Help, I Want to Fire a Family Member from the Business

I get this question from time to time and my response is always the same.  There are two good reasons for firing family members:  Reason number 1—they have failed to fulfill their roles and responsibilities to the business.  Reason number 2—see Reason number 1.  It is no surprise the response I always get back is, “I just can’t do that.” 

 

Business advisor:  "The problem with your business is your son — he's incompetent and destructive. You need to fire him right away."

 

Business owner:  "I know it, but there is just one problem. I have to sleep with his mother."

 

That well worn joke points out an all too common problem with many Family Businesses: A family member hired who eventually proves a bad fit.

 

Any business, whether it is a family owned business or not, cannot afford to have people on the payroll that are not fulfilling their roles and responsibilities.  Leadership will lose credibility if nonperformers are allowed to “get by” without performing.  In a family business, it is difficult to fire a nephew or an in-law because that means some holiday gatherings can become very intense.  More than being intense, animosities tied to a family business firing sometimes prove extraordinarily long-lived.

 

However, if you do it right you can remove the deadwood without losing the family or the business.  Here are a couple of steps that I have found to be useful:

 

1.  It is imperative that the business have regular Family Meetings with open and honest communication. It is here that owners of the business need to empower the leadership of the company (whether family managed or not) to operate it like a business and not a family.  When faced with a decision, they should ask themselves “What would a good business practice dictate?”  Then they should do it. The business can't allow the fact that someone happens to be a family member to interfere with what the situation demands.

 

2.  Start by writing a policy of family-business employment that describes the conditions under which family members will be hired, developed, promoted, evaluated, compensated and, if it comes to it, fired.  If a family member clearly understands going in that they will be treated in a certain way they will start off on the right foot.

 

3.  Like any employee, family members should be evaluated regularly based on the same standard as other employees.

 

4.  The biggest problem with firing a family member is usually not the other family members working in the business (because they already know it is time to fire this family member), but those outside of the business. The person who's fired will turn to other family members.  The owner who fires another family member will then be contacted by family members who are going to condemn him for disloyalty.  This is why Family Meetings are so important.

 

5.  Have a family employee code of conduct that goes beyond the workplace performance and covers behavior in the community.

 

6.  Be sure to communicate with clarity to other employees, family members and associates.  There also needs to be a “party line” on why the termination took place.

 

7.  Consider giving the employee the option of resigning.  If you have done your job properly and laid out the criteria, people will often resign and walk out the door with dignity, rather than being fired.

 

8.  You do not need to say you are sorry.  This is all about performance. Family members will try to make the situation personal and question, “How can you do this to me? I'm family.”  But if the business owner is applying good business practices to the situation, he has absolutely nothing for which to apologize.

 

9.  If in doubt, keep the family out. Hiring a family member isn't written in stone. We all like to help our loved ones, but don't assume that a relative is the best choice for a particular job. When looking for employees, go outside the family. Owners need to identify the roles needed by the business, define them clearly and define qualifications. If and only if a family member meets them should he or she be hired.  This forces a family business to operate more like a business and less like a public works program.

 

This is about tough love and a mindset that we are a business that is owned by a family.  The business needs to come first because if the family does not take care of the business, the business will not be there to take care of the family.    If you would like more information about holding family meetings, please contact me for a planning checklist.

Comments

[Jason M Blumer]

Scott-

You've got some wisdom! This is a great article. I'll be checking in regularly for some good fodder for our firm's blog (http://THRIVEal.com). Our firm is Blumer & Associates, CPAs, PC.

I believe we know someone from Oregon writing a book on professional firms using SM (Jan Davis of JT Research)? Did she interview you too?

Take care.

Jason Blumer

[RickC]

Scott, you're right on except I have one suggestion; that there really are two reasons for firing a family member. I would add as the second reason "unethical conduct". I have seen many family members sweep the problem under the rug rather than fire a family member for sexual or race discrimination. Do not rule this out.