The Family Business Employment Policy
Sooner or later, almost every business owner faces the issue of whether or not to hire family members. This problem becomes critical in the second and third generations of a business, when there are more and more family members to consider. Let me tell you how one of my family business clients (let’s call them the Wilson family) handled this issue.
The Golden Goose
The four Wilson brothers own a business with gross sales of nearly $50 million. Founded by their parents, the business has provided very well for all the brothers, but they have serious concerns about succession and employing members of the third generation all 27 of them! There are enough members in the third generation to field three softball teams, while the third generation’s spouses bring that number almost high enough to form a league. One member of this younger generation is already employed in the company, and others are knocking on the door. The Wilson brothers know they have a potential problem on their hands. They asked me for help in developing a family employment policy that would meet their special circumstances. They need tough, clear rules that would protect the company, which they laughingly refer to as “The Golden Goose”.
The Wilson’s long-term goal is prudent stewardship of the family enterprise. The family’s values emphasize education competence, self-esteem, independence, church, and community. We worked to design a policy that would reflect those goals and values.
To set a no-nonsense tone for the policy, we use such phrases as “constructive contributions” and “opportunity is earned…not a birthright”.
A decision to alternate the presidency between family and non-family employees provides an opportunity for renewal within the corporate structure, something often overlooked in family held businesses. Of special significance is the policy’s section on education, where training to become a knowledgeable owner is separated from career opportunity. This avoids the mistake of confusing these two elements and equating family ownership of a business with the right to a job a mistake that can lead to the demise of a closely held enterprise.
What follows is a family employment policy developed for The Golden Goose. You can modify it for use in your own firm or use it as it is.
Purpose
The purpose of this policy is to define the procedures, process and criteria that will govern how Wilson family lineal descendants and/or their spouses enter and exit from the employ of the family company. This policy is intended to remove the ambiguity that currently exists so that interested family members can shape their career paths accordingly. We believe that clear, constructive communication of these policies will contribute to the long-term success of our family and The Golden Goose Company.
Philosophy
We are a family committed to our members and descendants being responsible, productive, well-educated citizens who practice the work ethic and make constructive contributions in the local community and the world at large. Each member is encouraged to develop and use self-supporting, marketable skills that contribute to the enhancement of his/her own self-esteem and independence. We believe that for a family member to be employed in the company there must be a legitimate job and the skills to match.
It is the policy of this company to search out and employ at all levels, individuals who have ability to manage vertical and horizontal relationships, show evidence of ability and willingness to take initiative, evidence self-confidence and high self-esteem and are both independent and responsible in managing life and their jobs. No “flakes” need apply.
We subscribe to the philosophy that the opportunity to be employed in our company must be earned, it is not a birthright. Our family business succeeds best when professional competence is the criteria for entrance to employment. Further, high level competence must be supported by a sustained performance record. We believe that family members who cannot meet these high standards will be happiest when employed elsewhere.
General Conditions
- Family members must meet the same criteria for hire/fire as non-family applicants.
- Family members are subject to the same performance review as non-family members.
- As a general principle, family members will be supervised by non-family members.
- Family members under age 30 are eligible for temporary employment. This temporary employment can be pre or post-college graduation. Under no circumstances will the length of one unit of temporary employment exceed one calendar year.
- No family member may be employed in a permanent, entry-level position (defined as a position that requires no previous experience or training).
- Compensation will be at “Fair Market Value” for the position held.
- Family members’ seeking permanent employment must have at least 5 years’ work experience outside the company. One of those jobs must have been at least 3 years with the same employer, during which time there would have been at least two promotions or similar evidence of rising levels of competence, increased responsibility and trust. It is our view that, if a family member is not a valued employee elsewhere, then it is likely the family member will be neither happy nor useful to The Golden Goose Company.
Applying for a Position
Family members must first make their interest known to the president and chief operating officer of The Golden Goose Company. When a position becomes available, only family members who have expressed an interest in employment will be informed of the opportunity. They may then complete the normal application forms and submit the application for appropriate processing and consideration.
Succession
The size of our company necessitates our reliance on non-family professionals. These industry leaders bring fresh ideas into our business and thus, renewal to our family and our business. To provide incentive for these employees to excel and aspire to the presidency of our company, we will alternate the presidency position, family member, non-family member etc. No family member can succeed another family member as President/Chief Executive Officer of The Golden Goose Company.
Education
- Each quarter there will be a meeting to report the status of The Golden Goose Company. This meeting is open to all extended family members age 14 and older. It will follow an educational model with segments of the meeting geared to different levels of understanding. The purpose is to develop throughout the extended family a broad-base, high-level understanding of business matters. Financial matters will be heavily stressed along with asset management. Learning how to handle confidential family matters will be part of the education process. One of these meetings will be called The Golden Goose Annual Family Gathering. It will include outside presenters, interesting learning opportunities and other activities that will enhance and enrich our family life.
- If a Master’s Degree has not already been earned at the time of permanent employment under provision #7 of General Conditions, then the family member must earn and receive a Master’s degree in a business related field within 6 years of employment. If done while in the full-time employ of the company, the family employee will be reimbursed for tuition and school related costs for each term the family member earns a “B” average or better. Family members who become permanent employees and already have earned a Master’s degree in business or topics directly related to our business, will be paid a bonus of $20,000, to be paid in equal quarterly installments over the first four years of employment.
- When/If a family member has completed his/her Master’s Degree, as a condition of continued employment the family member must complete 40 hours of approved continuing professional education in each calendar year. Failure to do so will freeze the family member’s salary for one year and jeopardize his/her employment status.
