Introduction
We briefly touched upon the pros of hiring non-family members into a family business and how they bring a fresh and unbiased perspective to the table in part one. Even though the pros of hiring non-family members significantly exceed the cons, most family businesses are against the idea of hiring outside talent. The family members do not like the idea of losing control of their business and want to remain independent. They are also not willing to trust any outsiders with their business secrets and resent the competition they pose.
The truth is very few families have all the necessary skills and experience to successfully run the business and take it to the next level. The key to the survival of the business is to hire talented individuals from the outside who can meet various business challenges head-on and aid the family employees in taking the business to the next level. As the business grows, the complexities and uncertainties increase.
Not knowing when or how to recruit such talent becomes a key challenge. Therefore, the business needs a robust recruitment plan that ensures that the required core competencies and skill sets are available at the disposal of the business. Doing so can preserve the value of the business and aid in the long-term growth and success of the business. Most family businesses will eventually have to deal with the challenge of hiring outside talent. In this article, we look at some of the common pitfalls and best practices of hiring outside talent.
Common Pitfalls
- Unclear Roles and Responsibilities
Not having clearly defined roles and responsibilities before hiring non-family members is one of the biggest mistakes a family business can make. It can be very hard for family members to delegate responsibilities and give access to outsiders. The ambiguity regarding roles and responsibilities can create many conflicts between family and non-family members. The lack of trust and unwillingness to be completely transparent will make it difficult to find the best talent and retain them.
- No Growth or Advancement
Family businesses have a certain perception attached to them. Outsiders usually aren’t too keen on getting into a family business as most of them have no opportunities to grow or advance in the business. This coupled with the fact that family employees are favored more than non-family members makes it difficult to find or retain the right talent. Not having a clear and fair career path for these employees with no top jobs available even if they have the right skills and competencies can be an unattractive proposition. It becomes important to shed this perception and clearly inform the candidates about the company’s intention of giving them a fair shot at career advancement.
- Lack of Cultural Fit:
While hiring candidates with the right competencies and skills is important, it is equally important to hire candidates with the right cultural fit. Hiring candidates that share the family’s values and culture is vital to the long-term success of the business. Hiring the wrong candidate can lead to multiple problems as these non-family members will speak to clients, suppliers, employees, and other stakeholders on the family’s behalf.
- Undefined Compensation and Benefits Plan
Bringing in non-family members in a family business is a tricky situation because of compensation. While we have an entire article dedicated to compensation, the important point here is to have a fair and realistic compensation plan for both family and non-family members. The family business can’t be paying family members more than non-family members for the same role. The skills and core competencies of the non-family members must be recognized, and appropriate benefits must be given. Clearly defining these at the time of hiring makes it much easier to manage expectations. Failing to do so, will result in low morale and high turnover.
- Spontaneous Hiring
Impulsive hiring just to fill a void can have some serious consequences. While there are some major differences between family and non-family businesses, the compliance rules are applicable in both cases. Failing to follow all the necessary steps before hiring someone can lead to legal troubles. Missed steps or shortcuts to hire someone should be avoided. Ensuring all legal and compliance formalities are met before hiring someone is imperative.
Best Practices
- Plan Ahead
Develop a long-term recruitment strategy to identify and secure necessary skills and attributes lacking in the current employee base or at risk of leaving, complemented by a fair compensation plan. Create detailed job descriptions and skill requirements, anticipate business needs for external talent, and establish clear career paths with realistic advancement opportunities to attract candidates. Prioritize finding the right fit to save time and effort for the company.
- Prepare for Change
The leadership must prepare all family members for the drastic change. Having a clear discussion about how things are going to be once a non-family member comes in and the rationale behind the decision must be clearly explained. The idea is to have all family members take the hiring in a positive way. This will make it easier for the family members to accept the transition and for non-family member to settle in.
- Due Diligence
Candidate due diligence is very important in a family business. As the trust factor for non-family members is already low, knowing all the relevant things about potential employees is necessary to avoid any surprises. Conducting background checks including taking references, education, medical conditions, prior legal issues, ability to work in the country, etc. is important. All the necessary documents must be gathered and stored safely. In case of any discrepancies or irregularities, the employers have proof and can use it to relieve someone of their duties.
- Interviews
Key decision makers must conduct rounds of interviews to determine if potential candidates tick all the right boxes. Ensuring that candidates meet the cultural fit requirements is also important. The entire hiring process should be explained clearly along with realistic time frames for decision making. Unbiased interviews should be conducted, and a scorecard should be maintained to make sure that all candidates were assessed fairly.
- Contract
An agreement on employment contract which clearly defining the terms and conditions of employment, the responsibilities, company polices under relevant company laws, compensation, rules of termination, liabilities, etc. must be signed by all employees. It is vital to have this agreement as it saves the owners a lot of legal trouble later.
- Hire experts
Professionals or consultants who do this for a living can be brought in from time to time to handle the recruitment process. In doing so, a business can ensure a professional, unbiased and a non-emotional recruitment process. These experts will also have means and connections to reach the right candidates and will take care of the entire process from start to end.
Conclusion
If the risks and pitfalls can be managed carefully and the entire process can be planned properly, hiring talented and skilled non-family members can be a game changer. Throughout this process, the bigger picture and end-goal should always be in mind. The idea is to set the business for long-term success and not to fix short-term issues.
Also Read: Part 5 – Essential Professionalization of Management in Family Businesses
