Cutting Back

Must It Come To This?

Business downturns happen. Family businesses are not immune to them. Still, the emotional impact of compensation cuts on family relationships can be muted somewhat if standard business practices are followed from the start. Kliska and Hilburt-Davis offer these suggestions:

  • There should be ongoing, open communication about industry trends and the state of the business.

  • Set up a performance review and appraisal system for all employees, including family members.

  • Compensation should be tied to performance and in line with industry standards. "It's not an extension of allowance and not based on how much a person needs," says Kliska.

  • Use an outside board of directors to review compensation practices. "That mitigates resentment," Kliska says.

If all these business practices are in place, when there's a downturn, family members whose compensation has been cut should be able to understand the situation. If they can't, "it might be better to suggest they go elsewhere," says Hilburt-Davis. To further convey that this is nothing personal, ask them if you can help with any planning or additional training they might need to make a move.

Patricia Schiff Estess publishes the newsletter Working Families and is the author of two new books, Managing Alternative Work Arrangements (Crisp Publications) and Money Advice for Your Successful Remarriage (Betterway Press).

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This article was originally published in the February 1997 print edition of Entrepreneur with the headline: Cutting Back.

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