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Ask a consultant

  • March 30, 2008 - 8:21 PM

Q How does a small, family-owned business keep its business out of family time and family time out of the business? If the boss is a family member, when is it good and acceptable to give him or her a raise? When would employees not be slighted if they didn't get raises?

LISA NEEDELS

NEEDELS SUPPLY

A True to the name, family businesses are often mixed sorts. Some families spend most of their time together inside and outside of the business, while others separate their personal lives more from their work. It's OK for families to set boundaries differently based on their unique circumstances, but they usually are most successful when they include affected family members in the process.

Determining compensation for family members -- particularly the CEO -- can be a challenge. If the family business is very small, the owner can decide how much profit should go to salary and how much should be reinvested in the business. Oftentimes, these family business owners prefer to limit salary and reinvest in the business. Such individuals may need encouragement to take higher pay.

Larger family businesses may have two governing entities that can provide compensation guidance or policy. The first is a board of directors or advisers -- outside members who provide insight based on performance of the CEO, comparable salaries in similar businesses and the culture of the family business. The second is a family council, which can clarify family values and help establish policy as a guide. Input from both should be considered.

Raises for family members can be challenging. Many such employees feel they are expected to do more, but get paid less than other workers. Other family members may be paid too much. Family businesses can help by adopting policies on family member pay, using standards for performance evaluation and setting rates consistent with industry norms.

RITCH L. SORENSON,

DIRECTOR, CENTER FOR FAMILY ENTERPRISE

UNIVERSITY OF ST. THOMAS

OPUS COLLEGE OF BUSINESS

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