at all levels. When ignored, a very large problem will continue to shadow whatever successes the family business has achieved and when the issues become emotional and highly charged, they can compromise the business and split the family apart.
For this article, instead of a black sheep, I will use “Fredo” as the “elephant in the room”.
Having a “Fredo” in the family is a result of inconsistencies that are far and wide. Fredo as a family member grew up with values such as unconditional love, being nurtured and equality among siblings while expectations of “Fredo” as a business manager or employee centers on performance, meritocracy and accountability.
Prof. Kimberly Eddleston explained it succinctly, “When this logic (of love and equality) transfers to the business, however, it can be dangerous since it encourages the family to compensate for the weaknesses and failings of family members and to forgive indiscretions.”
While it is indeed difficult for a family business leader to initiate change, it will always start with a firm resolve of separating the family and the business.
As part of my governance advocacy, every next generation family member interested to join the family business must demonstrate that they have something of value to contribute to the business. In short, the family member must apply just like any employee and be deserving of the employment.
We are aware that not all family members are capable, therefore I encourage leaders to resist the urge of including all family members in the business. Guaranteed employment may have been the practice of the founding generation but the growing complexity and the increasing number of family members have made it unwieldy to manage the family and the business.
To operationalize these initiatives, the enterprise must also invest in HR consultants and professional managers so they can formulate “best practices” policies and introduce an environment that promotes accountability, transparency and consequences for bad behaviors.
I am suggesting a few rules to avoid or deter a “Fredo” from creating problems for the family business:
- Avoid hiring a “Fredo”
- Develop and communicate rules of entry and exit for family members
- With the guidance of an HR consultant, establish minimum standards for entry such as education level and years of experience. The rule of “No Nepotism” must apply
- Do not create jobs for relatives. Avoid becoming an employer of last resort
- Don’t force family members into the business if they are not interested. You are compromising the business by having demotivated, unfocused, dispassionate employees who happens to share your bloodline and last name
- Do not reward bad behavior
Kim Eddelston also pointed out several points worth mentioning, “if you feel you must hire a family member with questionable abilities and drive, place him or her in a job where the rewards are based on commission, such as sales.
She also added that “having clear job requirements tend to decrease the prevalence of “Fredos” since they know what tasks are expected of them and how their performance will be evaluated.
And finally, Eddelston cautioned business leaders by raising the alarm bells regarding this issue: “do not allow family employees to have special privileges. This creates an us-against-them mentality with non-family employees, spurring feelings of injustice. It also encourages a sense of entitlement among family”