Editor's Blog


Nepotism: Keeping it all in the family

May 7, 2012
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The wrong and the right ways to enter into the family business.



When I was the last of the three brothers to enter the family business my dad told me, “I owe you an opportunity not a guarantee.”

Pretty frank, don’t you agree?

At first, I was a little annoyed. That’s because I felt I had been proving myself worthy for years. After all, I had been working in the business since I was old enough to dump waste paper baskets and push a broom all for a free lunch and $10 spending money.

I had been working in the business at all different levels throughout high school and college. There was no time off when I wasn’t in school and I have nothing but gratitude for the education and opportunity I was given. Still, as my dad insisted, I had to earn my place at the table.

The reason is my dad didn’t feel it was fair to my other brothers and to the staff for me to get special treatment or to conduct myself in a way that would be detrimental to the long-term health of the company. My dad took his stewardship seriously and he felt that he owed it to all to keep the team strong.

Continuing the family legacy

You and your company may be facing the natural transition in family businesses of bringing on board a younger family member to join your team. How they join the team makes all the difference in either ensuring a successful transition to the next generation or the sowing of the seeds of destruction and a family legacy. It’s rarely anything in between these extremes.

What makes me qualified to talk about the good and bad of nepotism?

Well, I was the third generation in the business and now my nephew is on board as the fourth generation working side by side with my brothers as they transition the shop. The systems and structure we put in place has made this possible. I also have been coaching a lot of owners I work with on how to bring new family members into the business the right way so they too can avoid the pitfalls.

Doing things the wrong way

1. You let them skip over the bottom levels of your Organizational “Org” Chart and demoralize team members who felt they had earned their way to the top. Plus, you put the family member in a position to fail. This causes them damage by placing them early on in a position to fail. Longer-term it costs your company dearly.

2. By pushing them into leadership roles without them having demonstrated that they can follow and be led. They need to master the basics of the jobs they will ultimately be supervising to be better at leading.

3. You treat them differently in allowing them to break the policies and procedures you expect everyone else at the company to follow. People pay attention to double standards and it crushes unity.

4. By giving them a free pass on being held accountable for their actions or inactions.

5. By not having an Org Chart in place so they can see where they are today and where they can earn their way into the future. They assume they are in charge when they aren’t [at least shouldn’t be right out of the gate].

6. Because you didn’t spell out objectively what they get paid today and how they can earn future pay increases.

7. By not creating a proper set of expectations that are based on measurable things.

8. Because you let them run rough shod over the chain of command and, thereby, you have allowed the authority of those who already have earned their place at your company to be compromised.

So, how do you do it the right way?

1. Share with them what my dad shared with me, “I owe you an opportunity, not a guarantee.”  

2. Create an Org Chart with all the boxes it takes to run your company and then share where they will be starting today, what they must demonstrate and where they can earn their way into the future by performance.  

3. Match the Org Chart discussion with how they will be paid today and how they can move up the salary ladder.  

4. Explain how and when they can earn an equity stake in the company.  

5. Share how you are going to be providing special coaching to help them up the learning curve for each step they move and then make good on your promise.  

6. Setup the necessary outside training you will need to provide constant improvement to their skills for each level they will occupy.  

7. Ask them how they see themselves fitting in and try to find a way to weave it into the path you’re creating.  

8. Ask them what their goals are for the next year and share with them how this can happen whenever possible.  

9. Ask them where they want to be in three to five years from now and put a long-term business plan together that helps them achieve their goals as long as they also benefit the company, too.  

10. And if you can’t be objective enough to judge them [that means you’re either too easy or too hard on them] setup an independent committee of either high-level staff or outside experts to monitor their performance.  

Note: If it’s inside people, their input must remain confidential to avoid future reprisals.  

I find it personally very gratifying to help a company welcome a new family member into the business and make that person successful. It’s good for them and it’s good for their company and I love beating the odds.  

Do the right things and avoid the pitfalls and watch your company springboard into the future with your business in trusty hands!

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