• Mike McGrann

Family Business Strategy: Managing the In-Law Influence

The question of whether to hire in-laws is one that most family business owners contemplate at some point in the life cycle of their firm. Answering this question may result in a simple “yes” or “no” answer, but the more complex consideration for family ownership teams is often the one that follows it. Namely: “How will we manage the influence of our in-laws?”

Answering this question requires three key perspectives: the potential employee; the potential shareholder; and the stakeholder in the family firm.

The Potential Employee Most of us would agree that highly qualified in-laws can be productive and loyal employees. By this metric, it would be a loss to not hire them simply because they are married to family members. But the decision to hire in-laws can have a dramatic impact on the organization and the family. Decisions on this should be made within the context of a discussion at the ownership level to define the “rules of the game” for in-laws. For example, a Family Involvement Policy will clarify how the family and the business will interact. Most importantly, such a policy should define the process by which family members and in-laws are hired, evaluated, promoted, and fired.

Boundaries for in-law employees need to be very clear. Communicating that they will be treated like any other employee and eliciting their agreement to accept their place within the organizational hierarchy usually requires an explicit conversation prior to hiring. Despite these efforts, treating an in-law – or any working family member – like all other employees can be incredibly challenging. A Family Employment Committee can ensure that the hiring, evaluation, promotion, and (if necessary) firing of in-laws (and family members) occurs according to norms established by the company.

The Shareholder

A second consideration is whether a family will allow in-laws to own stock in the company. Most families we know prefer to limit ownership via a stock restriction agreement to direct descendants (or adopted children) of the founding family member. Deciding on this is another part of the process that requires conscious consideration and planning.

The Stakeholder

In-laws have an important and influential roll as stakeholders in the family business system. Their influence (positive or negative) comes via their relationship with the family member. As such, they should be managed by the family business system leader.

The policies established by family members, such as the Family Member Involvement Policy, have implications for their children. Because of this, they need to be informed about what is happening in the system. If your family has created a Family Member Involvement Policy, sharing with and eliciting input from in-laws is a necessary part of the process. While they do not have the right to approve or change the policy, their voices and opinions are important. These conversations build better relationships and help them feel engaged in the process.

A strong technique is to include spouses in family meetings at least once per year. Debriefing on the events of the year, looking to the year ahead, updating on new or changing family policies and structures (perks, vacations, family member roles and involvement, etc.), or training and workshops for better business and family strategy can be key parts of these annual meetings.

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Give your in-laws what they deserve: information and a voice (not a vote). In the process, you build trust and create the conditions for them to have a positive influence on the system overall.

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