Should You Fire A Family Member From The Family Business?

In a family business, separating the family from the business can be the biggest challenge. We spoke to Dr. Denise P. Federer is a speaker, consultant, coach and psychologist in Tampa, Florida to get her insight into the issue associated with potentially having to fire a family member from the family business. Here are her thoughts on the matter.

A few weeks ago, I was watching a romantic comedy called ‘What Happens in Vegas’, starring Cameron Diaz and Ashton Kutcher. While I don’t normally get ideas for an article from run of the mill Rom-Coms, the opening scene of this movie hit home, when Kutcher’s character Jack is fired from the family business by his father. In the film, ‘Jack’ is an affable guy who likes to goof off—which is not good for business and leads to his firing. Shocked and dismayed, he heads to Vegas with a friend where, as you might imagine, hijinks ensue. But what actually happens in Vegas in this movie isn’t important. The setup for Jack’s trip there is.

In my work as a family business consultant, the issue of family members not ‘pulling their weight’ comes up often. Deciding what to do about it is one of the most difficult issues a family business will ever face. Should you fire a family member? The short answer is—it depends.

There are a variety of factors at play when deciding what to do with a family employee who is not getting the job done in the manner that the business requires. Far from a simple yes or no, your decision should come only after careful consideration of the facts surrounding the case—including the following factors:

Your Family Business Model

I strongly believe in the importance of having a family business model, and how you construct your corporate governance around the model used.

There are three main models for family businesses:

• The Family-First model, in which the family’s happiness and sense of togetherness should come before everything else. In this model, differences in the quality and degree of family members’ contributions to the business will not be fully recognized.

• The Business-First model, in which all decisions are based on what is best for the company, and the family needs become secondary. The model rewards hard work, promotes shared success, and is driven by growth and individual opportunities to succeed.

• The Family Enterprise model, which splits the difference and creates a balance between Family-First and Business-First models. All decisions should balance family satisfaction and the economic health of the business.

In the Family-First model, firing that family employee would be a last resort, only after all other avenues are exhausted. In the Business-First model, firing the family member would likely be in the cards (dependent, of course, on how severe the issue is). In the Family Enterprise model, the decision essentially comes down to what the corporate governance says. Choosing one of the three models for your family business will help you create your corporate governance, which will easily lay out what your decision should be ion any of these situations. The importance of corporate governance cannot be understated, and if you’re currently in the position of deciding whether to fire a family member, you’re probably nodding right now.

Your Values

As the leader of your family business, what is important to you? Do you consider yourself more of a parent/sibling or more of a boss when dealing with the family member in question? Blood is thicker than water, but is it thicker than your business needs? If you don’t have a family business model, you’ll have to go on your values and make the best decision that satisfies them.

The Developmental Stage of Your Business

If your business is growing and you plan on bringing in outside leadership whom you know will not tolerate certain issues with family employees, the calculus on your decision changes. If you’re an established family company, your best bet may be to find a better fit within the company for the family member.

Your Culture

The culture of your family business is incredibly important. If you have a family employee who is damaging that culture, you have a problem. But not every instance is that severe. Look at how this person affects others in the company, and whether they are representing the values of the company. A lack of technical expertise can be fixed. But when someone is poisoning the culture, you may find that your hand is forced.

No family business leaders really want to fire a family member. And in most cases, it should only happen after all other options have been exhausted. For instance, if a family member simply lacks the technical expertise, but is otherwise a hard worker and positive influence on the culture, a move to another department—or the creation of a new position—can solve the issue. The bottom line is that you must be honest with yourself and your family.

That means having the tough conversations that most family businesses avoid. Difficult as they may be, those conversations can result in a solution that works for the family, the family employee and the family business.

About the Author: Dr. Denise P. Federer is a speaker, consultant, coach and psychologist in Tampa, Florida. She brings over thirty years of experience to her work with individuals, executives and family businesses providing consulting and performance coaching.