Soriano: Compensating Family Members The Right Way (Part 2)

Soriano: Compensating Family Members The Right Way (Part 2)

By: PROF. ENRIQUE M. SORIANO   COMPENSATING family members is a perennial source of emotion and, if left unresolved, poses a future conflict amongst siblings and cousins. Family businesses are constantly trying to balance the bottom line with paying its family members fairly. That balancing act can become more difficult if a compensation strategy is not clearly defined. Family harmony adds additional emotions to the already passionate topic of compensation. According to an article published by Findley Davies, a human resource consulting firm, as family businesses grow, so too does the compensation and rewards structure to engage your most valued assets–your people. In the start-up stage, there are few employees, very little structure, and most, if not all, team members are part of the family. As the company grows, the need for business structure and processes surfaces. In this stage, young family members start occupying positions. This is where the start of the conflict happens. Some common examples that tend to compromise and disrupt the organization are the following: Equal compensation for all family members regardless of qualifications Overlapping and undefined roles and responsibilities Family members overstepping on their functions and encroaching on other roles assigned to non-family members Newly-hired family members don’t know how and when to start as reporting structure to a superior are unclear as well. The key is to work on a compensation plan. In my article last week, I highlighted the need to prepare an accurate job description for every family member entering the family business. Today I will continue with the following plan of action: Identify what your compensation philosophy is. Industry standards...
Soriano: Compensating Family Members The Right Way

Soriano: Compensating Family Members The Right Way

By:  PROF. ENRIQUE M. SORIANO   THE past two months, I have been inundated with emails from readers requesting (some actually “pleading”) for an article on the subject related to compensation. I deliberately ignored these requests, as I have my own topic calendar until I figured in three (out of seven) family interventions this month and took me aback, as all issues zeroed in on compensation! So on my flight back to Manila, I decided to informally poll the email requests and expectedly, 70 percent of the emails came from the Gen 2 and Gen 3 family members. This made me decide to write this article pronto. Thank you my dear readers for the “push”. Gen 2 and Gen 3 concerns We typically refer to these two generations as the sibling and cousin generation phase. This a phase in the development cycle of a family business where family members have extended members in spouses, in-laws and cousins, nieces and nephews. I consider this phase a very complex one and often referred to as the multi-generational stage. When not guided appropriately, it can result in unnecessary conflict. Is money the root? They say, “money is the root of all problems”, but this can be prevented if individuals are clear with what is fair and just. This is true in family businesses. Families involved in business tend to avoid talking about money matters. It is a very sensitive topic and creates so much discomfort to all parties. However, “sweeping this issue under the rug” only adds up to the confusion and dissatisfaction. I often receive requests for guidance involving sibling and...
Soriano: Creating A Family Employment Policy: A Must! (Part 2)

Soriano: Creating A Family Employment Policy: A Must! (Part 2)

By: PROF. ENRIQUE M. SORIANO ACCORDING to an article published by the KBH Group, a full-service chartered accounting firm based in Canada, the best way to manage these expectations—and the ensuing family drama—is to create thoughtfully-written family employment policies. Having these policies in place lets all of the relatives know exactly how the company handles the employment of family members. In my last column, I explained the first pre-employment condition and highlighted an important rule: the requirements for being accepted into a job post at entry level. Are the expectations of family members clear, as far as attainment of certain degrees or certifications before they join the company? If so, this should be spelled out in the employment policies, along with a timeframe required for completing the education or training. How about investment of the family business on training for special or technical skills? At the Ateneo Center for Continuing Education (CCE), short and diploma courses on practically everything about business are offered all year round and I must admit, part of my mentoring model is to encourage family members to enroll and further reinforce their business and management skills. So far, it’s worth every peso invested by family businesses! In today’s column I will complete the governance aspect related to family employment policies, namely: Shared vision and mission, participatory leadership and values for teamwork A family business is strong when all who participate in its development shares a common vision and mission. In the succeeding generations, shared objectives and course of action should be kept in line. Even if changes are needed in the business in terms of...
Soriano: Creating A Family Employment Policy: A Must!

Soriano: Creating A Family Employment Policy: A Must!

By: PROF. ENRIQUE M. SORIANO IN the Philippines and in Asia, I rarely come across family members working in family businesses having employment contracts. Their entry in business is usually guaranteed by their last names, a sort of a birthright. For most family businesses, requiring family members to sign formal employment contracts may be a waste of time, especially for businesses in the startup phase. However, as the business transitions from a mom and pop, single proprietorship type of business to an organization in the multi-generational phase where siblings, cousins and in-laws are involved, then it is hugely important for family members to have clear and concise employment contracts. Without rules on how family members will work together in the family business and with different views of what the family business should be about and what should take place, conflict is almost inevitable! Family businesses need rules by which to operate – and if they don’t have them, they will fail. What are rules? Rules are authoritative statements of what to do or not to do in a specific situation, issued by an appropriate person or body. It clarifies, demarcates, or interprets a law or policy. What are rules for, anyway? Rules replace thought. If you know the rules, you always know what to do. Discretion among family members can almost always cause disagreements. If you know the rules, you never have to stretch too far. As Douglas Bader, the aviation hero said: “Rules are for the guidance of wise men and the obedience of fools.” Tipping point According to an article published by the KBH Group, a full-service...