How can family businesses objectively assess in-law contributions without succumbing to familial polite lies or bias?

Question

Tyler Smith · Accepted Answer

Assessing in-law contributions in a family business can be fraught with challenges, often leading to polite lies or biases that obscure true performance. The core issue, as explored in "We're Fine (& Other Lies)," is the difficulty of separating family dynamics from business imperatives. To achieve objectivity, family businesses must implement structured, impartial processes.

Firstly, it is essential to 'establish clear rules separating roles as owner/partner/family member from roles 'in' the business.' For in-laws, this means treating them first and foremost as employees. Their job descriptions, performance metrics, and reporting lines should be as clear and measurable as for any non-family employee. This helps avoid the polite lie that their presence is enough, or that their family connection automatically confers competence.

Secondly, utilize formal performance reviews conducted by objective managers, potentially including external advisors or a neutral board member. These reviews should be tied to measurable goals and offer constructive feedback, not just familial praise. Compensation should also be market-based, preventing either overpayment due to family pressure or underpayment due to a perception of 'family discount.' By applying these principles, a family business can genuinely 'address and work through difficult dynamics within the team' and leverage an in-law's skills effectively, rather than allowing polite lies to dictate their role or perceived value.