Managing non-family employees in a family business

Managing non-family employees in a family business

Every business faces different challenges and oftentimes the challenges faced by family businesses are even greater. While many businesses want to 'keep it in the family', they often undercut their success by not wanting to engage qualified non-family members or incorporate them into the inner management circle.

Partner, Global Head of Family Business

KPMG in France


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Family ownership does have its privileges, but it doesn’t assure your company’s success nor its survival, without key players working in harmony with the controlling family members. Bringing on non-family members as key employees in a family business may be the only path to success for some businesses.

There are approaches that can be taken to minimise, and even negate, the ‘trauma’ of hiring in non-family members though. 

Making family business differences work

Consider that a non-family employee has an outside perspective on the business and will encounter experiences and engage with challenges differently than a family member who has been entrenched in the business their whole life. Hiring non-family members into a family-run business can be very beneficial to the business’ dynamic since it may add more objectivity in how the business is managed, as well as bring in a wider variety of values and philosophies.

In a start-up or family business, everybody does everything. But this is where a lot of conflicts occur. Sherman Titens, author of 23 Secrets for Success in Your Family Owned Business…and More, says that you have to make sure that everyone has a role and responsibilities that are spelled out and very clear.

“Set out in the simplest of terms, what is expected from each individual and what role each person will have in the business. Write the expectations for each person and, where appropriate, communicate the authorities and responsibilities to all employees.” – Family Business Insights: Making Differences Work For You

The authority to make decisions

It’s vital that the power structure within the business is clearly outlined. Family business owners and managers must empower non-family members with the authority and decision-making responsibilities appropriate to their roles in non-family businesses.

It might even be advisable to even give non-family members the authority to reassign or terminate lower-level family member employees. This will put the non-family member at ease within the business and work even harder for the advancement and success of the business. In the event that an outsider manages the company and the owner consistently meddles, he/she will undermine the non-family manager’s authority, credibility, and effectiveness.

Titens advises that when dealing with conflict or disagreement, always remember that you’re dealing with business issues and not family matters. Relatives may have grown up together; may have played, competed, collaborated, loved and hated each other at one time or another, but the workplace is not an environment in which they should play out or resolve their childhood or adult dramas.

Be firm with all family members involved to leave family issues at home and maintain professionalism at the workplace.

Improve open communication, improve working relationships

And just as much as communication is important in a private relationship, it’s a rule that is applied in any business and even pushed further in a family-owned business. Ensure that you establish clear channels for communication.

Almost every family business owner confesses to encountering challenges after employing an outsider and trying to provide them with opportunities for advancement. Employees, like the family members who run the company, want to grow professionally and personally in their work. Businesses need to understand that an employee who is growing will stay with a company longer, especially in a weak economy or a rapidly changing work environment, providing the stability and flexibility to maintain the business as a viable entity.

This strategy requires a financial investment in the individual employee and in the future of the company. Non-family members can be given stock and made shareholders in a family business. Another way to encourage growth is to include top non-family managers in strategic planning.

Instead of bringing in an outside consultant to develop a plan, do it internally, involving key people, to avoid the potential threats down the road of the employee leaving due to feeling being left out.

Planning for family business succession

The issue of succession in a family-owned business will put both business clients as well as employees at ease if there is a succession plan in place should the unexpected happen. There is going to come a time when someone retires, leaves, or perhaps passes away. If you don’t have a plan, you are setting your business up for failure.

According to Nancy Bowman-Upton in the Small Business Administration publication Transferring Management in the Family-Owned Business, it is estimated that less than 33% of family businesses survive the transition from first generation ownership to second generation ownership. Sometimes this is because the family has no interest in running the business, but in most cases it’s due to the lack of transition planning.

A succession plan is absolutely necessary to ensure the business lives on from generation to generation.

And even though we’re often told not to mix business with pleasure, in a family-run business this needs to be overlooked at times in order make non-family members feel a part of the business. Make it a point to include them in big family events every now and then.

Employees will feel that there is a long-term vision at play and will appreciate that loyalty and commitment operate two ways. It’s even more effective when companies stand by non-family employees during tough times and in return the business will be repaid, many times over, for treating people like people.

Read Sherman Titens’ full article, Family Business Insights: Making Differences Work For You.

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