The process of building this policy required a great deal of discussion among the Wilson family. They needed to articulate who they were and what they stood for, and then they had to craft a statement that would work for them.
Every game, including the “Game of Life,“ has rules of engagement. Family businesses are best served when they clearly define the terms and conditions of employment for family members and for non-family.
When you are born into your family, you are accepted unconditionally. The love of your family is unconditional. At least, that is the way it should be.
Employment in a business is different from membership in a family. Regardless of the ownership structure, all businesses require competent employees in every position. Acceptance in the business must be conditional, based on competence and the ability to produce and perform at a consistently high level. If a person is less than competent, they simply will not meet that standard.
This blog is the first in a series on Family Business Employment policy.
What follows is the first blog in the series. My focus is the theory behind each section of the employment policy. This policy is drawn from an actual policy designed for a real company. The universal principles are excellent and applicable to all family businesses. This policy was developed in the mid 1980s and the principles underlying it are the “gold standard“ of all family employment policies. Any family business policy worth its salt will have the components of this policy. The policy can be read in full at:
https://www.familybusinessmatters.consulting/wp-content/uploads/2017/08/familybusiness.pdf
The policy begins with a statement of purpose, establishing the fundamental reason for the policy:
To remove the ambiguity about the matter.
“The purpose of this policy is to define the procedures, process and criteria that will govern how the Wilson family lineal descendants and/or their spouses enter and exit the family company’s employ. (Note the clarity of including spouses as employees. Some families do not permit this.)
This employment policy is intended to remove the ambiguity […]
Family constitutions are a form of governance that sets up structure to regulate the manner in which family business matters are handled. A family constitution has the effect of helping a family run an efficient, effective, customer-focused and community-focused business. This type of focus ups the ante on the quality of behavior inside a family enterprise.
Corporate governance in family business is essential for long-term success. Family businesses that have survived over the generations have an internal governance structure that parallels the structures found in leading businesses around the world. Such structures provide an internal discipline on how family and non-family members will function within the business.
A policy for how family members will be permitted to participate in the family business can be referred to as Rules of Engagement. Family business rules are often manifested in the form of a Family Business Employment Policy. Family members working in the family business must show up, produce and perform to the same standards as non-family employees.
All owners of a family business eventually must consider a family business transfer from one generation to another. For a smooth transfer, families are encouraged to make a fully documented, comprehensive plan for all the things that must happen in the business and in their families so that transfer of control can occur in a timely manner.
The founders of a family business make it possible for future generations to benefit from their vision and entrepreneurial spirit. A true leader inspires success. When considering succession in family business, the founders or leaders of the company want future generations to have the same level of motivation, drive and passion for moving the business forward.
A properly constructed family business advisory board gives owners access to high-level executive and management talent beyond those employed by the company. Advisory boards create a forum in which active owners, in concert with other advisors, impact the strategic issues facing the company. The board makes non-binding recommendations on strategic issues.
Every family faces the possibility of a key executive in the family business suddenly being taken either by accident or natural cause. Life can be fragile and no person is exempt from such forces. Strategic planning for the family business requires the family to prepare for the unexpected with the development of an emergency action plan.
There can be advantages of nepotism. Experience has shown that nepotism works if and only if the values of the family members are congruent and the successor is fully competent. Every company needs a source of competent, dependable employees, and this is where the advantages of nepotism can come into play.
