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FEBRUARY 25, 2000

It Can Be as Controversial to Replace Long-time Employees as Relatives

Excerpt from Keep the Family Baggage out of the Family Business


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Family businesses often view their employees as members of their extended families. There are times when this can be a real plus for a business -- for instance when there is genuine concern for the workers. It also has its drawbacks. For instance, it may be just as difficult to fire long-tenured staff as it to fire family members. Emotional considerations can win out over business judgment.

Family businesses don't like turnover among managers and key long-term employees because their departure often creates burdens for family members. When the business is small, there aren't many workers left to absorb the tasks. Also, the departing person probably possesses institutional knowledge that enables him or her to do the job more efficiently than the people taking over. It's also possible that the person didn't do his or her work correctly but had managed to hide that fact, so the remaining employees will be forced to clean up the mess left behind. Moreover, any replacement from outside the company will be an outsider, so there is concern about whether he or she will fit into the family.

Family businesses often overpay long-term managers and key employees to retain them. This has two consequences. It wastes resources. And overpaying someone to stay in place is considered a good investment to avoid having to bring new people -- potential troublemakers -- into the company. Unfortunately, maintaining the status quo can be dangerous for a business operating in today's rapidly changing environment.

Managers with a long history of common experiences tend to have similar beliefs, values, and attitudes. This group's motto is: "We're open to any new ideas that conform to our expectations." The other problem is that long-tenured management groups tend to be the same age, so they often retire around the same time. We've already discussed the problems that arise when a single person departs. Can you imagine the effect when a whole group of managers does so in rapid succession?

The paternalistic leadership style common in many family businesses tends to create employees of marginal ability. Owners, acting as "parents," tend to do things and make decisions for employees rather than forcing them to take the initiative. In such cases, it's better to be a loyal, obedient employee (or is it a loyal, obedient child?) than to be assertive.

Family businesses also have a bad habit of keeping people in the same job too long. This is often simply the result of the business being small -- there aren't any other jobs. Unfortunately, staying in the same role over an extended period of time has a tendency to further narrow an employee's skills.

The result is a group of people who are loyal to the family but are marginal performers. Unfortunately, for these long-tenured employees, their lack of readily marketable job skills and inflated salaries make them unemployable elsewhere.

Successors wishing to strengthen their businesses find that they are unable to clean house. The employees are considered untouchable because their predecessors have a strong bond to them. I've seen cases where a successor wanted to replace old Joe, the plant foreman. Joe is an old friend of his father, has been at the company for years, and his main function was to be a good fishing buddy for Dad. The successor knows that if he or she tries to replace old Joe, he or she will have an angry visit from Mom and Dad. Sometimes, parents have even fired their kids.

Quentin J. Fleming is a management consultant with more than a decade of experience in the field, advising a variety of clients from small entrepreneurial ventures to Fortune 500 companies. He lives in Los Angeles. For more on Mr. Fleming, see his Web site:

Reprinted and excerpted with permission from Keep the Family Baggage Out of the Family Business By Quentin J. Fleming, Copyright 2000, Quentin Fleming Reprinted with permission of Simon & Schuster ( All rights reserved. Available at the McGraw-Hill Bookstore and online bookstores


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