Roles for family in the business

A question we are commonly asked is whether family members, in particular the next generation, should be involved in the family business.

Some families choose to have a blanket rule that no family members can work in their business; they leave the 'non-family professionals' to it so as to avoid potential for conflict and ensure meritocracy. I have known one mother to say "No way are my children working in the business. It took their father, my husband, away from the family and his life revolved around it."

At the other end of the spectrum, some families take the view that "As our name is above the door, all family members are entitled to a job in the business; it's their birth right." Within this category, some would say that family members are only entitled to a job commensurate with their level of ability, whilst the ultimate extreme is where a family member is given the CEO role even if they're not the best person for the job.

There are many options in between these two extremes. I have worked with families with a rule that gives preference to family candidates, if they are equally as qualified as any non-family candidate going for the same position. Others decide that family members must have at least, say, five years' work experience in a relevant industry before being eligible to join the business – not always easy if your surname matches the competitor's biggest rival!

Other factors – remuneration, reporting lines and other elements of the family enterprise

Once the family has agreed on their policy regarding family employment, there are other factors to consider. For example, it may have been decided that family members are allowed to work in the business, but at what level of remuneration?

It is sometimes suggested that because family employees are family, they should be paid more than the market rate to recognise their choice to work on behalf of the family in the business as opposed to elsewhere. However, recognising the differences between the rights, responsibilities and privileges of ownership and management is important and we would not recommend blurring the boundary between economic benefit received because of ownership and that received because of management.

Alongside remuneration, another factor to consider is reporting. Who should family members working in the business report to? Reporting into 'Dad' can make it difficult to have open conversations, but reporting into non-family members comes with its own difficulties – appraisers may feel obliged to treat you differently if you're the 'boss's daughter', and may feel uncomfortable giving honest feedback. A solution to this is ensuring that there is sufficient dialogue about these risks between all parties: family members need to understand that they will be treated equitably, and non-family members should feel able to treat family members as their peers.

Other stakeholders – investors, employees

Finally, it is important to consider how other stakeholders are likely to perceive the family's involvement in the enterprise. Does having family members working in an executive capacity within the enterprise show that the family are intrinsically involved with and committed to the business for the long term, or does it show that decisions might be being made for the wrong reasons? Might this encourage future employees to work in this 'family-values-orientated' business, or might they fear that it is not run as professionally as a listed business? Managing perceptions and communications is very important here.

A suggestion

Each family is different and will have their own reasons for wanting, or not wanting, family members to work in the family enterprise - there is no right or wrong answer.

What is important is that the family agree and articulate a set of clear protocols, so that others simply 'follow the rules'. Creating these rules is best done as early as possible, before the need to make a decision on family employment arises. Consider them at a later date, at the point at which an individual becomes involved, and the decisions become (or are perceived to be) far more personal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.