Recruiting and retaining bright young executives to assume leadership roles in family businesses has been a continuing dilemma in many maturing family enterprises. Several steps can be taken to ensure successful employment experiences for nonfamily employees, whether their role is to fill gaps between the founding generation and the younger generation, or to fill a specialized need that family members cannot. Although the categories below are not all-inclusive, they are key to making nonfamily employees feel comfortable with the company.

Attitude and Acceptance
Be careful not to create a wall that excludes nonfamily members from participating in the triumphs and setbacks of  the enterprise. Recruiting people to the inner management circle should be based on their qualifications and experience, not on their relationship to the family.

People often leave companies for one of three reasons:

    1. Feeling insecure about their future with the company,
    2. Being excluded from management decisions and not being able to influence company actions, or
    3. Not receiving feedback on their job performance.

It’s important for family business owners to develop an atmosphere that provides these key elements.

Empowerment
It is critical for owners and managers of family businesses to empower nonfamily members with the authority and decision-making responsibilities that would accompany their roles in nonfamily businesses. There have been instances where nonfamily members have been given the authority to reassign or terminate lower-level family member employees. Though this may be difficult for the owner, it must be allowed if the family business is to stay competitive with larger, professionally run corporations. The astute family business owner will realize that this is the best course for the business and for the morale of the nonfamily employees.

Paying Market Value
If the family business owner wants to attract and keep outstanding employees, the nonfamily employee must be properly compensated. Serious morale and business problems can arise when family members are paid more than nonfamily members in similar positions, especially when their education and experience don’t warrant a higher salary.

Rewarding Equity
Nonfamily members can be given stock and made shareholders in a family business. When the contributions and importance of an employee warrant it, giving a nonfamily employee equity in the company may be the only way to keep that individual. One of the ways to keep key nonfamily employees happy is to issue phantom stock or stock appreciation rights. This method allows employees to share in the company’s growth without investing and without the benefit of permanent ownership. Vesting schedules can also create incentives for executives to stay with the company.
Nonfamily Employees Key To Success

You cannot assure your company’s success and, possibly, survival without key players working in harmony with the controlling family members. Bringing nonfamily members as key employees in your family business may be your only path to success

An Additional Article for Small Businesses

Many maturing family businesses struggle to recruit and retain bright, young executives to assume leadership roles in the company. While these businesses are trying to “keep it in the family,” they often undercut their own success.

Fortunately, you can take several steps to ensure successful employment experiences for nonfamily employees, whether their role is to fill gaps between the founding genera-tion and the younger generation, or to fill a specialized need that family members cannot. Although the categories below are not all-inclusive, they are key to making nonfamily employees feel comfortable within the company.

Nurture Acceptance
Be careful not to create a wall that excludes nonfamily members from participating in the triumphs and setbacks of the enterprise. Recruiting people to the inner management circle should be based on their qualifications and experiences, not on their relationships with the family.

Family business owners must develop an atmosphere that provides these key elements. People often leave companies because they:

1. Feel insecure about their future with the company,
2. Are excluded from management decisions and can’t influence company actions, or
3. Don’t receive feedback on their job performance.

Empower Nonfamily Members
Family business owners and managers must empower nonfamily members with the authority and decision-making responsibilities appropriate to their roles in nonfamily businesses. You may even give nonfamily members the authority to reassign or terminate lower-level family member employees.

Although you may find this conferring of power difficult, it must occur if your family business is to stay competitive with larger, professionally run corporations. An astute family business owner realizes that this is the best course for the business as a whole and the respective morale of your nonfamily employees.  Our solution is to develop management Teams.  Teams provide a system that enables family and nonfamily members to participate and execute.

Pay Market Value
If you want to attract and keep outstanding employees, you must properly compensate them. Serious morale and business problems can arise when family members are paid more than nonfamily members in similar positions — especially when their education and experience don’t warrant a higher salary.

Reward Equity
You can give nonfamily members stock and make them shareholders in your business. When the contributions and importance of an employee warrant it, giving a nonfamily employee equity in the company may be the only way to keep that person. One way to keep key nonfamily employees happy is to issue phantom stock or stock appreciation  rights. This method allows employees to share in the company’s growth without investing and without the necessity of permanent ownership. Vesting schedules can also create incentives for executives to stay with the company.  Another method, which is included in the succession planning area, is the use of ESOP's.  Employee Stock Ownership Plans are commonly used to keep valued employees and save on Taxes for the Owner.

Make Nonfamily EmployeesYour Key to Success
You cannot assure your company’s success and, possibly, survival without key players working in harmony with the controlling family members. Making nonfamily members key employees in your family business may be your only path to success.

If you are thinking of adding nonfamily members to your management team, you’ll find it helpful to discuss the matter with a business advisor. We can assist with recruiting and screening candidates, integrating the person into your business, and developing a management and compensation system that keeps both family and nonfamily employees happy and productive.