Managing talent in a family business: 7 challenges and 4 solutions

Every business is struggling with talent these days.

It’s hard to find employees – and it’s hard to retain employees.

For family businesses, it’s even harder.

Why?

Because when you combine family + business, you get some unique challenges that non-family businesses don’t face.

Here are the 7 biggest.

1. Treating family employees differently – the established “old guard”

A lot of family businesses get started from ground level zero – and begin with family members holding all the jobs.

As they grow and expand, they start to hire non-family staff.

When family member employees are treated differently than non-family members, it creates a big problem. You’ll find it hard to hire people – and hard to get them to stay.

This is especially a problem in the executive ranks.

2. A glass ceiling for non-family members

As the business grows larger, it offers executive roles and opportunities for advancement.

Many professionals are hesitant to come into these fast-growing family businesses because there’s a perceived glass ceiling.

For example, there may be an opportunity to come in as a Vice President of Finance, but if the candidate believes that the CFO position is being reserved for family member, that creates a glass ceiling that deters high level talent from coming into the business.

3. Integrating new hires with legacy employees

This situation can get very contentious.

The new hires may feel unsupported and isolated.

Tenured employees may feel like they’re getting passed over. “I’ve been here for 30 years, why are you hiring somebody ahead of me? They don’t have the loyalty like I have!”

4. Family intervening in established hiring processes

You establish a robust hiring process with a methodology for recruiting, vetting, making job offers, etc.

Then suddenly, a family member parachutes in and says “Hey, I want you to hire my buddy. He’s a good guy! We don’t need to put him through all that bureaucracy.”

If you bypass your process, the rest of the employees will see that and lose confidence in your processes.

5. Managing family talent

Do your family member employees get performance reviews? What happens when a family member is underperforming or causing problems?

Managing family talent can be tricky and emotional. We’ve noticed a tendency for family business leaders to ignore these problems to avoid confrontation.

6. Talent succession

This is related to the “glass ceiling effect” mentioned earlier but applies at all levels of the organization.

If employees don’t feel like the family employees and the non-family employees will be treated equally when it comes to promotions, you’re going to have disparity that will lead to having a hard time recruiting and retaining talent.

7. Recruiting talent

Many employees in institutional businesses and large corporations yearn for the kind of culture that a family business can offer.

Family businesses tend to invest more in their people and want to keep them long term. This can be very attractive to potential hires.

However, when you consider things like the glass ceiling, or the divisions between new employees and tenured employees, recruiting talent can be a real challenge.

So what do you do?

We propose the following 4 things.

1. Decide on your business philosophy: will you be a family-first business or a business-first family?

This decision is foundational to all aspects of your business, but probably MOST relevant when it comes to talent.

If you choose to remain a family-first business, know that you will always have issues attracting and retaining great talent.

If you make the commitment to being a business-first family and anchor into that decision, you can minimize or eliminate those issues.

2. Establish a process for family talent and put it in your Family Constitution

Many times, the family doesn’t understand what their role is.

So, they unintentionally disrespect the process that you built for recruiting or hiring or compensation.

Embedding this process in your Family Constitution clarifies it for everyone and creates a governance document that helps lead family businesses from one generation to the next.

3. Define the source of value the family brings to the business

Families don’t always ask themselves: “What’s the value I’m bringing to the business? How is the family a strategic asset?”

This chart lays out 4 specific models for how the family can add value. Note that you can be a hybrid of more than one.

4. Install a talent management plan

Your talent management plan needs to cover these four critical components:

• Recruitment
• Performance Management
• Learning & Development
• Compensation Management

Once you have this in place, continue to improve it as you change with the times.

Talent management is continuously evolving, so you need to keep it relevant and aligned to your long-term strategic needs.

Family businesses can use their culture and their talent management plan as a competitive weapon to attract and keep talent

By following the guidance in this article, you can overcome the unique challenges with managing talent in a family business and position your company as a great place to work and build a career.

If you’d like further information, check out our webinar recording on this topic in our learning library (sign up below) – or book a call with one of our advisors. We’d love to support you!