One of the toughest challenges for a small business is finding competent and reliable employees. When you find one and they are family, why look further? See Small Business — Employing Family for some pitfalls. Managing family employees can be difficult. Techniques to make it easier include job descriptions, market-based compensation, and other market-based policies.
Establish Company Policies
According to some owners, there are many reasons to establish a policy of never hiring family members. The previous article cited some. Other reasons range from “simultaneous vacations are too disruptive” to “family members who believe they are immune to termination may even work together to frustrate the boss’s goals.”
Unfortunately, these potential problems are unconvincing to the child or sibling or to a good employee recommending his relative. They see the immediate need, not the future risks.
“Market-based policies” may be the best tool for a small business faced with family employment issues. Larger businesses have traditionally “established a policy” to handle potentially contentious issues in a consistent way. In contrast, small businesses often perceive policies as big company overhead and bureaucracy, the very thing they try to avoid in their own business.
The benefits of establishing a policy are (1) you can spend your time more productively because you don’t have to invent an answer every time the same problem arises, and (2) you don’t have to deal with accusations of favoritism and inconsistency each time you make a new decision on the same subject.
One example of a market-based policy is that every job will have a “job description”, citing responsibilities, duties, and qualifications. These provide a reason to reject mediocre relatives, and a way to control disputes about responsibilities when the fairness and blame games begin.
A job description is also the foundation for a market-based compensation structure, which can control the inevitable favoritism complaints when family members are employed. Once the responsibilities and qualifications are in writing, you have the opportunity to find the market price for such an employee. This becomes the benchmark for compensation – the market, not whether you like me! Link provides market-based labor rates by job title. You can localize it by zip code.
Rates of pay can vary from the marketplace norm for clear reasons, such as including a family-member’s equity interest as part of their compensation, or additional responsibilities delegated to a family member. As long as the compensation is based on clear responsibilities and qualifications and their worth to other employers, you have a chance of resolving matters on a logical rather than emotional basis.
Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), and a SCORE Mentor. He can be reached at 630-512-0406 or firstname.lastname@example.org. For information on the scope of Tom’s activities, see www.tom-gray.com. For more on SCORE services, see www.scorefoxvalley.org.