It’s a Family Affair: HR Tips to Stop the Squabbles

You will often see cases involving or have heard of disputes in family businesses that highlight why policies and agreements need to be put in place within a family business.

With that in mind, I have put together a few tips on how to develop a policy within a family business that incorporates business decisions, family employment within the company and codes of conduct. Policies will very much depend on the size of the business as well as how many family members are involved, the company culture and the relationship between the family members, e.g. on good terms or slightly disjointed.
 

​Business Decisions

Decision making is key in any business; however it can become slightly more complicated in a family business if roles are not clearly defined. The decision needs to be made how business matters are decided, such as by vote. If it is by vote, who is eligible to cast a vote?

A lot of the time, business decisions are often made at management level, so generally with a family business is in its first or second generation without a board of directors, it falls to the older members involved in the family business to make individual choices on how to proceed with something. Whilst this is efficient, it may also be an obstacle for growth of the company.

Therefore, a board of directors is key in a family business to establish management policies and instil company values throughout the organisation.
 

Employing Family Members

Deciding which family members will be involved in the business and what their role will be can be hard to determine. Some businesses get everyone involved and make sure each family member chips in where help is needed. Depending on the size of business and the industry this might work, however as the company grows, more defined roles need to be put in place.

It is easy for families to get into disputes over who should be involved in the business, and therefore family members should really be treated like any other employee in regards to work experience and qualifications. The decision makers need to take a step back and properly evaluate the benefits of hiring a family member over a non-family member, or vice versa.

Another issue within family business arises over compensation and performance evaluation. As mentioned in the news story above, there can be much confusion over roles and responsibilities, the amount one is paid, how standards of performance is determined, what is likely to happen if a family member does not meet expectation, and most importantly, if non family employees will be treated in the same manner as family employees.
 

Codes of Conduct
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Sometimes, relationships within family businesses can get a bit heated due to the familiarity between family members. Therefore rules need to be put in place to determine how issues are resolved and conflict is handled. I’m a firm believer that problems should be solved behind closed doors as non-family employees who see disagreements within a family can sometimes begin to lack job satisfaction.

Below I have included some steps to follow when developing a policy for a family business, which should hopefully lead to a successful company and a happy family.

1. Decide on what the policy should include, such as guidelines for now and the next generation. If there is little experience in developing a policy, the family should keep it as simple as possible, or if there is budget, look to an HR advisor to draft up a policy.
2. Get advice from non-family members and HR professionals about a policy. Research other family policies and see how they could be adapted to suit the business values and goals.
3. Assign responsibilities to individual family members involved in developing the policy. There are many factors that go into putting a policy together, such as researching, writing drafts and gathering company documents to include in one master policy. All of the elements should be delegated but overseen by one person.
4. As mentioned above, ensure rules on decision making have been made and agreed upon and include these in the policy.
5. Again, as above, consider family employment and compensation procedures to be stated in the policy.
6. Policies should begin with a short statement outlining the thinking behind the policy and what it hopes to achieve. This should be discussed with family members and drafted up so everyone knows why the policy is being put in place.
7. Draft and discuss the policy as many times as needed to ensure everyone is happy with the final document. Each draft should be dated and any conversation that takes place regarding the policy should be recorded or have minutes taken.
8. Have an HR professional check over the policy to ensure all necessary and important points have been included.
9. Once the family are happy with the policy, present it to the board of directors to ensure they are satisfied with the document so it can then be authorised and printed.
10. The policy should be added to any other company policies, such as health and safety, maternity, bullying and harassment to make sure all documents are in one manual.

 
 

The contents of this article are necessarily expressed in broad terms and limited to general information rather than detailed analyses or legal advice. Specialist professional advice should always be obtained to address legal and other issues arising in specific contexts.

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