Quentin Fleming knows the tact that family businesses must exercise when hiring or firing family members.

As a small-business consultant, Quentin Fleming discovered that family dynamics are essential when it comes to family business talent management. These dynamics become tenuous when family members underperform and, frequently, they underperform because they are not suitable for the positions they fill. Therefore, the error lies not with the family member but with the process that saw them hired in the first place.

The emotional bonds that tie family members together have the potential to affect business decisions. For example, hiring a family member, even if they lack the necessary skills to thrive in their position, is often easy, while telling them to go is difficult.

In his initial research for Keep the Family Baggage out of the Family Business: Avoiding the Seven Deadly Sins that Destroy Family Businesses, Fleming found that the majority of family business literature focuses solely on the advantages of joining the family business. It offers little guidance for next-gens on the fence. Fleming was left with the question: if family hiring can make or break a business, how can it be approached in a way that ensures its safety and efficacy?

We had the opportunity to sit down with Quentin Fleming to discuss the problems that arise when family and business perspectives become conflated, methods to facilitate decision-making when confronted with family business dilemmas and how technology is changing human resources.

Hiring in the Family Business
Image courtesy of Quentin Fleming.

What should businesses avoid when hiring within the family?

Often, family businesses view hiring next-generation candidates with bias. The incongruency between a candidate’s skill and their perceived skill in the eyes of their family is potentially damaging to both parties. It’s essential that hiring family members is approached with impartiality.

Family business members must ask themselves whether or not their relative is suitable for the role based solely on their work history and merits. If their paperwork doesn’t make that decision clear, then they might not be the ideal choice. Is their potential, especially in light of the personal relationship bias that family likely implies, reliable enough to risk jeopardising the sustainability of the business?

One of the most prominent issues that exist in familial hiring is the order of succession – which children take over the family business after their parents retire. Often, the mantle of leadership is conferred by male birth order.

However, this system is flawed; there is no correlation between a child’s talents and abilities and their birth order (or their gender for that matter). I often find that the youngest sibling, particularly when female, has talent and energy for the business but is overlooked as a natural successor simply because of this tradition.

In this instance, the business is doing itself a disservice by hanging on to an irrelevant cultural phenomenon. Whether it is a conscious decision or not, reaffirming birth-order succession or patriarchal control simply for the sake of historical consistency will only dismantle trust within the family.

This practice alienates women in the family and, just like that, the family business has lost half of its familial talent. Younger male siblings also become disenchanted when taken out of consideration because they were born a year late.

Hiring in the Family Business
Image from Shutterstock.

“Non-biased outsiders judge whether or not the family member’s talent and ability are reliable…Allowing next-gens to demonstrate their capability without their family’s aid.”

What practices should family businesses implement when hiring family?

Many family businesses encourage family members to work elsewhere – often in a completely unrelated field or industry. This allows them to establish their rapport with and work ethic at another company. Some family businesses even require an earned promotion or two from another company before being considered for a place in the family business. Not only does this practice allow family business members to develop skills they otherwise wouldn’t have, but it also ensures a level of impartiality.

Non-biased outsiders judge whether or not the family member’s talent and ability are reliable. At the same time, it also builds confidence, allowing next-gens to demonstrate their capability without their family’s aid.

“There is no easy way to remove a family member from a position to which they’re dedicated. However, it is reasonable to hope that personal relationships can overcome the disappointment.”

How should family business members address the underperformance of their relatives?

Because of the personal relationships within a family business, there exists a much higher potential for resentment or frustration between family members when performance is an issue. To avoid hurt feelings and strained relationships, I see some businesses redirect their members’ talents to where they are more useful. Sometimes this is done internally, but often, this means helping them search for opportunities outside of the family business. Redirecting talent is a sensitive issue, but it is more effective than simply letting family members go altogether.

The difficulty lies in letting go of a family member who is dedicated to their role but unfit for it nevertheless. These are the conversations that end in hurt feelings and resentment.

However, it is the responsibility of employers to put their business’s needs first; elements that hurt the business must be removed. They must approach the situation with impartiality and ask, would this person remain in this role if they were not related?

Hiring in the Family Business
Image from Shutterstock.

There is no easy way to remove a family member from a position to which they’re dedicated. However, it is reasonable to hope that personal relationships can overcome the disappointment.

In many cases, it is a relief for both parties when a poorly performing family member is redesignated to a more appropriate role or let go entirely. Family members often lack determination when joining the family business, and their interests and talents are sometimes pushed aside. Easing them out of a role where they’re not happy or contributing grants them the opportunity to thrive elsewhere.

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How can family businesses enhance retention?

Family businesses sometimes underinvest in talent development, which can lead to a lack of formal development for future leadership.

Creating opportunities for employee development is beneficial on two levels. First, it strengthens individual employees’ sense of worth. Secondly, it develops a talent pool within a group that can then work as a team, bringing individual talents to the table in whatever ways are appropriate.

Talent investment overlays every aspect of running a business. Investment in talent, regardless of family ownership, enhances the quality of work employees offer and the amount of effort they are willing to invest in the business.

If done well, this mechanism can improve employee work ethic. There are purpose-driven organisations that live by the purpose they state, which on paper can be very attractive to an applicant. In a family business, however, purpose is already established and ingrained in the system. There is legacy to consider, a reputation to maintain and evolution to invest in for future generations.

Not only can maintaining an adaptive attitude to talent investment create better retention rates for family employees, but it can also attract outside talent when community members recognise a business’s ability to invest in its future.

How is technology affecting human resources?

Many historical family companies are struggling to incorporate automation into their operations. For some, the uncertainty is debilitating, and change is hard to enact when prior success has been achieved using only traditional methods.

That said, I’ve certainly seen the impact on factory floors where automation has taken over tedious jobs. The implications of technological change where HR is concerned are by no means limited to manufacturing, however. Even in tech companies, it is often the younger generation that is most active in bringing new technology into production.

Technological transformation represents an opportunity for family businesses to branch out further and hire talent from outside of the family. More traditional industries will benefit from young, outsider perspectives. Hiring people with specific training to implement digital strategies can help family businesses maintain their relevancy. It depends on the perspective of family members, but fully embracing a digital future often requires new employees with specific digital training and expertise.

This plays into the topic of talent investment as well. Leadership is only performing well when they’re current with and considering all the latest technologies in their industries. Regardless, investing in the development of younger employees, family or non-family, adds an element of security and trust when the time comes to hand the business over to a new generation.