In a bad economy, there may be more temptation than ever to turn a small business into a family business. Maybe your brother-in-law needs a job.
Or Mom and Dad have cat food in the cupboard and don’t own a cat. Personally, the thought of hiring members of my family gives me indigestion. But a family company can be an all-around winner–provided you learn how to manage the “family” part.
Of the 6 million small businesses that employ 100 or fewer workers, 20 percent involve two or more family members. It turns out that some of the traits associated with these family-owned animals put them in better stead to survive and prosper in these leaner, credit-crippled years than conventionally owned firms. For starters, family businesses tend to be patient capitalists–building conservatively over years and turning a deaf ear to the siren song of debt, says Matthew Brady, head of the wealth-advisory group at Barclays. And money isn’t the only altar at which they worship; they’re more likely to focus on issues like legacy and commitment to community, and thus be that much more averse to foolish bets.
Ultimately, mixing family with work requires certain precautions and constant maintenance. “Use your brain, not your heart” when thinking about hiring your kin, says Don Schwerzler, the founder of Family Business Institute, in Atlanta. Compassion for someone who has lost his job is not a good reason. Make sure there’s a real job waiting for him and spell out your expectations for his duties, hours, vacation, compensation and equity opportunity.
Harder still but just as necessary: Spell out what will happen if he screws up and fails. Those difficult talks can be easier if you involve an advisory board in both hiring and firing. Should your new employee become your worst nightmare, it’s a relief to be able to say, “The board and I decided that a brick could do better work.”
Photo by John Spooner