Key Rules for Running a Family Business - FamilyEducation

Key Rules for Running a Family Business

If you own or are employed by a family business, learn these key rules to ensure that the business -- and your career -- run smoothly.

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Relatives working in a family business can prevent resentment, rancor, and ruin by setting down a series of rules -- and then following them. Here are five key rules to ensure that your family business operates as smoothly as possible. (By the way; it may not be too late to set these rules into motion, even if the business is already long established.)

Don't Go There

In a family-managed company, relatives are always "top management," whatever their official job or title. Remember, on Saturday evenings they're the ones schmoozing around the boss's dinner table.

Family Matters

The rules set forth for the family business depend on the family's philosophy, mission, size, industry, and resources available. Those guidelines must be consistent with the family's values.

Don't Go There

In-laws may act too tough on each other so as to not show favoritism or act too wussy because of the relationship, especially during trainee time. QED: Try not to have in-laws train in-laws.

The Rules:

  1. Have set rules for hiring all employees -- especially in-laws.

  2. Make sure everyone knows the rules. The rules are not intended to be family secrets, like Uncle Joe's Kathie Lee-and-Frank moment, your mother-in-law's tendency to nip at the cooking sherry, or your brother-in-law's thing about ladies' underwear.

  3. Apply the rules as fairly as possible to every in-law. (Let's not kid ourselves; in-laws are usually going to be treated differently from the hoi polloi. And "differently" better mean "better" or you'll be hearing from Aunt Edna in the morning.)

  4. There must be a way to adjust the rules to deal with changing business situations -- like a decision to stop manufacturing slide rules, black-and-white TVs, or Edsels.

  5. Everyone must be notified if the rules change. (See rule #2.)

    What factors should you consider when you write the rules? Here are some of the most important ones:

    • When and under what circumstances can in-laws enter the business?

    • What experience and education are required?

    • Will they fill a vacant position or can a position be created for them?

    • Do they need to be a certain age to be employed in the business?

    • Do they need to retire at a certain age?

    • Is re-entry possible after a voluntary or involuntary exit? (Due to childrearing, attendance at graduate school, jail time, liposuction, argument with family members, etc.)

    • Is part-time work permitted?

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