Tips for Preventing Family Loyalty From Interfering With Company Success

A successful small business can be an important component of an individual’s legacy and may also contribute substantially to their family’s finances. In many cases, owners of closely held businesses want their organization to offer opportunities to their closest loved ones.

Successful family businesses frequently employ workers from multiple generations, as well as members of the owner’s extended family. While there are many benefits to including loved ones in your professional life, personal relationships can complicate business operations, leading to claims of nepotism or the exit of particularly skilled workers who play a critical role within the organization. 

Those running successful family businesses can limit conflict and operational setbacks by adhering to these guidelines for blending company needs with family dynamics:

• Establish defined roles for all employees — Hiring family members can easily become problematic when they do not have defined roles within the organization. They may try to assume positions of authority or fail to avoid making any meaningful contributions. Establish specific job functions for each position and clear managerial structures.
• Ensure wage transparency and fairness — In some cases, family members might receive pay that does not align with their job responsibilities or title. Those scenarios can foment resentment among other key professionals within the organization or lead to allegations of unlawful wage practices.
• Avoid favoritism when filling leadership roles — Although many people running family businesses want their children or grandchildren to take over the company, they should ensure that only those who can competently meet job expectations are among those considered for key roles in the company.  Promoting an unqualified relative to a C-suite position while denying opportunities to workers with more skills, better credentials and greater seniority can lead to claims of nepotism and a loss of key talent as workers seek opportunities for advancement elsewhere.

Executives and owners who recognize that working with family members can create employment challenges are in the best possible position to limit the controversies that could arise at a family-run business. Clarifying each worker’s position, being fair and transparent about wages and using objective metrics when choosing whom to promote are all ways to prevent family businesses from imploding due to worker conflicts.

The Law Offices of Donald W. Hudspeth, P.C. advises family-owned businesses in Maricopa County and throughout Arizona. You can reach us at our Phoenix office by calling 866-696-2033 or contacting us online.