by David Bork

“So…Who’s going to run your family business?“

The answer to this question for many family business owners is, “I am!“ They think they will live forever; the business will prosper and continue to put unlimited cash into the pockets of family members. Oh, that such a thing would happen but the reality is that it doesn’t work that way.

The best answer to the question is grounded in sound business practice.

“No business will be successful if the leadership is not competent.“

Unfortunately, in family owned business, the matter is more complex, in part because of the way parents have raised and nurtured their children. It is also complicated by the fact that the premises in the family and in the business are not the same.

Premise of Family Premise of Business
Task or Purpose Raise responsible adults, who have high self-esteem and can function independently in this world. Profits – Compound the value of the total asset pool
Acceptance Unconditional acceptance and unconditional love Conditional acceptance, based on competence and ability to perform and produce in a professional manner

Because the foundation for acceptance in the family and in the business is different, there is a fundamental “disconnect“ between the two systems that many people do not recognize. Families who don’t understand these differences will use the business to complete the family task. Families who confuse these tasks create huge problems for themselves and others.

Thus, it is necessary to establish “Rules of Engagement,“ a policy for how family members will be permitted to participate in the family business. This often manifests itself in the form of a Family Business Employment Policy.

The time to prepare such a policy comes long before you need it. Regardless of the current age of your children, do it NOW! When one analyzes problems found in family business, they are often related to the family member being less competent than is required for the position and their experience base is inadequate or even non-existent. Ask yourself this question:

“Would you consider hiring an unsuccessful nonfamily member to fill a key slot in your family business?“

Of course, the answer is and emphatic, “No!“ It must also be the same for a family member. A family member who cannot prove their value in another business will not do will in the family business and ultimately be a problem. Working in another business is analogous to a “proving ground.“

Family members working in the family business must show up, produce and perform to the same standards as non-family employees. This will lead to them building credibility within the business. In some family businesses, family members get lax and think that they can set their own work schedule, take long lunches and assume other privileges simply because they are family. This kind of attitude becomes an accident waiting to happen.

Creation of the “Rules of Engagement“ for entry into the business is just the beginning. The rules must be discussed with family members. Those discussions can take the form of casual conversations with sons and daughters when they are younger and just learning about business and other realities of this world.

The worst time for these discussions is when a family member says they are looking for a job and would like to work in the family business. Having the policy in place long before it is a factor in the family contributes to the growth of the business and is an element of the compensation policy within the company.

The family employment policy needs the following elements:

Earn Your Opportunity

A clear statement that family members must earn the opportunity to enter the business. A job in the family business is NOT a birthright.

Requirement for Experience and Demonstrated Competence

This is often manifest in the requirement that family members work outside the family business for a period of 5 or more years, hold positions of responsibility in their job and demonstrate that they have been and can be a valuable employee. Their value would be evidenced by promotions during this period. Note the emphasis on experience and competence. The ability to sustain a high level performance over time is the best evidence of competence.

Clear Statement about Professional Growth

Some families require higher education as a prerequisite. I think both higher education and continued professional education are essential. The best business leaders are those who begin with a sound foundation and are continuously learning in both formal and informal settings, thus expanding their knowledge base and ability to lead.


Compensation will be at “fair market“ rate for the position held. This is important in developing a clear understanding of one’s economic value in the market place. It also avoids the family member getting an inflated view of their contribution. In some family businesses, family members receive an additional distribution, sometimes viewed as a share of profits. If this is the family practice, it is important that this is fully understood as a “family factor,“ and not earned income.

Entry, Performance Evaluation and Exit from the Family Business

The door to the family business swings both ways, “In“ and “Out.“ Most discussions focus on entry but there needs to be clarity about family members being subject to performance evaluation. Such professional processes present an opportunity to discuss quality of contribution, work habits, professional growth, demeanor and attitude within the business and with customers. Family members set the standard for the company and their behavior must be a leading example for all employees. The policy must also state that a family member’s employment can be terminated for cause, with a clear description of those conditions.

The Golden Goose Family Employment Policy was developed for a large family. {See link below.} It is more stringent in its provisions than many families require, mainly because there are so many family members. The structure and content of this policy has become the “gold standard“ in family business circles. Readers may benefit from visiting this site, which is in English.

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