Dave Ciambella

Equality in Family Business: Should I Compensate my Children Equally?
July 9, 2007

Compensation in the family business arena can be challenging for parents, employed family members as well as non-family member employees. Unfortunately when it comes to their own children or other relatives, many business owners engage in “selective memory” and they ignore the concept that individuals should be paid according to the job they are responsible for and how well they perform. After all, isn’t that how the rest of the non-family member employees are compensated? 

Several years ago I was referred to a couple who owned and operated numerous successful businesses with multiple family members actively involved. The oldest child had been working in the business for approximately ten years and the youngest child was recently hired into the business. The parents found themselves asking the following question: how should I pay my children?

Unfortunately, this question surfaced after about two years of already paying equal compensation to their children.  The parents could clearly see and feel the tension among their children. The oldest child had already made a commitment to the business and was instrumental in its recent growth. Unfortunately, he found himself in a position where he was making an equal paycheck to his brother who had taken advantage of the six year program at the local university and also exhibited an entitlement attitude. Furthermore, both children were receiving equal vacation time. The newest family member employee abused that privilege, which added more fuel to the fire. One can only imagine the questions that lingered in the mind of the oldest child not the least of which was, is this going to be my future partner?  

Every individual has been blessed with certain talents and has developed a unique personality. However, each of us chooses to use our talents and strengths differently.It has been my experience that people will act according to how they are paid! Family member employees who are willing to make a commitment, pay the price and meet or exceed performance expectations should be rewarded, not be penalized or held back by their less motivated, underperforming family members.

The issues and challenges regarding compensation present themselves differently but one thing is clear: how you choose to compensate family members can have a profound impact on sibling relationships, intra-family communication, self-confidence of family member employees, the motivation of other family members (or lack thereof) and how non-employed family members measure and view the success of family member employees.

Next Topic: Mission Impossible: Equal Asset Distribution

Posted by Dave Ciambella on July 9, 2007 | Comments (0)