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  • Katherine Bullock

The Family Charter – The pros and cons of working for family

Situations which are awkward in the normal course of business can be made exponentially worse where the odds of running into a disgruntled employee over Christmas dinner are high! These notes consider how the family charter can help.

Joining the Business Running a family business means deciding which family members can be employed in the business. Setting out specific requirements ahead of time can ensure that everybody is on the same page when it comes to seeking employment with the company. Ensuring that guidelines for employment are in place can also help motivated family members target specific areas of self-improvement so that they can contribute more to the business’s success.

"A charter can clearly set out that no positions should be created exclusively to employ a family member…"

Some family charters provide that family applicants cannot take entry level positions with the company. But what exactly is entry level? Positions with no requirement for prior work experience are rarely an issue when it comes to basic, low-responsibility roles. If so, this clause may be more accurately aimed at management positions. Employment requirements here can vary, but a requirement for a family member to hold from two to five years’ work experience in an unconnected company is fairly common. This ensures that new perspectives and insights make their way into the family business and avoids a high turnover of family members joining the business and leaving quickly when unrealistic expectations are not met. However, keep in mind this approach risks losing motivated and talented family members to competitors.

A charter can clearly set out that no positions should be created exclusively to employ a family member, safeguarding the financial health of the business. Education about the business itself compliments these rules and manages expectations – how many lawyers, accountants and so on does the company employ? Similarly, many family charters include clauses reminding the business that it cannot employ solely on the basis of family, but only the right candidate for the job. Tie-breaker situations require careful thought. Conversely, it is important to ensure this commitment to fairness does not result in family members always being the last to know about available positions.

Moving up the Ladder Once a family member has secured employment with the family business, the next concern is normally an expectation of a job for life with guaranteed promotions going forwards. The family charter could be written to allow for that. However, to ensure that family members pull their weight and rise only as high as merit allows, many charters are drafted to manage those expectations before they can lead to misunderstandings and bad relations.

Family charters commonly include a clause requiring that a family member will be subject to the same performance reviews as all other employees. This can be essential in ensuring that family members are providing value to the business – recognised through their remuneration - and in deciding which family members would make valuable contributions in roles with more responsibility and decision-making powers. For many family businesses, this may be more critical than equity between stakeholders; if the view is that family should comprise some or all of the Board, training and developing suitable internal candidates is essential.

To ensure impartiality and relieve pressure on family relationships, clauses are often included with the effect that no family member should be directly supervised or appraised by a parent or sibling. A similar clause with regards to the mentoring of these family employees may be valuable. A supervisor may be excessively lenient, or excessively harsh with the consequence that the family member receives insufficient training or is forced out of the business entirely. Suitable mentors or a parallel system of assessment for family employees can prevent this and is something to consider when writing up your charter.

Leaving the Business Having to fire an employee from your business is never pleasant, and when that person is family it is doubly important that nobody feels that the individual was treated unfairly. Including your expectations in the charter goes a long way towards keeping the peace.

A clause covering these points need not be intimidating, or directly reference the matter at all. What is important is that the expectations are set that family members will be judged on the same grounds as any other employee. Standards may even be set higher for family both in their work and in their general conduct and these cultural expectations can be explored whilst drafting. Nobody can claim that they were unaware of what was expected if they fail to live up to these standards.

Many charters make it clear that working for the business is not a birth right, but an opportunity. It is equally important to set out clearly the obligations of the business to the family employees – that they will be nurtured and encouraged by the business and given responsibilities appropriate to their abilities. After all, the family business ought to look out for all of its employees just as they should look out for it.


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