How to Fire a Family Member in a Family-Run Business To fire a family member may be one of the most difficult challenges a family business will face. Here is how to ensure the process is as painless as possible.

By Andrew Keyt

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To fire a family member may be one of the most difficult challenges a family business will face. There's no magic solution to avoid the hurt feelings, the tension, the discomfort.

Those who've gone through the process can speak to the short- and long-term effects it's had on their family and business. It is an incredibly complicated situation. I know this not only from writing about it but from my own first-hand experience. At the age of 22, I unexpectedly inherited my father's share of the family farm and later served as manager in two family-owned firms. Now, I lead the Loyola University Chicago Next Generation Leadership Institute, where we prepare family business successors for successful transitions.

Related: 4 Secrets to Highly Successful Family-Owned Businesses

Preventative tips

Hiring: Serious performance problems are likely to crop up when family members are hired for positions that don't match their skill set. It's probably not the best idea for a parent to hire their recent college grad because he or she is a) struggling to find a job, b) the parent wants their child to make a certain salary or c) the parent wants their child to live nearby. Hiring for these reasons hurts the business and is ripe for family conflict. Do you really want to have to fire your son or daughter when they flounder in the position you hired them for? Hire family members because they're qualified and ready to fulfill the expectations of a positon that the business needs.

Expectations: In order for someone to be held accountable for their performance, you've got to set clear expectations. Family businesses are notorious for having vague expectations and operating from the gut. Set some expectations and communicate them from the get-go. The clearer the expectations, the easier it is for a person to self-evaluate where they excel and where they stumble.

Feedback: One of the most common complaints from family business successors is that they never get any objective feedback on their performance. Firing a person who has never received feedback (or an opportunity to respond to feedback) will fill them with a sense of injustice -- one that can reverberate for generations to come. When providing feedback, focus on a person's performance and rely on as much objective data as possible. For senior-level family members, consider the perspectives of non-family board members; they can inject even more objectivity into the process.

Related: 5 Reasons Why 'Family' and 'Business' Do Mix

Tips to help you through the process

Don't downplay: So you've decided to fire a family member. You provided them with objective feedback and saw no change in their performance, or their actions have forced you to make this decision. Don't downplay the situation: firing a family member is not akin to firing a non-family employee. Realize that firing a family member will impact both short- and long-term relationships.

Talk about performance and family relationships: Communicate clearly to the person being fired that the family still loves and cares for them. But also explain that their performance in the business isn't meeting expectations. Tell them, "We need to work together to find a job where you can be successful at meeting your expectations."

Help them find success: Once the family member has been fired, don't just cut them off. Providing resources to help them transition to a new career will keep them connected to the family and lessen the emotional loss. Denying them support will exacerbate an already difficult situation and sends the message, we don't value you, or, we don't love you.

Family business leaders can make choices to avoid ever having to fire a family member but for those who must confront this challenge, remember: take the conversation seriously, talk about the importance of both family relationships and business needs and offer to help them find a path to success.

Related: The No. 1 Reason You Should Hire a Family Member

Andrew Keyt

Author and Executive Director of the Loyola University Chicago Family Business Center

Andrew Keyt is the author of Myths and Mortals: Family Business Leadership and Succession Planning and the executive director of the Loyola University Chicago Family Business Center. 

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