When Demetri Giakoumatos took some paternity leave in August, he wasn't worried. His brother, William, was capably managing things at American Custom Contractors in Rockville, Md. “We accommodate each other on a regular basis,” Demetri says. The brothers' parents founded the business in 1972; Demetri has been involved for 5 years, William for 10.
Having family members in the business, as partners or employees, has pluses and minuses. Among the strengths: loyalty, continuity, and dedication; the weaknesses: conflict of interest, discipline issues, nepotism, and family “baggage.”
Six and a half years ago, after his sales manager left, Matt Merrifield, owner of Lakeside Exteriors, in O'Fallon, Mo., called his brother Dan — a manager at a payroll company — about coming to work for him. “As the business grew, we needed some help,” Matt says. “Dan was the perfect fit.” Today Lakeside Exteriors is one of the largest installers of fiber-cement siding in the U.S.
DO'S AND DON'TS Drew Mendoza, managing principal at the Family Business Consulting Group, in Marietta, Ga. (www.efamilybusiness.com), says that employing family members raises different issues, depending on whether you're talking about a spouse, sibling, son, daughter, or cousin. But if you elect to employ a spouse, sibling, or son or daughter, ask yourself:
- Is the person you're hiring qualified? Would he or she be hired if they weren't a family member?
- Are family members held accountable exactly as you would hold any other employee accountable? Mendoza suggests written job descriptions to avoid ambiguity.
- What are you paying that family member? Be aware that the IRS can question the amount of compensation paid to a family member if the amount doesn't seem reasonable.
Playing to the strengths of a family member coming onboard is key to making that move a success. For example, Steve Rennekamp of Energy Swing Windows, in Murrysville, Pa., knew that his stepson Don Darragh, who now manages the company's salesforce, relates well to people. And Rennekamp's wife, Betty, is detail-oriented and has excellent phone skills, making her a good fit for her position handling the company's data entry for lead and sales tracking.
POTENTIAL TO BACKFIRE Ralph Feurer of Norton's Quality Exteriors in Salt Lake City has had mixed experience with hiring family members. “Sometimes it was good, sometimes mediocre, sometimes disastrous,” he says. Feurer's oldest son, Shawn, started working for the company at age 12, building shutters and sweeping, then went on to get his business degree. He's now co-owner. But a nephew, after learning the business, left the company to start his own business that directly competes with Norton's Quality Exteriors.
These days at Feurer's company, even family members aren't hired for key positions without first conducting a behavioral profile to match personality and skills to a job description and to ensure a good fit with the company culture. “It's a very good predictor,” Feurer says.