Could You Fire a Family Member? How to Handle Difficult Talent Management Challenges in Today’s Family Business

Family business in America can’t be underestimated—these enterprises account for 50 percent of America’s GDP, 60 percent of employment in the U.S. and 78 percent of all new job creation. (Clark, 2014).

It’s not just the U.S. where family business is the backbone of the economy. In emerging markets about 60 percent of private sector companies with a revenue of at least one billion dollars are family-owned. (Åsa Björnberg, 2014)

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Having a family business, whether it’s small or a multinational corporation can come with a number of advantages but there are also certain challenges these organizations face particularly in terms of talent management. These challenges aren’t just a concern for the business owners, considering the overwhelming importance of family business within the global economy.

One such challenge involves what happens when a family member is no longer cutting it in a position. Family business leaders are faced with a choice: they can keep things moving (seemingly) smoothly on an emotional level by leaving someone in their position, or they can do what’s best for the business and fire that person.

In a February 2014 Wall Street Journal piece, Raymond Lucas, senior vice president of financial planning and training for Integrated Financial Partners said the following: “Remember: When it’s all said and done, you need to be able to sit at the Thanksgiving table together. (Dagher, 2014)

The question then becomes how do you fire a member of your family and ensure this is still possible? It is never easy, and it’s never without its share of difficulties, but below are some tips that can help you navigate this situation if it’s one you face in your family business:

Be Proactive

While this tip may not directly address the sticky issue of firing an employee, if you’re proactive it can save everyone a lot of heartache if or when the situation does arise.

According to PwC’s 2014 Family Business Survey, 83 percent of family business respondents say they have a formalized plan in place for handling conflict, and even though that may be an overwhelming majority, the challenge lies in enacting those conflict plans when it comes to a family member’s behavior or performance. (PwC, 2014)

Create a strategic and clearly defined talent management plan, and build everything in your business around that plan.

Develop standards for each employee regardless of family status, and also create specifically defined job descriptions. Put in place a process for evaluating employees, and outline what measures will be taken if an employee is not performing adequately.

By having all of these elements as part of your overall business strategy it’s not only easier to see who may need to go, but this formalized process can take a lot of the emotionality out of difficult situations.

Establish Clear Communication

Any business where there’s a sense of secrecy or a lack of communication is a place the talent management strategy is going to suffer and this certainly holds just as true in family businesses.

The more clearly members of a family business communicate, the more professionally a firing can be handled.

When there are things like employee performance evaluations and disciplinary actions are communicated clearly, at least a member of the family enterprise won’t be completely blindsided by a hiring. If a family member/employee feels as if he or she is at risk for being fired it may also give that person to exit gracefully through a resignation.

Have a Third Party Step In

When human resources is handled by a person or team of people outside the family it’s easier to make the best talent decisions for the business, rather than thinking only in terms of family and emotional relationships.

Even if you’re not prepared to have an HR employee outside of the family handle the situation, think about hiring a consultant to assist with the process. Having an independent third-party consultant present can help the situation remain more professional and less emotionally driven.

Approach a Firing with Confidence It’s the Best Solution

Of course it’s unlikely anyone would take the firing of a family member lightly, but it’s important to use data and information to back up your decision and not base it on anything involving your emotions or personal relationships.

It’s also important to realize and communicate the fact that even though you may be firing that person, you feel as if your relationship would suffer more if they were to stay in a position for which they aren’t a good fit.

Additionally, be honest when firing a family member. Don’t try to sugarcoat the situation—by being upfront the person is more likely that they will understand your situation and decision. Being upfront also helps heal any frayed relationships and can help rebuild trust.

Have you ever been in the situation of firing an employee who’s also a family member? If so, how did you handle this difficult situation?

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