Do non-family employees feel like "outsiders" in your business. If so, it's a sure bet that their lower morale and simmering resentments are having a negative effect on your operations and sapping your profits. It makes sense, then, to take action that will make outsiders feel right at home.

Workplace psychologists suggest two steps. First, foster a business environment that communicates respect for all players. Second, make a point of uncovering festering issues before they escalate into serious moralebusting crises.

Both steps, to a large extent, require a continuing improvement in communication techniques.

"Facilitating open communications can be even more important at family-run operations than at other kinds of businesses," says Jerry I. Kleiman, cofounder of Optimal Resolutions, a Manhasset, N.Y.-based firm that helps family businesses resolve relationship problems. "There are so many additional issues involved that you really need to be mindful about identifying and dealing with problems before they become critical."

Here are some great ways to keep non-family employees happy:

SET THE GROUND RULES

Right from square one, non-family employees need to be told the ground rules in terms of their prospects. "During the hiring process the applicants should be informed as to whether they will be essentially place holders, or whether there will be some potential for promotion," says Susan Lazar, a Minneapolis-based family business consultant. "It is important that expectations be clear."

Is your family business one of the many in which there is no possibility that a non-family member will be able to gain ownership. That's not necessarily a problem, says Lazar, as long as the non-family employees realize the restriction and are comfortable with it.

TREAT PEOPLE FAIRLY

"Non-family employees realize they will not be treated in a manner equal to family ones," says Aron Pervin, present of Pervin Family Business Advisors in Toronto. "But they do expect to be treated fairly." This means family members must not take advantage of their positions in ways that cause irritation or resentment.

It's important to avoid any appearance that family members are benefiting unfairly from the sacrifice of others. Suppose you pull into your parking space in a new Mercedes, and then tell everyone you cannot absorb more of their health insurance premium increases. That behavior is very hard for people to take.

CONFRONT FAMILY ISSUES

"Family discord directly affects morale and creates a culture that is not attractive to aspiring and ambitious talent," warns Pervin. When family members are arguing with one another, or simply giving one another the cold shoulder, profitability is threatened because business strategy then becomes somewhat ad hoc and subject to the whims of the family member holding the most power. And the insecure nature of such power dynamics can spark paranoia about outsiders. "High performance by a non-family employee may actually be viewed poorly as it undermines owner-manager control," says Pervin.

The solution to this problem, adds Pervin, is for family members to make a commitment to open communications. Disagreements and personality con.icts must be discussed, not swept under the rug.

WORK HARD

Non-family employees will especially resent privileged goldbricks. Any family member who receives a paycheck has to work as hard as non-family employees.

On the matter of performance, problems often arise when it appears family employees are not being assessed by the same standards as everyone else. In the real world, though, underperforming family members sometimes have to be retained in the business. "There are cases when a family member may be just not capable or competent, but the family feels a responsibility to provide the individual with a means of financial support," says Lazar.

What to do? Lazar suggests creating a position tailored to the skills of the family member. "Your challenge here is to allow the person to feel they are achieving something. In this case they will gain the respect of the other employees even if the person is not performing to the level of the other family members," he says.

SHOW APPRECIATION

Employees feel valued in a variety of productive ways. Share the fruits of success in terms of bonuses, benefits packages and retirement plans. And provide less ambitious but still highly prized extras such as:

  • food baskets at Christmas
  • summer picnics
  • company luncheons or dinners to award individuals for length of service
  • a willingness to provide advice and guidance to employees on problems outside the business It's in these little areas that family organizations can really shine. Bigger companies often just don't have the time.

OPEN THE DOOR

Open-door policies are often a hallmark of family-run organizations. Family members in supervisory positions should be approachable, either when they are working alongside others or when they are in their offices.

The bottom line is to encourage a climate of clear communication among family and non-family employees. Dealing with issues through explicit policies and open communications can prevent problems that impact company performance.

"Problems arise at family businesses when there is a weak intersection of expectations and reality," says Paul Karofsky, principal of Transition Consulting Group, Weston, Mass. "This can lead to frustration, hostility, terminations and even lawsuits. This stuff can get nasty. Left unchecked it can kill morale and destroy profitability."

The Non-Family Manager

Families love to run their own businesses. Problems can occur, though, when there is a lack of sufficient management skill to grow an organization to its next level. As competition becomes more intense, a greater number of family businesses are hiring skilled outsiders as managers.

"Mature families often realize they do not hold all the cards needed to win the game," says Paul Karofsky, principal of Transition Consulting Group, Weston, Mass. "Hiring an outsider can be the best way to acquire needed skills."

Hiring a manager from outside the family, though, must be done correctly. Karofsky notes that family companies must clearly define job functions to avoid resentments when a non-family manager makes decisions that may conflict with the traditional procedures and established roles of the family. He suggests writing down clear job definitions and responsibilities for the new manager and for everyone else in the organization.

Even with such job descriptions in place, warns Karofsky, conflicts can arise when the non-family manager makes decisions that family members consider foolish or even threatening to the company. Prevent such crises by drawing up a strategic business plan that calls for measurable implementations and results. Establish a regular program of communications between the manager and the family owners. This can include initial written reports, followed by formal board presentations with strict agendas, and ongoing, informal discussions all along the way.

That kind of multi-layered approach distills good communication techniques into a workable management machine. It's not a bad template for any family business.

Resources

Many educational institutions have family business programs. From offerings of specialized courses to fullfunded family business institutes, here are a few of the prominent programs:

THE UNIVERSITY OF MASSACHUSETTS FAMILY BUSINESS CENTER sponsors presentations by experts in psychology, management, law, accounting, financial and estate planning and banking.

umass.edu/fambiz

THE UNIVERSITY OF PITTSBURGH, KATZ SCHOOL OF BUSINESS FAMILY ENTERPRISE CENTER offers educational programs and peer advisory activities.

familybiz.pitt.edu 

THE LOYOLA UNIVERSITY CHICAGO FAMILY BUSINESS CENTER sponsors research projects on family business leadership, the communication patterns of business-owning families and the performance of family businesses compared with non-family managed counterparts.

sba.luc.edu/centers/fbc/

THE UNIVERSITY OF NORTH CAROLINA AT ASHEVILLE'S FAMILY BUSINESS FORUM enhances the viability of closely held businesses in North Carolina.

unca.edu/fbf

THE UNIVERSITY OF SAN FRANCISCO, GELLERT FOUNDATION FAMILY BUSINESS CENTER works with family businesses to promote networking.

usfca.edu/fbrc

UNIVERSITY OF SOUTHERN CALIFORNIA FAMILY BUSINESS NETWORK is a resource for families and their businesses, providing a sophisticated forum for information about management, growth, continuity and strategy.

marshall.usc.edu/web/FamilyBusiness.cfm

THE CANADIAN ASSOCIATION OF FAMILY ENTERPRISE (CAFE), while not affiliated with an educational institution, is included here because of its critical role in the Canadian family business scene, maintaining chapters throughout the nation.

cafemembers.org