Building a Family Business Style Company Culture

When family businesses treat non-family employees like second-class citizens, morale and productivity can suffer. Here are tips for not letting that happen.

Phillip Perry

“Welcome to the family business. Take a back seat.”

Does that sound friendly? Maybe not, but too often non-family member employees of family businesses hear something similar. They often get the short end of the stick. Some get shouldered out of important meetings. Others get passed over when promotion time rolls around. And the company parking lot? Family “outsiders” often get assigned the worst spots.

However it plays out, discrimination against non-family employees can be costly to the bottom line. Otherwise good workers start to exhibit low morale, engage poorly with customers, or even jump ship for the competition when they feel under-appreciated and ignored.

It all highlights a critical fact: People beyond the bloodline are vital to any family business. “Unless one has a huge family with members possessing the competences for every phase of the business, outsiders are needed,” says Ian Jacobsen, a management consultant based in Morgan Hill, Calif.

On the positive side, family operations grow and thrive when they take steps to make non-family workers feel like productive members of the community. “Successful family businesses, if they are going to grow, will depend on their ability to attract and retain non-family employees,” says Craig Aronoff, chairman of The Family Business Consulting Group, Chicago.

The integration industry is loaded with family-run firms. Ron Prier, who runs Bowersville, Ga.-based RPAV with CFO wife Angela, recalls having dinner during last year’s NSCA Business & Leadership Conference when he realized that the table consisted of four husband-and-wife teams from four different firms.

The question that any person responsible for running a family business integration firm must ask themselves is: Do non-family workers feel like part of the team — or like unwelcome intruders? If the latter, you can take steps now to create a more welcoming work environment.

It’s Business First

To start creating a better environment for non-family employees, take a fresh look at your core principles. “Determine what sort of organizational culture you want for your business,” says Jacobsen. “Are people to be respected and valued more for who they are in the family or for what they bring to the business?”

The first attitude is typical of what is called a “family first” organization. Such a business, says Jacobsen, is really “a social welfare organization for family members.” The second attitude characterizes the “business first” organization, which is “a real business that includes family members and outsiders.”

How you define your organization’s position between these two categories will determine a host of management dynamics — not the least of which is your treatment of non-family employees.

Familiar Faces: Family Businesses in the Integration Industry

Aaron McArdle is CEO of Normal, Ill.-based integration firm Zdi. He hired his brother Jay, who is now VP and CIO. Aaron recalls that in the early days he would get accused of defending Jay in work-related differences of opinion because they are brothers, though in reality it was because he thought Jay was correct. It can be a difficult road to hoe.

Perhaps it’s not surprising that Jacobsen, like most other family business consultants, advises creating a “business first” environment. “For the business to succeed over the long haul, people need to be valued more for their contribution to the organization than for their family ties,” says Jacobsen. “That requires establishing an inclusive culture based on personal respect and what each worker brings to the business and accomplishes.”

Hire as Needed

All this is not to say that a “business first” organization can never promote a family member to a top job. “Family members will be brought in from time to time and promoted,” says Jacobsen. “That is part of what makes up a family business. People who are not a part of the family need to understand this and appreciate it in order to succeed and not to be discouraged when this happens.”

Even so, family business counselors advise carefully preparing any family member who wants to join the business. A common suggestion is that family members earn their stripes elsewhere. Then if they arrive at the business when needed they have the background and experience to fulfill their duties.

“We advise family members earn their stripes by working three to five years outside the family business,” says John Joseph Paul, a Portland, Ore.-based family business consultant. “This allows them to bring something of value to the organization. Non-family employees are more likely to recognize that they have paid their dues.”

It can be smart also to obtain a degree that adds value to the company. People will respect the family manager if their qualifications for a job are unassailable.

Don’t hire a family member just to give the person a paycheck: There must be a valid position to fill.

“The business should make sure that the role the person is filling is really needed and that there is a general recognition of that need,” says Jacobsen. “Those non-family people who sought the job and did not get it should be assured that they are respected and valued and should be encouraged to continue at the business.”

Once the hiring decision is made, conduct a careful transition to the workplace. “This goes back to transparency,” says Wayne Rivers, president of The Family Business Institute, Raleigh, N.C. “Suppose daughter Sally got an MBA and worked for a corporate giant somewhere. Now she says ‘I might want to be back in the family business.’ If you bring her into the business, don’t let her arrival be a secret. Don’t just lock the door on Saturday and then let everyone see Sally working in her corner office on Monday. That just creates gossip and morale problems. Run her hire by folks first and see what their ideas are.”

Finally, says Rivers, hold young family members to the same standards as non-family workers. “If everyone is working 50 hours a week and Junior is working 35 that will make it hard for him to be respected by the workforce.”