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Sometimes Less Really Is More

This week we’re looking at a topic that’s actually pretty common with family enterprises, but that most people don’t like to discuss.

We’ll get into some tricky areas where family members all work together, and even though that can be great when it works well, when it causes problems, those problems get bigger in a hurry.

The expression “addition by subtraction” is pretty self-explanatory, but just in case it has eluded you, I’m talking about making an improvement in something (the business) by actually removing something (or someone).

In that specific context, I think you can all imagine why this can get tricky, especially when the person you need to subtract is a member of the family.

No Simple or Magic Solutions

Now lest you think that you will read this post and walk away with the silver bullet to make this easy to do, let me disabuse you of that notion.

Situations like this are never simple to deal with and there’s no magic answer here.

What I do want to share is that situations like this should not be ignored because they cause follow-on problems throughout the company.

When an underperforming employee is tolerated and held to different standards just because they have a certain last name, the work culture takes a hit.

The longer that persists, the worse the culture gets.

You may pretend that others don’t notice and are unaffected, but you are almost certainly wrong.

The Family Enterprise Model

Regular readers may recall that I’ve been redoing all of the courses of the Family Enterprise Advisor program (FEA), as part my new role as a project team advisor.

This has re-introduced me to a visual called the “Family Enterprise Model”, which I want to share here, as it can be part of the answer when faced with this kind of challenge.

This model is actually so simple that my friend Mr. Google came up empty when searching for a shareable version here.

It basically just shows that while a family may own a business, they also typically own all sorts of other assets as part of their enterprise, such as real estate, liquid investments, a foundation, vacation properties, heirlooms, a family office, etc.

In such cases, there may be other areas where the employee you need to subtract from an operating business may be more suitable for employment.

Ownership Versus Employment Compensation

Another consideration that families need to keep top of mind, especially when employment in the business is not a good fit, is to really think about how family members can gain from being part of a family that owns a business.

Employees get paid to do work, whether they are family members or not.

Owners of a business can also collect dividends, presumably when the business has made a profit. Such owners may also be employees, or they may simply be owners who do not work for the company.

When family members are owners who also work in the business, this distinction of whether they are being paid to work or are receiving compensation as an owner needs to be clear.

Confounding these two ways to benefit can cause problems.

The negative culture effects of a poor employee may make it so that paying someone to not come to work and having them simply collect a dividend may make more sense economically.

Sooner Is Better Than Later

When an underperforming family member is tolerated and not held to the same standards as others, it can become contagious.

The sooner you decide to deal with this the better, because it won’t fix itself on its own and it will probably get worse with time as others eventually become infected.

Honest feedback isn’t easy to deliver, but is necessary. 

In the end, the goal is for the family member to come to their own conclusion that continued employment is not working out and that a change of scenery will be better for everyone.

The Best Thing That Could’ve Happened 

You often hear stories about people whose careers took an unexpected turn, where the person is shocked to have been fired but then later looks back and admits that it was the best thing that could’ve happened to them.

That’s what I hope you’ll be able to achieve by confronting such a situation.

It’s not easy, but it is necessary.