Jeff Faulkner

What Policies Does Our Family Business Need?
December 6, 2007

The development of family policies is no simple task when done right. Here’s a list of potential family business policies:

• Criteria for employment: Most important is the criteria by which family members can enter the business. These may address previous employment and education requirements. They would determine whether in-laws are eligible and under what circumstances.

• Behavior, attitude, and performance expectations: It’s vitally important for family members to know in clear detail what is expected of them. Don’t assume that your family members know what you expect. Spell out in detail what is expected in terms of conduct, dress, work ethic, attitude, etc. Family members need to understand that they live in a fish bowl. The microscope is dialed in on them and their every action is scrutinized. The expectation should be that family members will be role model employees.

• Compensation, benefits, and perks: Are family members paid based on the market rate for their position in the industry, or are they shown favoritism as a family member? Are all family members paid equally? Are their raises based on family need, or are they consistent with the way every other employee gets a raise? What kind of special perks do they receive? Do they get a company car or cell phone? Are they shown favoritism when it comes to time off?

• Advancement: What is the basis for family member employee advancement within the company? Are they on the fast-track to the executive suite, or do they have to earn their way like everyone else? Taking the elevator sends the wrong message.

• Family Governance: These policies will deal with how decisions are made. Do you need formal structures, or professionalization of the family business leadership? Do you need a Family Business Council or Operating Board of Directors? 

• Criteria for Stock ownership: Do your family members get stock in the business because they have the correct last name? Or do they have to earn the right to become a stockholder? In short, what are the requirements for stock ownership?

• Legal shareholder agreements: I wish I had a dollar for every time I came across a family business in which the stock was spread among family members with no agreements in place. These agreements should delineate what a shareholder can and cannot do with his/her stock. 

There are many other policies that could be developed and, if done right, it is no easy task. The point here is to give you some ideas on the types of issues you need to be thinking through with regard to the development of family policies. If you take the time to develop family policies in the right way, it will go a long way toward alleviating potential problems. When these issues are dealt with pro-actively, family members can keep their eye on the business performance ball, rather than being distracted by what someone else is getting away with.

Posted by Jeff Faulkner on December 6, 2007 | Comments (0)