When Business-Owning Clients Should Fire Their Kids

Let’s start with a little role play. 

Imagine you’re a highly successful business owner and you’ve appointed your son or daughter to a key management position. Despite your guidance and best intentions, however, they consistently fail to meet expectations. Would you have the resolve to fire them? 

The natural relationship dynamics that unite families can cause significant strife if allowed into the workplace, according to Alejandro Cárdenas Villa, an author and family business advisor. While it’s not always easy to do, separating familial relationships from business roles is critical for both family harmony and business stability, and avoiding difficult decisions is often a recipe for disaster. Fortunately, experienced advisors can do a lot, and it all starts with facilitating frank conversations. 

“Family relationships may be unconditional, but a role in the family business cannot be,” Cárdenas told Advisor Upside. “Most conflict that I’ve seen in family businesses has been caused by the older generation, let’s say the founder, because they haven’t had the courage to make tough decisions. It becomes a ticking time bomb for the next generation.”

The Big Question 

Successful business owners often dream about bringing their kids into management once they’re old enough. It’s not an inherently bad idea, Cárdenas said, but it’s crucial to ask whether you’ll be willing to make the tough choice if they don’t measure up.

“Probably the best piece of advice I can give to founders in this situation is to take the decision out of your own hands and to be forthright from the start,” Cárdenas said. “Your children need to know from the very beginning that performance matters and that they will be held accountable as they would be in any other workplace.” 

Other helpful tactics include: 

• Naming an independent party who is going to make key hiring and firing decisions, such as a headhunter or board of directors. 
• Avoiding the natural instinct to pay all children equally even if their roles and responsibilities differ significantly. 
• Balancing the needs of managers and owners in a sustainable way. 

Ownership vs. Management. Even if family members aren’t brought into management, they still need to be trained to be a future owner and inheritor of significant wealth. “You can outsource the management of a family business, but you can’t outsource ownership,” Cárdenas said. “You have to recognize and address any troubling patterns of behavior among siblings, for example, and encourage people to act like mature adults when conflict arises.”