Maybe you are at the stage when you are considering employing your first family member. Perhaps your children have grown up and are looking for a new job, or your business has developed to make employing your spouse a viable proposition.
Sarah Parker weighs up the pros and cons of keeping it in the family Family-owned and run businesses are an important characteristic of the UK’s entrepreneurial landscape.
According to figures published by Barclays Bank, three out of every five businesses with an annual turnover of less than £5m are owned and managed by family members who are related through blood or marriage. Bringing other family members into established family-owned businesses can bring many benefits.
Family businesses have a competitive edge.
Family members within family-owned businesses are usually prepared to take a longer-term view and go that extra mile. It’s not just a job to them – more a common cause they feel really passionate about.” In addition to hard work, loyalty and commitment, trust is another key factor. Paul Matres, head of UK Family Services at Howard Marks, remarks: “Most family members working together want a happy, harmonious family life, as well as a successful business. Trust is crucial in both.” Whereas a business owner or manager may have to consider sharing sensitive company information with non-family employees, they might feel more comfortable with their relations.
Trust also extends to being able to leave employees to work unsupervised without quality or productivity dipping as a result. Being assured of an employee’s honesty is essential, when handling cash and stock is involved.
Non-family members can be just as honest, hardworking, trustworthy and committed, of course. Succession Another reason why family members are brought into a company is succession of management or ownership. Many dream of the time they can lessen their day-to-day involvement or retire in the knowledge the company is in safe hands. In this situation, employing a family member at the earliest stage is advised.
They get sufficient time to immerse themselves in the business, giving you time to decide whether this is the best move for you, the business and the family member. However, succession can be problematic, particularly if you are choosing, for example, one son or daughter over another. Domestic tension and jealousy can result, while you have to consider whether that family member is up to the challenge. Employing family members can bring financial benefits.
If company finances are stretched, then a family member might be prepared to accept lower wages in the short-term. Alternatively, should you choose to employ your spouse, there are potential tax benefits to be gained. Your accountant or tax adviser will explain how employing your spouse could help you to bring more money into your household. Potential problems If employing family members seems like a simple way of making your life easier and more rewarding, then there are many important factors that could mean otherwise.
There is a risk of conflict — between family members working together in the business, as well as family members and other employees.
You are legally required to establish a formal mechanism for resolving conflict, clearly communicated in writing to all employees. Rob Powell, chairman of the LES Centre for Family Business, warns against treating family employees differently from others: “They should be treated in accordance with their written contractual obligations — as if they were not family members at all.” Family employees being singled out for special treatment is likely to have a demotivating effect on other employees. You could lay yourself open to charges of favouritism.
Discipline aside, to avoid this you need to consider everything, from distribution of duties and workload to attendance, punctuality and even use of a company vehicle. Being even-handed is the key. Avoid wage imbalances between family and non-family employees with the same levels of responsibility. Leach stresses that family members should be employed on their market-value basis. “If you overpay them they won’t get the respect of others in the business.
If you underpay them, other employees might not respect them enough.” Where possible, your family member should have sufficient skills or relevant work experience. If there is no suitable role for them, think carefully before creating one.
Likewise, if you are keen to employ a family member, do not pressure them into accepting a position they might feel they are not suited for or they may not want. Inaccurate assumptions on either side can lead to disaster, as Rob Powell warns: “The worst cases I’ve seen are where people go into a family business because they believe that they will be looked after and treated specially. Whereas, in fact, the work environment is very different, and a family member has now become their boss.”
“There are a number of cases where sons and daughters are working in a family business because they see it as a duty — but this can cause problems down the line.” Demarcation lines Blurring the line between work and home, in terms of time and setting, is another danger. This could make your breakfast table seem more like boardroom furniture, or the aisle of a local supermarket more like your office. Business owners and managers need to prepare themselves for every eventuality. For example, if they have to discipline a family member or even make them redundant, how would family gatherings be affected?”
There is also the potential for domestic tensions entering the workplace. Apart from being highly unprofessional, this is likely to make your working day much more difficult. Another consideration is how other employees will see you and your family member, after they have witnessed domestic arguments in the workplace. Assessing the idea of working with family members, Rob concludes: “When it works, it tends to work very well, but clarification of the boundaries between home and workplace are very important. Keeping your business life and family life separate is a big issue.”