The Human Resources Dilemma In Family Businesses

These reflections illustrate one of the ways in which a family business has an additional layer of employee-related issues that have to be tackled above and beyond normal business decisions. When you add in the country’s current low unemployment rate, the hiring problem in family firms becomes intense.

Some may say that every business looking to fill vacancies or to grow its workforce is faced with this same challenge. It is no longer good enough to simply offer good wages and a fair benefits package. Now companies have to dangle hiring bonuses and incentives, and sometimes even reward performance that are at levels once considered barely acceptable.

Unfortunately, family businesses have it worse than most. They suffer from the inevitable complications of hiring family members, the perception that they are duller and less financially rewarding places to work than public or potentially public companies, and the improper conveyance of family relationships and management styles into the workplace.

Perhaps the primary reason hiring is tougher in family businesses is the potentially prickly web of issues created by having relatives who are available and eager to fill workforce positions. A family member who is rejected to fill a vacancy in the family business may feel affronted, particularly if that vacancy was previously filled by a family member. However, family members who are hired may lack credibility with colleagues as to their real job qualifications.

Hence, having family members on staff, or considering them for employment requires a balanacing act. When family needs carry equal weight with business values, equilibrium is maintained.

When an emphasis is placed on what is economically good for the business, or vice versa, a primary concern is to appease family tensions, the relationship between business and family becomes unbalanced.

The result can be a collapse of an otherwise well-working, economically sound system. If the issues are too difficult to unravel, then management needs to consider outside, objective input. Some businesses may turn to an independent human resources agency for hires, thus keeping family issues out of the evaluation.

Another problem faced by many family businesses is how to attract capable, talented new employees, as well as keep those they already have on staff, when more exciting and enriching opportunities are out there in competition. A recent TV news report stated that there are 30 new millionaires created each day in California, primarily in Silicon Valley, thanks largely to the continued success and growth of dot-com companies.

Moreover, family members are not immune to the lure of a work style offering more and faster riches, thus giving family business managers additional potential hurdles to overcome.

Family businesses, are often slow growing and operate in old-fashioned, unglamorous industries. Although certainly viable entities, many perceive that family businesses cannot keep pace with the explosion of interest in the Internet and biotechnology businesses.

Nevertheless, family businesses can offer something fast-growing, instant-riches companies cannot: longevity.

Family businesses are like blue-chip stocks. They have staying power. They can offer employees the assurance of sustainable growth rather than a turbulent roller-coaster ride. A family firm, especially one involving several tiers or generations of family members, can be a supportive, reassuring foundation in a chaotic business environment.

To compete with IPOs and the promise of quick bucks at dot-com companies, family businesses can offer financial incentives such as phantom stock programs.

Such programs tell family enterprise employees that there is value, reward and even special status to staying on board at the family business. Employees who own stock in the company, even if there is a cap on how much stock each may own or vote, will have a stronger vested interest in the company beyond a steady job.

Employees need to be treated like employees, not family members. Similarly, family members need to be treated the same way at work as any other employee. There should be a set structure regarding pay, authority, benefits and hierarchy not varying according to family relationship. If family members, or even non-family members, express reluctance to evaluate a family member's performance, consider bringing in an outside resource.

Finding and keeping the right employees is sometimes as tricky as figuring out whether the person you're talking to is a son, supervisor or secret saboteur. But, like it or not, it is a challenge every family business must confront and conquer if it is to survive.

This article is partly excerpted and adapted from Hutcheson, J.O. Business Adviser - Help Needed: Family businesses have a more difficult time, Financial Planning, June 2000.

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