Here’s a story that you might be able to relate to.  (Names and some details have been changed to maintain anonymity.)

We have a friend (let’s call him James) who works for a family run business – Dad’s the CEO, Mum’s the bookkeeper/finance manager. One of their adult kids works in the business too; their daughter is the office manager.

The business is reasonably successful – it has good products that fit a niche in the market, and the business appears to be making a good profit year on end. James has been brought in as the Sales Manager, and he reports to Dad/CEO who has run the business for 25 years.

Sounds good so far, right, but what if we throw these details into the mix?

Mum/Finance Manager doesn’t have qualifications in Finance, and took on this role a few years ago when the business was small and the role only entailed bookkeeping. James is finding that clients aren’t receiving their invoices on time, which means that the business’ subcontractors and suppliers aren’t getting paid on time either. Financial reporting for the sales department is either incorrect or missing, making it difficult for James to do his job.  He has asked Mum/Finance Manager about the issues to which she was quite defensive, and Dad/CEO has since told him he is ‘overstepping the mark’ by asking these questions.

Daughter/Office Manager runs a tight ship. Unfortunately, when she’s under pressure (which is often), she is aggressive and intimidating towards staff and James is finding that people are coming to him as the only ‘non-family’ senior person with issues and complaints about her behaviour.

Does any of this sound familiar?

If you manage a small or medium business, hiring the relos might be very familiar indeed. There is certainly nothing wrong with hiring family and friends to work for you; after all, why else did you start this business if not to make it your own, and have more control over those types of decisions? And certainly if wife/daughter/Uncle John is the best person for the job, it can be a great thing for your business.

In theory.

But consider what James is facing on a daily basis: roadblocks to him performing his own job well, the weight of expectation on his shoulders from his colleagues who are too scared to make a complaint, and seemingly no path in which to take.  How do you think he feels (and the others in the business?).

The key with being Dad/CEO in this case is realising that business is business, and personal is personal. They need to be separated, even if your wife is a non-performing finance manager. And, yes, granted, that one is the trickiest of all, but the impacts on your business of doing nothing can be huge.

So, what would we recommend? Our focus is on Dad/CEO.

If you are a business owner or manager with employees working for you, it is inevitable that at some point you will have to deal with sticky people issues. These are delicate enough, and we know that they can become even more complicated when the people involved are actually your family and friends.

Dad/CEO needs to open his mind to running his business as a business, and seeing everyone as an employee first. Here are 6 things we would tell him he can do to help ensure a smooth working relationship for everyone in the business – family, friends, and other employees.

1. Don’t play favourites – consistency is key. This one is first because it is the most critical in ensuring harmony (and performance) at work. If your family and friends are employees, they should be treated that way. There’s no issue if Dad/CEO has a succession plan for Daughter/Office Manager, but he has to remember that if staff think that she is treated differently, there certainly will be. This is how resentment breeds. The key here is to remember that ALL employees need to be held accountable to the same policies, standards,
   and workplaces requirements – particularly when it comes to aggressive behaviour.  So, no playing favourites.  Secondly, (are you listening Dad/CEO?) other staff must be able to speak up if your son/wife/brother is not performing or is behaving outside the standard
   that everyone else is held to. You’ll only do more harm than good if your golden child is untouchable, so put your relationship to the side and be their manager first, their parent/sibling/friend second.
2.  Have clear policies in place.  We also want to mention contracts and position descriptions. Having clear, documented guidelines to refer to at all times is key when managing a family member or friend. It is these documents that will form the basis of the working
   relationship; they will set expectations right from the word go. They also help to de-personalise things when there is an issue; for example Dad/CEO could address the behaviour issue with his daughter/Office Manager by saying ‘it’s important that you understand our code of conduct, and the way we manage our staff’ rather than ‘people are scared of you and don’t like your attitude.’
3. Set boundaries. What’s work, and what’s not, need to be clearly distinguishable and defined. You should be able to clearly differentiate between work discussions and social chats. This works particularly for when friends are also employees. Some good ways to do this include:
   i.     Introduce structure to your work discussions; specify regular times, use the same meeting room, and set an agenda. These meetings should have an entirely different tone to your at personal relationship.
   ii.     Avoid socialising in the office; if the two of you have a drink together every Friday after work, stick to your usual watering hole rather than getting in the habit of having drinks in the office. It can blur the boundaries between work and friendship.
   iii.     Avoid discussing work in a social context. This can be a hard one to stick to but it’s worth making an effort to do so in order to maintain boundaries. Dad/CEO and Mum/Finance Manager might find these difficult at first, but minimising the crossover between work and personal is critical to success.
4. Establish a clear performance management system. Performance management and coaching is a fluid process; it should be happening all the time. However there are two occasions where it becomes a little more complicated. The first is during the annual review process when you have to give employees feedback on their performances and set goals for their development. Sometimes this feedback is about areas for development, which can be difficult to communicate to a family member or friend. The second occasion here it can be challenging is when they require formal performance managing. This may be due to poor job performance or, perhaps even trickier; it could be in response to a harassment complaint. You may be required to investigate an allegation, or issue a warning.  Whenever you are managing an employees’ performance it is important that there is consistency amongst all workers, as well as clear written policies to support decision making. It is a classic mistake that occurs often in small businesses; people being allowed to under-perform because they’re friends with the boss. It breeds resentment and distrust among your other employees, not to mention the brand damage to your business. Ensure that you have a clear performance management system in place that includes KPI’s, objectives and incentives; these are the tools that will hold everyone accountable.
5. Be transparent. This one is two fold.  Firstly, it’s about being transparent with your family member or friend, right from hiring, about your expectations of their performance and working relationship. This might be tough for our Dad/CEO, as he can’t go back in time, but there’s no time like the present to start setting boundaries and being honest.  Secondly, it’s just as important to be open and honest with your other employees. If you’re hiring someone who is related to you, tell your staff. Also, let’s say our Daughter/Office Manager is going to be trained in all aspects of the business with the intention of eventually taking it over, that’s OK too. But there is no point making a secret of it. People will not take kindly to feeling like they have lied to, so in your business it’s critical that succession planning is as transparent as possible.
6. Finally, be prepared to make the tough decisions. This is the crunchy stuff for James’ boss.  Firstly, if you decide to hire a family member or friend, go into it with your eyes wide open. Ask yourself – ‘if it comes down to it, could I performance manage this person? Could I terminate their employment if I had to?  Will our personal relationship be able to survive the working relationship?’  If you can’t confidently answer yes to these questions, think carefully before hiring this person.  Or if it’s too late and they are already working for you, have a conversation and set the boundaries (see Points 3 & 4). Working with family and friends may have its pros and cons, but it’s not impossible. It’s just about having clear processes in place, so that everyone in the business knows what is expected of them at all times. And in our Dad/CEO’s case, we should cut him some slack – we know that when you’re running a smaller business it’s easy to focus on the day to day work, and he doesn’t know what he doesn’t know.  But managing this stuff really is critical. The hardest part is starting. After you have the structures in place, it’s easy to update them as your business grows.

If you are James’ boss and want some help in having the difficult conversations and coming out of it with your relationship AND business in tact, give us a call.