Career Opportunities

The High-Tech Career Handbook

A weekly ComputorEdge Column by Douglas E. Welch

All in the Family

October 27, 2000

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Imagine this scenario…one day, out of the blue, your brother or sister comes to you with a new business idea. This might be some hot, high-tech, Internet new economy startup or opening a new retail establishment at the local mall. Regardless of the type of business, there are a few issues that are very important when you contemplate going into business with a family member. This week I will offer a few ways to insure that your new partnership doesn't put undo strain on your family and vice versa.

Two separate relationships

As cold as it might sound, even when you are in business with a relative you must do everything you can to divorce the business relationship from the family relationship. Any decision that is made simply because of family connections is deadly for a business. Business decisions should be made because they are good business, not because of familial responsibilities. Nothing will move your company to bankruptcy more quickly then ignoring this simple rule. More importantly, everyone must agree with this concept from the beginning. If they can't, you are better off partnering with someone who does, family or not.

Who's in charge?

Another gray area in family businesses is the concept of who is actually running the company. Long before the first contract is ever signed everyone involved needs to understand their role in the business. There are many ways of arranging the power structure of a business. For example, you might be CEO (chief executive officer) while you sister is CFO (chief financial officer). You control the production of your products or services and she controls the money. That said, it can be difficult to have a family member in a truly subordinate role to another family member. This often stirs up resentment very quickly. One possible solution is to have family members on the board of directors or as investors, but not actively involved in day-to-day business.

Another scenario involves trading off on leadership. This is the way that my sister, Denise, and I arrange it when we work together. Denise owns a computer training and consulting firm in Palm Desert, California. When she needs me to perform some work for her, she is in charge. I abide by her rules and act as any other employee. Conversely, when Denise is providing a service for one of my projects, I am in control. She then agrees to meet my deadlines and perform work to my satisfaction. While it can be difficult to be both employer and employee, as long as everyone understands and agrees to the arrangement up front it can work out well for everyone.

The biggest mistake

One of the biggest mistakes that can be made in any family business is allowing family members to ignore the rules and requirements that other employees are required to observe. Time and time again I see companies where family members arrive late, take long lunches, ignore dress codes, utilize company resources for personal projects and generally behave more like owners than employees. While this might suit the family members, it quickly raises the ire of non-family employees. It can be very difficult to retain employees in an environment like this. No one likes to feel like a second class citizen. When a family member is hired at the same level as a regular employee they must agree to abide by the same rules and requirements as any other employee. This means they can't shirk difficult work, or pass their workload off to another employee. Eventually the word will get out and your pool of employees while dry up, leaving you to rely only on family members for your staff.

Being in business with your family can be another rewarding aspect of family life as long as you insure that everyone involved -- whether they become an investor, a director, a principal executive, a manager or simply an employee -- understands that business is business, family is family and any confusion of the two will lead to failure. Addressing these issues before the company is formed will help you to build it on a firm foundation so that the family business becomes as sturdy as the family homestead.



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