With 40% of Canadian marriages likely to fail within 30 years, should robust governance structures top the lists of family business priorities? Scott McCulloch reports.
Should your family have a ‘no in-laws’ policy? That’s the question.
How to integrate in-laws into the family business. Now there’s a how-to project for our time.
Both the question and statement are actually titles of articles published by elite business schools.
Drill down to mainstream business magazines and the headlines – Hiring In-Laws: The Kiss of Death – get grittier.
Why? Because the treatment of in-laws is among the touchiest of areas in the family business governance sphere.
So, should your family have a no in-laws policy? Families tend to fall into two camps: all in or no way!
Ownership and Jobs
They either forbid in-laws from joining the business, keeping ownership and jobs for blood relatives, or they welcome in-laws, as a policy, and throw caution to the wind.
There are pros and cons to both.
A policy against bringing in-laws into the business sets out clear rules and expectations upfront. Family and in-laws know where they stand.
Power struggles are common in family firms. A no in-laws policy enables couples to separate family from business. It also encourages a family to interact with an in-law as a spouse, not as an employee.
Yet no in-law policies are far from flawless. Rigid by nature, they drive blood relatives away. If a next-gen is called upon to join the family firm, it’s not uncommon for a spouse to make a career sacrifice in support.
Since family-owned businesses comprise 80-90% of businesses worldwide, it can be challenging for in-laws to find meaningful jobs outside their new family. That can be a source of friction.
Talent or Simplicity?
Another drawback is that the family business might forgo talent, as marriage can introduce highly qualified – and trusted – individuals to the enterprise.
Family firms bring together a set of issues that humanity has been struggling with for millennia, says Ivan Lansberg, a leading family-business expert and author of the Succession Conspiracy.
“They are at the core of who we are as a species… issues of collaboration with relatives, issues of inheritance, and it doesn’t matter whether you have a billion-dollar enterprise or five goats,” Lansberg explains.
“If that is what you own, how do you make decisions about how you are going to leave your assets on to your next generation?”
Watch the short interview with Ivan Lansberg and discover the challenges faced by families and in-laws.
By having in-laws involved, you increase complexity
Family business governance is so personal a matter that Randall Carlock, a family business expert at INSEAD, suggests how a family manages its in-laws should be decided by its values.
“There is no template for succession planning in family businesses,” Carlock writes in an INSEAD article that compares two entrepreneurial families with vastly different attitudes towards spouses.
Citing conflict of interest as a deal-breakers, countless families acknowledge that they potentially give up talent when introducing the no in-laws rule.
Talent is sacrificed for simplicity.
“By having in-laws involved, you increase the complexity,” says Timothy (surname withheld for confidentiality), a family business panelist interviewed by Carlock.
Part of that complexity is the probably of divorce. Canada’s Vanier Institute of the Family estimates that 41% of Canadian marriages will end by the 30th year of marriage.
Consequences of Divorce
A divorce can have unimaginable consequences on a family-held enterprise. Consider the Vanier data and the likelihood that numerous family-run enterprises will be rocked by spousal separation is arguably high.
There’s no one-size-fits-all guideline when it comes to bringing in-laws into the family business. Yet it’s important to separate in-law ownership and in-law employment through a robust family business governance structure.
Family business experts stress that these roles have very different responsibilities and authority. If you’re considering involving in-laws in the family business it’s helpful to clarify business goals, family goals, and individual goals.
As a high priority, document a family work policy. In it, define “family” and rules for how the different types of family can work in the business. There should be rules on reporting structures, succession plans, and who has the authority to revise policies.
Does your enterprise take its family business governance seriously?
What’s the difference between good governance and great management? Find out.