Letting Family Members Go

Is it possible to fire a family member without inciting a feud?
Magazine Contributor
3 min read

This story appears in the July 2006 issue of Entrepreneur. Subscribe »

Family breakups rarely go smoothly, but when a family business fires a family member, it can wreak lasting havoc on personal and business relationships alike. This year, a company founded by media entrepreneur Sumner Redstone is being sued by the billionaire's son, who alleges the elder Redstone forced him off the Viacom Inc. board and passed him over for promotions in favor of his sister. The son wants the company, which controls CBS and Viacom, sold so he can free up his stake, which he values at $1.3 billion.

More than being intense, animosities tied to a family business firing sometimes prove extraordinarily long-lived. A son of the founders of Goya Foods Inc. began a legal wrangle that continued for three decades after he was fired in 1969 for speaking out about an alleged tax-evasion scheme. Once started, the troubles can spread: Just last year, another son was forced out of Goya's top spot by members of the third generation.

It doesn't have to play out that way, say family-business experts. Do it right, and you can get rid of deadwood without losing the family or the business.

Start by writing a policy of family-business employment that describes the conditions under which family members will be hired, developed, promoted, evaluated, compensated and, if it comes to it, fired, says James Olan Hutcheson, a Dallas family-business consultant. "If a family member clearly understands going in that they will be treated in a certain way, they [will] start off on the right foot," says Hutcheson, who was a longtime executive in his own family's business, Olan Mills Inc. Existing family employees wouldn't have to meet the hiring conditions, but termination rules would still apply, Hutcheson says.

Hiring and termination policies don't need to treat family members like everyone else, says Paul Karofsky, principal with the Transition Consulting Group, a family-business advisory in Palm Beach Gardens, Florida. "Family members are held to a higher standard," explains Karofsky, also a veteran of a family business. "They should be--it's their company." A family employee code of conduct is also likely to go beyond workplace performance and cover behavior in the community, Karofsky says.

Whatever the reason for a termination, relationships in the family as well as business relationships with suppliers and customers will benefit from speed and clarity.

See that employees, family and associates get full explanations of the reason for a termination. "People need to understand," Karofsky says. "There needs to be a party line--one story that is told to the community."

You may be able to accomplish a termination without damaging the family relationship at all, Hutcheson says. Document your reasons, then give the family employee the option of resigning, perhaps with an attractive severance package or continuing relationship as a supplier. "Often, there's no need to actually terminate somebody," he says. "If you've done your job right and laid out the criteria properly, they'll often recognize that they need to resign. It's OK to let people resign from their positions and walk out the door with dignity."

While these precautions can ease the task, it's still no party to fire a relative. "It's tough love," Karofsky says. "The family has to make a decision about which comes first--the business or the family. In some cases, the business has to come first because if the family doesn't take care of the business, the business won't be there to take care of the family."

Mark Henricks writes on business and technology for leading publications and is author of Not Just a Living.
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