Fiducia Partners Insights - Firing A Family Member From The Family Business

Firing A Family Member From The Family Business

November 7th, 2019 Posted by Business, Planning 0 thoughts on “Firing A Family Member From The Family Business”

Firing a long-term employee is difficult. Now imagine firing a family member. Unfortunately, this is sometimes necessary and while it will always be difficult, handling the situation in the right way will limit the damage, both to the business and the relationship. 

Prevention

To prevent this situation from arising in the first place would of course be ideal and when thinking about prevention I think family businesses should start with a clear policy detailing how employees, family or otherwise, can gain employment in the business, be promoted, how they must conduct themselves and what kind of behaviour would lead to review and termination. You might include a rule that no family member can work in the business unless they have had at least 5 years of work experience outside the business, or that they must hold a degree in a relevant subject. And even if they meet the criteria, asking family members to apply to the role like any other candidate allows executives to assess their readiness and aptitude for the role before hiring. As with any employee, you should have an employment contract and role description that their performance can be measured against. All this helps to put the emphasis on merit rather than family status. It must be clear that no family member is owed any position in the company and even once they have a position, they must work to keep it. If such values and procedures are established early on, if termination becomes necessary, they can be referred to and the termination process will be less personal and more procedural.  

In general, unless there has been an incident of gross misconduct, the behaviours that lead to a termination usually take place over a long period of time. Regular performance reviews will also help keep employees on track and prevent a termination from being a surprise to any party. They also provide a useful back-up if the termination is disputed. 360-degree reviews can also work well in a family business by helping to ensure objectivity that can be difficult when family members work together.

Termination

Even with a solid prevention strategy there might still come a time when a family member needs to be fired and while this won’t ever be easy, for the business or the family, it can be eased.

You might first consider damage limitation and your immediate thought will likely be about how you to keep the relationship intact but as the business leader it’s also important to consider the wider perception and impact of the termination to the company. Any major firing can disrupt a business and create fear among employees but firing a family member will do so ten-fold. That said, keeping a family member on when they’re not performing is also damaging by either making non-family employees feel that there is an unfair difference in expected performance or by lowering performance across the staff who follow by example. 

It’s also crucial to make it clear that the business and family are separate and that the reasons for which the person might be terminated do not affect their worthiness as a member of the family. In the business, the needs of the business must come first and firing the person from the business does not mean firing them from the family. Equally, avoid talking about the situation with other family members who are uninvolved in the management of the business. This will only cause people to take sides and increase tension around the subject.

The board of directors can be a useful tool to provide advice and support, particularly if there are non-family members on the board as it helps to ensure impartiality. However, the board should not be used as an excuse or proxy to carry out the termination. The final decision rests with the CEO and they should be the one to deliver the news, whether they’re a family member or not. 

However, before serving a termination notice it’s a good idea to offer the person an honourable way out by suggesting resignation. If it has reached the point where termination is necessary one would hope that all parties know the reasons and it is not a surprise. The conversation about resignation would include an honest conversation about performance and also reassurance that it doesn’t affect their status in the family. Having an impartial third person in the room, be that a board member or outside consultant, can also help to temper emotions and keep the conversation on track.

If the resignation offer is not accepted and a termination notice must be delivered, be as specific as possible and utilise evidence such as performance reviews. With clear, empirical reasons the person may recognise the reason to leave and do so without the family relationship being damaged.

In summary, the process of firing a family member will never be damage-free or emotion-free for any of the people involved or the business but being open and honest will go a long way to limiting the damage. 

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