Small Business Techniques

Using Policies to Manage Family Employees

by Tom Gray | on Jan 01, 2012 |  Comments

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.

Job Descriptions

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.

Market-Based Compensation

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 tgray@tom-gray.com. For information on the scope of Tom’s activities, see www.tom-gray.com. For more on SCORE services, see www.scorefoxvalley.org.

 

Management Techniques for Family Employees

by Tom Gray | on Jan 01, 2012 |  Comments

Family employees can be a problem as well as a blessing. See Small Business — Employing Family and Small Business: Employing Family – Techniques That Work. Establishing policies makes sense even for a small business. Address the problem once, write down the answer as a policy, and move on. Aside from job descriptions and a market-based compensation plan, other useful techniques include objectives, accountability, shared values, and even a major project approval process.

Agree On Objectives

Imagine you employ your spouse, and he or she does the finances. You want him or her to produce the end-of-month reports by the fifth business day, not the fifteenth. When you ask for that, the response is a litany of how he or she spends their time.

What is missing here is a list of goals to be accomplished, agreed to by both parties at the beginning of the year. Your finance person needs to deliver the reports when you need them.

They have to figure out how to do that, rather than telling you their problems and, by implication, asking you to manage their time. This is their problem to solve, not yours. You care about the deliverable, not how they manage their time.

The tool is agreed goals. Without them, there is no basis for the subordinate’s accountability.

Write Down the Company Values

The same idea can take the form of behavior expectations, commonly called “values”. These are “the way we do things around here.” Examples: we value teamwork; our integrity is never compromised; we deliver what we promise, to each other as well as to customers and suppliers; our behavior makes our colleagues proud.

It may seem silly to write down behavioral expectations, but it is most important when you employ family. Why? Because family members have a history of behavior outside the workplace, and they may expect to behave the same way at work – after all, you know them.

They may also believe there are no consequences for inappropriate workplace behavior if one is family, setting up a double standard when non-family employees are considered. The best way to handle this is a set of standards communicated (hence, in writing) before any problems arise. Like goals, these provide a basis for accountability and consequences.

Major Project Approval Policy

One other “policy” could serve small business well: a “major project approval policy.” A major project is usually a large investment, such as a marketing program or a new machine or moving the business. By thinking in advance about what would justify taking such a risk, you improve communications with any co-owner or family member who may be affected by the decision.

Prior definition of decision criteria can also help you as the decision-maker, bringing a degree of dispassionate logic to what may be an emotional issue, with hope warring against fear, or courage facing down prudence.

Problems with Policies

For a small business owner, the unfamiliar behavior here is thinking about potential business problems before they arise, and writing down a framework of expectations, or solution criteria. These owners normally don’t feel they have enough time to handle immediate problems, let alone anticipating issues that might come up in the future!

Also, they are not comfortable committing to written policies, because they know the future brings change and they will need flexibility. They might see policies as an obstacle to managing their future, rather than a tool for organizing their chaotic lives.

Managing employees is not easy, and family employees redouble the stress involved. Establishing and enforcing policies is the key to success: qualifications, job descriptions, shared values, objectives, accountability, market-based compensation, and a major project approval process.

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 tgray@tom-gray.com. For information on the scope of Tom’s activities, see www.tom-gray.com. For more on SCORE services, see www.scorefoxvalley.org.