Get Your Family Onboard: Lesson 1 From The Pirates – Employment, Management & Ownership Criteria

Get Your Family Onboard: Lesson 1 From The Pirates – Employment, Management & Ownership Criteria

As we can see from the pirates’ Code of Conduct, what was expected from each pirate while they were onboard the ship was clear. Furthermore, the consequences for non-performance was also made clear.

In many family businesses, family members are hired with little regard for whether they have a skillset that will benefit the family business. Furthermore, once they are hired it is often unclear what is expected of them. Given the family dynamics in family businesses, it is not uncommon that there are no consequences for non-performance. If this non-performance is allowed to continue this can result in this kind of behaviour not only being tolerated but becoming the norm or the expectation among family members. Typically, everyone just adapts around those family members that aren’t performing as desired.

Henry and Fred are two brothers that are co-owners of a family business and both have children working in the business. It is apparent that Henry’s son, Peter, is not performing and it is also apparent that Henry is taking up the slack created by his son so that his brother will not say anything about Peter’s non-performance. This happens far too often within family enterprises and results in the situation being ignored until the next generation ascends into leadership and ownership positions and inherits the mess. All of a sudden, Peter is confronted with the need to pull his weight, but unfortunately doesn’t have the skills to get the job done as expected.  This means that Peters’ siblings or cousins are now going to be saddled with a very difficult situation that could have easily been prevented. Had the family business developed rules of employment before employing any family members, this would not be the case. Instead of focusing all their time on the effective running of the business, the new leadership group will now have no choice but to spend time and money on remedying a very sensitive, painful and stressful situation.

We can provide our families and our family businesses with a real benefit  by implementing rules of employment before next generation family members enter the family business. Rules surrounding employment will make the process of hiring a family member more structured, more rational and skill-based rather than based on blood lines. Perhaps Peter would have never been hired in the first place or he would have been hired but his ascension into management and leadership would have been stalled or halted until his performance met the job expectations.

When there are consequences for non-performance (like the pirates) and they are clearly communicated to all, the expectations get reinforced and therefore remain clear to all. Of course, the type of punishment would likely differ from that of the pirates.

Families in business should have a rule outlining the criteria required for the employment of family members, as well as the process to apply. This could include clauses such as:

  • We do not create jobs for family members
  • Family members are encouraged to apply for any vacant positions
  • The financial impact on the business will be considered before hiring
  • The family member must have the same level of skill that would be required from a non-family member to fill that position
  • Family members will be paid based on fair market value (the same price you would pay a non-family employee to do the job)
  • An interested family member shall submit their CV and formal application to the President (irrespective of whether the President is family or non-family)
  • If all owners agree and the family member is to be hired, the employment offer should be documented and include start date, roles, responsibilities, compensation package, reporting to whom, probationary period, etc.

Just as important as having rules for employment (i.e., joining the family business) is having rules for the ascension of family members into management, leadership and eventual ownership.

Management Criteria: 

  • Family members aspiring to the ranks of management (leadership and decision making) are required to have the following qualifications:
    • University/college degree (or equivalent)
    • Work experience outside the family business (2-3 years)
    • Experience and skills compatible with the position being contemplated
    • Demonstrated commitment to the business and a good work ethic
    • Demonstrated ability to handle responsibility and accountability
    • Shared philosophy with the family business succession objectives
    • Demonstrated management and leadership skills (practical and academic)
    • Demonstrated business values and personal values compatible with the Executive Committee.
  • Family members who make it to the management ranks will be assigned a ‘mentor’ from the ownership group (active owners) or from senior management. The "mentor" will be responsible for grooming and assisting the family member (the new manager) for potential leadership and ownership. The advancement of family members within the family business will be assessed by the active owners who will provide their assessment (recommendations) to the Board of Directors (if in use) for their consideration and decision.

Ownership Criteria:

As for the criteria to make it into ownership,  clauses that could be included on top of the management criteria are:

  • 10 years of full time work in the family business of which a minimum of 5 years is spent as part of the management team. If a family member joined the company at the management level, the 10-year criteria would still apply.
  • Extra consideration would be provided to family members that have worked in more than one department.

Imagine if what was required to be employed as well as ascend into management, leadership and ownership was crystal clear to all family members (active and non-active). This would no doubt reduce the conflict amongst family members and family branches. If the pirates can do it – so can family businesses.

Next Lesson:

What’s one of the most common issues amongst family members in a family business? Compensation! Stay tuned to see what lessons you can learn from the pirates with respect to compensation.

Please click on the link to read the first article in the series Get Your Family Onboard: Lessons From The Pirates

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