Few things are harder to manage in a family business than the need to part ways with an underperforming relative. However, for the business to thrive, you must address all poorly performing, including those you see at the Thanksgiving table.
Maybe your great aunt really needs to retire so you can upgrade the accounting system. Maybe your niece is an entitled, lazy jerk. Maybe your brother needs to fulfill his dream of starting a different kind of business.
Regardless of the circumstances, here are five don’ts to follow when it comes time to separate a family member from the family business.
1. Don’t avoid documenting the issues
Like with any employee who underperforms, you should coach first and document your process. Is your son coming in late every day because he’d rather stay out late performing with his band? Document the tardiness, every time, as well as your counsel about why it’s important for all employees to be on time.
Did an outside audit reveal that your sister has embezzled funds? Use that audit, plus any internal documentation, when discussing why she must leave the company.
Coaching the underperformance as it happens helps avoid the firing being a surprise, which is a best practice in handling any problem employee. Documentation helps the employee understand that this is a business decision, not an emotional one.
Finally, consider consulting your attorney before the firing to make sure everything is in order. You want to avoid legal action if at all possible, but it never hurts to make sure you are adequately prepared, just in case.
2. Don’t wait too long
Just as when dealing with any employee performance issue, sooner is better. If your party-hearty nephew is drinking on the job and driving a forklift, avoidance means you’re opening up the company to serious liability as well as endangering the lives of everyone around him.
The longer you wait to address performance problems, the longer that relative’s behavior has to undermine other employees’ work and their respect for you.
An unexpected upside to immediate and continual coaching mentioned earlier may be that the relative realizes that this job isn’t a good fit and offers to leave on their own. In such a case, an offer of monetary support can help that transition as well as maintain family harmony.
3. Don’t make it personal
It’s tough enough to fire a non-family employee without worrying whether emotional baggage from childhood will erupt during the discussion. The best way to avoid saying things you may later regret is to practice ahead of time. Think through what you need to say, how to say it, and rehearse and role-play the situation with a trusted colleague.
As with any firing, find a private time and place to conduct the termination. At all costs, avoid a shouting match in front of other employees. Also if you expect things may go bad when conducting the termination meeting, it is always wise to have a non-family member HR executive to participate in the termination, just in case issues arise later.
It’s essential to convey that this decision was made for the good of the company. If your relative is clearly unhappy in their job, convey that you want them to be happy. Encourage them to see this as an opportunity to find a job they’ll enjoy.
When the family employee is great but their services are no longer needed, for instance if you eliminate or outsource an entire function, consider making your relative part of that change. Working through your company’s transformation with outside vendors could help her network and realize that other opportunities await.
4. Don’t leave out other family members
If several family members are involved in management, enlist their support. A show of solidarity can help the problem relative see that while they may vent their frustration, there’s really no debating the decision.
To nip a contentious firing in the bud, consider implementing an official policy of family-business employment. Such a policy should include how family members will be hired, trained, promoted, evaluated, paid and fired. You might even add a code of conduct that covers how to behave at the company and in public.
5. Don’t forget kindness
Few situations are more uncomfortable and more difficult than parting ways with an employee who is also a relative. That’s why it is essential that you proceed with kindness, civility and professionalism.
Offer to help with the transition, such as paid leave, referrals to other companies who may need their services, job skills training or career counseling. In the case of addiction, offer to pay for a round of rehabilitation. If your cousin wants to start his own business, consider offering to invest or help him find other investors.
Fewever regret maintaining good family relations. Remember that while firing a relative is hard, a rift in the family is harder. Doing your best to act in the company’s best interest while being kind can help you retain your seat at Sunday dinner as well as maintain profitability.
From a buyer’s perspective
The issue of family members and their involvement/performance takes on magnified importance if you ever plan tothe business to a third-party buyer. During due diligence buyers will drill deeply into your organization. If they find excessive nepotism and superfluous services being provided by family members, they may have concerns about post sale morale. It is far better that you remove any non-essential family members in the business long before buyers begin to review your . By doing so you will clearly show buyers that the business is not dependent on any family members that may bolt should you no longer sit in the corner office.