Firing your child from the family business

I recently came across an interesting article in the Harvard Business Review (HBR 07/2019). The title instantly grabbed my attention – “When Should you Fire Your Child from the Family Business?”

The authors, Judy Lin Walsh and Ben Francois suggest that “Choosing to fire your child can be one of the most difficult decisions you can make as a leader of a family business”.

Having served as a family business advisor for the past 30 years, I wholeheartedly agree with the authors. The consequences of this decision will transcend the business and continue to be part of the family dynamic forever.

Unfortunately, many family businesses face this hard dose of reality because they did not have the proper guidelines in place regarding hiring, performance evaluation and firing of family members. Additionally, it has been my observation that patriarchs of families, in particular, want to begin grooming the oldest son to take over and carry on the family legacy. Oftentimes, the son has no previous experience, did not attend business school and/or has no interest in running the business. A McKinsey study reported family-owned businesses run by outsiders are better managed than those run by the eldest son. Wishful thinking does not always turn into the intended result!

I am reminded of my first meeting with the patriarch of a successful family-owned manufacturing company. The oldest son, two daughters and one son-in-law worked for the business. The objective of the meeting was to discuss developing a succession plan to begin to transition leadership and ownership to the next generation. Instead, when I arrived at the office, the father asked me if I could fire his son for him. He told me that he had fired him ten times and he kept coming back. He was hoping that I could finally do the trick!

We had a thoughtful discussion about the root cause of the issues with the eldest son. Not surprisingly, some of the drivers of the problems with the son went directly back to the father.

Walsh and Francois suggest that working through the following four questions may lead to a successful path forward.

1. Are expectations agreed upon?

Have you set up your child for failure? Did you hire him/her into a position that they were not qualified for. Does the child have the proper skills and experience? Did the child go to college to study business? Did the child ever work at another company? Did you define clear goals and objectives and measures of success?

Again, I am reminded of a past client. The second generation owner of a food processing company had just brought a new $300 million plant online. Coincidentally, his oldest son had just graduated from a fine Midwestern university (my alma mater!). Ignoring my counsel, the owner named his son as the General Manager of the plant. Because the father was a shrewd business man, he also hired an experienced plant manager to “head up” operations. All of the employees realized that the son was the GM in name only. The operations manager was really running the facility. Soon the son found himself not really engaged in the business. He would come to the plant, sit in his office and surf the internet. Eventually, he stopped coming into the plant and would spend his days at the local casino! After running up a large gambling debt, his father finally relived him of his duties.

The son was set up to fail. Everybody but the father could see it coming. Again, wishful thinking does not always lead to desired outcomes.

Walsh and Francois say “If you have set your child up to fail with unrealistic expectations it will be impossible for them to succeed. Without clear goals and a mechanism for feedback and development, there can be no clear metrics to measure progress and hold your child accountable”.

In order to raise the likelihood of success in a situation like this, you must:

1. Clearly define the role for the next generation family member
2. Assess whether that person has the skills or aptitude for the job
3. If they do not, design a skill development plan.

You may also want to consider hiring a family business advisor to mentor the child.

2. Is there a cultural mismatch?

Oftentimes, the next generation comes in highly motivated to make changes and bring the company into the new millennium by implementing technology or new business practices. This may “upset the apple cart” and begin to eat away at the existing culture developed by the previous generation(s).

Walsh and Francois suggest, “We often find unexpected trouble when the next generation is highly motivated to make a mark on the business, but is not yet mature or trusted enough to do so, which wreaks havoc on the corporate culture.”

When this happens, the child will need to be encouraged to modify his/her approach and be respectful of the existing value set and culture while still being focused on making the changes needed for future success.

3. Is the child in the right role?

Just because you have a current job opening or you like doing a certain job does not mean your child wants to take on that role. Back to the food processing company example, as it turns out, the son was a people person and liked to go out and sell. He was given an entry-level sales position and began to excel. By the way, the daughter eventually joined the company after working at a Fortune 500 food company. It became obvious to everyone that she was experienced and qualified and should eventually succeed the father in running the business.

4. Could you be the problem?

In many situations, the problem is not always with the child. It may be caused by the current generation for a variety of reasons including:

1. Founder/current generation leadership does not want to admit that the business can run without him/her.
2. The founder/current generation does not have a “third act” plan and does not want to leave.
3. The father/mother still views their adult children as little kids and does not realize that they are capable, grown adults.

The toughest question to ask and answer is this: Is the problem truly your child, or is it you?

Walsh and Francois say, “If there’s even a chance this is why you want to fire your child, pump the brakes. Ask yourself if you want the business to be successful in your lifetime, or if you want it to thrive after you are gone. If you want longer-term success, then you will need to establish a succession plan that carries success forward’.

Always remember what hat you are wearing. If you end up firing your child – you are wearing your employer hat. You are not firing your child from the family! Walsh and Francois remind us of an oft-told story, “One family business patriarch, wearing his “CEO hat” told his son that he was fired. Immediately afterwards, he put his “Dad hat” on and said “Son, I’ve heard you’ve just been fired. How can I help?””

If you are facing strategic challenges in your family business and need counsel, contact our team today.