Trust as a Strategy for Managing the Complexities of a Family Business
The positive aspects of family business are often challenged with more complex relationships than are found in publicly traded organizations. These complexities are deep seated more than the frequently discussed taboo ‘nepotism’. To understand this complicated workplace environment, one may want to look at the various relationships that exist within a family business, and to identify strategies to overcome these challenges. Over the next couple months, I will discuss ways to build trust as the primary goal in these relationships.
Focusing on the relationship of leader-member exchange; co-owners with equal voting power but unequal reporting/hierarchy power; employee owners vs. non-employee owners; we’ll look at ways to build trust into each of these complex human dynamics.
Starting with the relationship of leader-member exchange (manager/direct report)…. If the leader is a family member (shareholder or not), the direct report will often feel there is less recourse (and often there is) if the leader is not effective or displays behaviors that are misaligned with the organization’s core values. Inverting that relationship, if the leader is a non-family employee and has family members as direct reports, the leader will often be uncomfortable addressing underperformance or poor behaviors through proper channels, for fear of upsetting business decision-makers – the family.
Expanding to impact to these two situations, team members who work with these leader-member dynamics, are often distraught because they don’t have a safe channel to explain, complain, and seek resolutions when a leader is underperforming in either of these cases. And THIS MAKES PERFECT SENSE. Of course, there is concern about blood being thicker than water, family gatherings with business chat peppered in, and business decisions being solidified outside business hours. In most family businesses, these decision-making practices are real.
TRUST as an OPTION: If a family business truly seeks to have the ‘best’ employee in each role, and wants each team to be fully engaged, highly committed to the customer experience, productive and maybe even high- performing, it may want to focus on this leader-member-team relationship. There are many options to consider for building trust within these complicated reporting structures.
Management Council - A family run organization may want to create a management council, made up of no family members. (P.S. it may not be made up of non-managers due to National Labor Relations Board regulations). This management team will include high-performing leaders at all levels of the organization as well as an employee relations specialist. They will agree to work confidentially and will agree to support the decisions as ONE, outside the meetings. Any employee, leader or not, may bring concerns to this council. The resulting decision – a pay increase, a promotion, a disciplinary action, a PIP, or coaching with a family or non-family employee, etc. – is agreed to by this council and is formally adopted just as a manager would do if the issues around family were not part of the equation. This promotes trust for managers, for non-managers, for those impacted by underperformance of family members.
Leader Accountability – many organizations are striving to create clear competencies and expectations around the various levels of leadership. Yes, the skills needed to be a C-suite executive are different than line managers working on the floor. Giving clarity to the competency around each level will support accountability – regardless of ownership. If this is applied to hiring, promotions, performance management, bonus decisions, and other decisions around a leader’s role and expectations, the process to hold all leaders accountable fairly, within culture of the organization is more aligned with trust and transparency, than arbitrary decisions. Consistent, equitable treatment is not only good for DE&I goals but for trust within the workplace.
360-degree Performance Reviews – I am not a fan of 360-degree reviews being used for performance management decisions (pay, promotion, etc.). But I am a fan of these feedback practices to support development. This includes creating professional development plans for employees at all levels of the organization. A 360-degree review to build intra-personal and inter-personal relationship and job specific skills. Of course, this feedback is also good for developing future leaders. When conducted right, having a voice to celebrate another’s work as well as an opportunity to share areas to develop may create trust in communication.
Hiring decisions are not easy when a family member applies and/or is recommended. How does a hiring manager/HR/Recruiter say no to a family candidate and choose another over him / her? Rarely have I seen a hiring manager choose another candidate. Even if the policy states family members will go through same process as non-family members, it is risky for this hiring team to say no to family. Never easy, and probably not great for one’s career to choose another candidate. Being transparent on the shareholders’ goal to develop and mentor family members is one way to help recruiters/hiring managers. There may be a clear policy that certain positions will be filled by family members to develop the next generation of working owners. This must be explicit before a hiring process is initiated. Another way to address family member candidates is to require family members to have higher level qualification (e.g. if a position requires 3 years’ experience, a family candidate may need 5; or if a bachelors is required for a position, a family candidate may need a masters, etc.). This may not seem fair to family, and some of the parents of these kids may take offense. But, if the goal is to create trust within the organization, start with bringing on family members who bring more to the table.
In next month’s blog, I’ll discuss building trust in the complexities of co-owners with equal voting power, but non-equal power within the hierarchy of the organization.
Dr. Patti Sullivan is a leadership coach, working with executives in diverse organizations. For over 15 years, she has assisted leaders in challenging their limited beliefs, cultivating key relationships, finding ease in leading high performing teams, and delivering exceptional results.