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The Alternative Board Blog

When the Time Comes to Fire a Family Member

May. 11, 2021 | Posted by The Alternative Board
Fired employee

Terminating an employee isn’t something business owners and CEOs relish. When the situation demands some drastic action, however, it’s necessary to follow through for the good of the business.

The unpleasantness takes on an added dimension when the person being terminated is a family member in a family-owned business. For obvious reasons, the process of termination is burdened by the emotional baggage of letting a relative go because he or she isn’t meeting job expectations and demands.

“Fundamentally, you need to decide which comes first,” notes GRF, a CPA firm, “the business or the family.” After all, “if the family doesn’t take care of the business, it may not be there to take care of the family.”

What’s the best way to fire a family member? While no single approach is effective in all cases, the following tips can ease the process and enable everyone in the family business to emerge without rancor.

Be sure an exit plan is known to all.

Whenever a family member is brought onto the team, it can be useful to discuss formal HR policies with that individual. Let them know that by accepting the terms of employment, it’s also understood that the same rules and processes apply across the board.

If grounds for termination should arise, the family member is subject to the same type of review as everyone else within the organization. No special treatment can be acceptable, and it’s important everyone understands this.

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Outline clear expectations for the family member.

It’s never a good idea to bring on a family member and leave his or her job responsibilities undefined. Instead, business owners “should make sure that the duties and expectations of the job are laid out” on the first day of employment, says The Business Journals. It’s imperative that the family member “follow the same rules and meet the same standards as other employees in similar positions.”

Maintain scrupulous personnel notes.

As with any other employee, the family member’s performance should be closely monitored. A paper trail noting problems with performance or other potential grounds for termination is essential if and when the time comes to let that person go. The 360-degree review process may be the right resource to ensure that issues around a family member’s performance are described in writing, for the record.

When the time comes to terminate, have a third-party present.

As with most terminations, it’s wise to have an objective third party present at the exit discussion. That’s because a skilled mediator “can promote effective and clear communication helping to navigate the anger, shame, denial and sadness swirling around the room,” says the Family Business Consulting Group. This individual can “help keep the emotions in check while acting as an impartial witness,” if a legal conflict should occur later.

Offer a face-saving alternative.

If the family member is clearly unhappy in their role, you can ease the termination process by acknowledging this is a “bad fit,” and letting the family member resign, instead of being fired. You can also assist in providing them with career guidance or some other type of assistance so they can land on their feet elsewhere.

Maintain a strict separation of business and family.

When the decision to terminate a family member is made, avoid putting it up for debate within the family. It’s not necessary for others to know all the details of the situation, nor should they be consulted about the decision unless they are stakeholders in the business.

More importantly, the challenge of hiring or terminating a family member is “easier if you consistently separate business discussion from family conversations,” notes Entrepreneur. Don’t bring up business issues at a family gathering and refrain from soliciting advice on employee issues with family members, whenever possible.

Want to learn more about effectively running a family business? Check out what seasoned TAB members have to say in “6 Ways You Can Improve Communication in a Family-Owned Business.”

Read our 19 Reasons You Need a Business Owner Advisory Board


Written by The Alternative Board

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