Andrew: Dad, I’ve been working really hard, putting in long hours, and have been here almost a year, and a lot of others in the company are earning more than I am. I think I deserve a raise.
Charles: Well, Son, I thought you had been pretty well paid, but I guess maybe it’s not enough. Do you think an extra monthly amount to cover your new mortgage payments would be reasonable?
Charles reflected on his discussion with Andrew: “I think Andrew is being paid fairly for the job he’s doing, but I know he could use more money to help with his new mortgage and I feel kind of responsible because I encouraged him to buy the house. He’s a good kid and he is working hard, but it’s awkward to have this kind of conversation with him. I feel like I’m still handing out an allowance.”
Andrew also felt unsettled: “I appreciate what Dad has done for me, but a lot of people in this company have easier jobs, work fewer hours, and earn more than I do. I hope I’m not always going to be in this position of having to ask my father for a raise.”
What should primarily be a business issue has become confused as a family issue. Andrew’s behavior is like that of a child asking his dad for more money because he needs it, not that of an employee asking his boss for a raise because he has earned it.
At another level, Charles’ agreement to “give” his son more money can be a blow to Andrew’s self esteem. Rather than being recognized and rewarded for his performance, Andrew is about to be “gifted” by his father’s benevolence.
What should the family do?
- Address the family business issues quickly before resentment sets in.
- Andrew needs to adjust his expectations about working in a family business. Typically, family members are expected to be more dedicated, work harder, and work longer hours, usually reaping their rewards later on through ownership and longer-term growth in equity.
- If possible, Andrew should report to someone other than his dad. He needs the objectivity that a non-family boss can offer.
- The company must establish compensation criteria, not just for family members, but for all employees. These consist of: job descriptions, measurable performance standards, a performance evaluation system, promotion opportunities, salary ranges, and performance bonus plans.
- Family businesses must resist the temptation to overpay family members, lest the recipient get a false sense of worth to the company. Salary should be based on function, not needs.
All businesses need a compensation policy providing fair and reasonable rewards. It must be clearly defined and based on objective criteria. This will create an environment in which young people can grow and develop with a healthier self-image, less resentment, a greater respect for others in the organization, and solid financial values.
