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November 2023 < Back

Family Employment Policy

When the Business grows at a rapid pace and the size of the family begins to increase, ambiguity on family employment matters can become a source of potential conflict. Therefore, arriving at a comprehensive Family Employment Policy (FEP) is important to ensure harmony and nurture family talent for the business.

The FEP needs to be articulated as a structured set of guidelines within the Family Constitution. It facilitates the collective establishment of rules, expectations, and criteria for the employment of family members. This process is essential for maintaining an equilibrium between family aspirations and the necessities for the long-term growth of the business.

Benefits of Family Employment Policy:

Despite the numerous benefits promised by the FEP, care needs to be taken to ensure that the policy is flexible enough to accommodate justifiable modifications and does not end up becoming an arduous, time-consuming activity for the family.

Steps for creating an effective Family Employment Policy (FEP)

1. Define Objectives: Determine the primary objectives of the FEP, such as ensuring fairness, maintaining professionalism, and facilitating succession planning.

2. Legal Considerations: Consult legal experts who specialize in family business matters to ensure that the FEP complies with relevant employment and family laws.

3. Stakeholder Buy-in: Involve all family members, including those who are actively involved in the business and those who are not, in the development of the FEP. Their input and acceptance of the guidelines are essential for success.

4. Set Clear Employment Criteria: Clearly outline job descriptions for critical management roles and the associated eligibility criteria. Evaluate the family executives for their contribution in the business and aligning appropriate compensation, incentives, perquisites and promotion opportunities.

5. Succession Planning: Detail the process of succession planning, specifying how leadership roles will be transferred and who is eligible for these positions.

6. Regular Review: Periodically review and revise the FEP to adapt to changing circumstances, including business growth, shifts in leadership, and new family members entering the workforce.

Such an approach is fair to both family and the business. It ensures that the most qualified person is hired for the job, regardless of their family ties. It also shows that the family business is committed to professionalism and meritocracy.

Insights from a Survey on Gaps in Family Employment Policy

Rob Lachenauer (Managing Partner of Banyan Global) conducted a survey with 59 respondents in 2021.

Setting Entry Standards: 62% of family businesses set clear entry standards, such as educational requirements and work experience, for family members entering the business. This has helped manage expectations and reduce disagreements.
Career Path Clarity: Only 21% felt they have established clear career paths for family members within the business.
Developmental Feedback: Only 41% felt that family members employed in the business received valuable developmental feedback.
Compensation Policy: Less than 50% have an effective compensation policy in place, indicating that compensation remains a significant source of conflict within family businesses.
Dealing with Unsuccessful Family Members: Only 20% of respondents have a defined approach for dealing with family members who are not successful in business. This highlights the importance of putting in place clear exit policies.

Involvement of Extended Family and In-Laws

Family businesses often face the question of whether to involve extended family members and in-laws in the business. Cousins, aunts, uncles, in-laws etc. can bring diverse skills and experiences to the business. These fresh perspectives can add value and innovation, helping the business stay competitive. They can offer high commitment and help to scale operations. When high number of family members are employed in the business, extra care needs to be taken to manage and proactively mitigate the risks of conflicts and power struggles.

Families may differ in their philosophy about involving family in the business. Some families tend to completely prohibit family members from working in the business and only focus on the Governance of the business. On the other hand, there are families that encourage family talent but ensure certain minimum conditions are met, such as minimum education requirements, prior work experience, and age.

Table 1: Illustration of Family Businesses with Family Members in Key Management Positions

Company	Family	Current CEO
Hoshi Ryokan	Hoshi Family	Zengoro Hoshi 46th Generation
Lanificio Fratelli Piacenza	Piacenza Family	Carlo 13th Generation
Ditta Bortolo Nardini	Nardini Family	Giuseppe(6th Gen) & Cristina (7th Gen)
Banque Pictet & Cie SA	Pictet Family	Marc Pictet (8th Generation)

Table 2: Illustration of Family Businesses run by Professionals

Company	Family	Current Chairman
Ford Motors	Ford Family	Jim Farley
Ralph Lauren Corporation	Lauren Family	Patrice Louvet
Walmart	Walton family	Doug McMillon

Case Study on Family Employment Policy:

SABIS –Family Business Employment Policy

SABIS® is a global education management organization that is backed by over 135 years of success in educating students and preparing them for the future. The name SABIS represents an acronym, named after its founders - Saad and Bistany. “SA” from Saad and “BIS” from Bistany.

In 1886, the inaugural school of the SABIS School Network was established in Lebanon. By August 2007, 25 family members were part of the SABIS enterprise. Currently, it has an active presence in 20 countries on five continents. Schools in the SABIS® Network educate over 70,000 students and implement a proven, proprietary system.

A brief extract of their family employment policy is explained below.

Key Philosophy / Principles:

The family focuses on the organization's best interests over family needs by prioritizing qualified individuals for SABIS, regardless of the family relationships. Employment is based on merit. Entitlement is not encouraged and there is an obligation for the family members to join the business.

Family employees are treated the same way as non-family professionals with respect to the employee policies spanning across hiring, performance management, compensation, promotions, and exit.

Prerequisites for Family Employees

A university degree (bachelor's or higher) from an approved university is mandatory.
3 to 5 years of external work experience is preferred but not always required. Family members get 6 to 12 months of training after joining the business.

Family Employment Guidelines

Family members interested in working at SABIS need to inform the President/CEO and fill out the standard application. If they meet the prerequisites, they undergo an interview and selection process. The Board makes the final decision on hiring family members.
Jobs for family members are not guaranteed. If a family member applies after 40, the Board checks their career and reasons for not joining earlier before deciding.
Family employees receive compensation and benefits based on their job, qualifications, and performance, like the non-family employees in similar roles.
Regular performance review feedback is provided to family employees like the other professionals. A personalized "Development Plan" is created for each family member that includes training, education, coaching, mentoring, and special projects.
Promotion decisions for family members involve recommendations from supervisors or management, with the Board making the final call.
Grounds for dismissing family members include poor performance and unacceptable conduct. If dismissed, a family member does not get reconsidered for employment. If a family member leaves voluntarily, they may return once with Board approval and if a suitable position is available.
Spouses of family members interested in joining SABIS go through the standard hiring process. The Board makes the final decision confidentially.
Family members will not be supervised by other family members. Board approval is needed for exceptions, especially in senior roles. Couples can't work in the same department.
Young family members interested in SABIS are encouraged to do short internships. However, internships don't replace the required training for a full-time position.
Continuing Education: Standard company policies apply to education and professional development of family employees. For extra financial support, family employees can request it from the SABIS Family Council through the President/CEO. The Family Council decides based on the request.

Source: IFC Family Business Governance Handbook

There is no right answer to an employment policy. The best policy for your family will depend on your specific philosophy. However, writing the policy is a valuable process that can help to ensure that your family business is successful for generations to come.

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Aiswariya

AMARELLI - More than 290 years old Family Business in Perpetuity

Experiencing succession in PEACE

Thank you for your interest in PFBI Connect. Each month you'll receive a concise rundown of tips, trends and analytics on topics that can leverage the best of both family and business.