Should we hire in-laws… or not?

by Mike McGrann, Executive Director
S. Dale High Center for Family Business

This is an important question – one that most family business owners struggle with at some point in the life cycle of their firm. Some families say yes. Some say no.

However, a simple yes or no doesn’t apply to the broader question for family ownership teams: “How will we manage the influence of our in-laws?” The answer should be considered from three perspectives:

1. As a potential employee of the business
2. As a potential shareholder
3. As a stakeholder in the family firm
   

As a Potential Employee
Most of us would agree that highly qualified in-laws can be productive and loyal employees and that it would be a loss to not hire them simply because they are married to family members. However, the decision to hire in-laws can dramatically impact the organization and the family and should be made within the context of a discussion at the ownership level to define the “rules of the game” for in-laws. A Family Member Involvement Policy clarifies how the family and the business will interact. Among other things, such a policy should define the process by which family members and in-laws are:

• Hired
• Evaluated
• Promoted
• Fired

The boundaries for in-law employees should be very clear: “You will be treated like any other employee.” In addition, they must be willing to accept their place within the organizational hierarchy – and to respect this hierarchy at all times, which means a deliberate conversation prior to hiring.

The reality is that treating an in-law (or working family member) like “any other” employee is extremely difficult. A Family Employment Committee can ensure that the hiring, evaluation, promotion, and (if necessary) firing of in-laws (and family members) occurs according to norms established by the company.

As a shareholder
A second consideration is whether a family will allow in-laws to own stock in the company. Most families we know prefer to limit ownership via stock restriction agreement to direct descendents (or adopted children) of the founding family member.

As a stakeholder
In-laws have an important and influential roll as stakeholders in the family business system. Their influence (positive or negative) comes via their relationship with the family member. They should be managed by the family business system leader. In addition, the policies that family members establish – such as the Family Member Involvement Policy - impact their children. Thus, they should be informed of what is happening in the system.

If your family has created a Family Member Involvement Policy, share it with the in-laws and ask for their input. They do not have the right to approve or change the policy, but their voice / opinion should be considered. Why? 1) Because asking their opinion makes them feel a part of the process and builds a relationship with them, and 2) because the policy will impact their children.

Families should include spouses in part of a family meeting at least once a year. Possible agenda items for a meeting with in-laws could include:

• A brief and general overview of what has happened in the business over the last year.
• A brief description of the plans for the coming year.
• An update on the creation of any family policies or structures. (Family member involvement, perks, vacation, etc.)
• Other topics related to the family.

A presentation from a local expert on an issue of interest to the group (Parenting skills, communication skills, building healthy marriages, estate planning, etc.)

Mike’s Bottom Line
Give in-laws what they deserve: information and a voice (not a vote). In doing so you will build trust, and hopefully, ensure that their influence on the system is positive.
Do you have a Family Member Involvement Policy in your family business? How has it worked for you? Feel free to leave a comment or take our poll in the sidebar.