The pitfalls of family engagement through employment

Empresa Familiar_Carlos Arbesú

When talking about next generation engagement in the family business, it is usual to point out the question of employment. In early generations, first and second, there are powerful and unconscious forces that drive families to employ next generation members. In these early stages of the family business, everybody tends to think it is a privilege for the young members to work for the family company. Legacy is basically and mostly our activity and dedication. In later generations or stages of development, the businesses tend to professionalise themselves, and the families start to think about setting up rules of employment for next generation members, usually cousins.

When families promote the employment of next generation members as a way to generate engagement, they can fall into various pitfalls:

  • A culture of complacency, because family members do not have to meet high standards.
  • The perspective of employment as a right, instead of a service to others.
  • A loss of self-esteem, trough the passing of time, because family members feel they should have started working in non family environments, to see more clearly what are they capable of.
  • Once “in”, is much more difficult to recognize the fact that a family member is not doing well in his position.

To face the question of family engagement through employment properly, families should ask themselves first: What is needed in our family business? What should be the degree of professionalism in our companies? Then, what should be our philosophy as a responsible owner? Not all philosophies are neutral for the development of a business. As experience demonstrates, well trained non family employees tend to consider the employment culture of the family company carefully, so they prefer companies in which they do not find glass ceilings because of the need to employ family members in certain positions.

Given the needs of our businesses and family structures for the future, What rules are appropriate for our family members? When businesses evolve into groups of enterprises or corporations, families tend to allocate certain positions for family members, and these must meet the set criteria. Nowadays is more common to find families with wealth management structures, such as family offices, in which they find room available for the family member´s activity, without interfering with the businesses. This also happens with philanthropic activities such as those of foundations. It is very different to engage family members through employment in our businesses, than to do the same in other structures more related to the family, such as family offices or foundations.

Family councils have to promote the debate about philosophies and rules of employment among family members, but first, they have to in-still in the family a clear idea about the responsibility of behaviour with a high degree of professionalism. A good recommendation should be that the family council hear the point of view of the board of directors and the CEO, prior to the debate about the issues involved. Family members have to take into consideration the needs of the business, family offices or foundations, and be responsible for them. Some families set the rule of “no job positions for family members”, and focus on board positions instead. Other families only allow family members to work in certain management positions when they meet the criteria set.

When working with these issues of employment, family councils need to be aware of the responsibilities that they acquire to monitor the appraisal reports of family members, give attention to their training and career development, e.t.c. In this task, family councils need to have an open channel of communication with the board of directors and the management.

What other ways do we have as a family to engage members without employing them in the business? Family councils should promote some other means of engagement, not linked to job positions, such as:

  • Giving financial support to family start ups and entrepreneurship.
  • Helping family members find job positions in other companies using family networking.
  • Promote non profit and activities involving family members.
  • Involve family members in social activities to enjoy the reputation of the family.
  • Education.

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