‘Family Business’ in the Natural Grocery Business

January 13th 2021

by Carolee Colter – Human Resources Specialist, Columinate

Some of my clients are businesses owned and run by families. Some have been in the family for three generations, with married partners, parents and children, siblings and in-laws working together. Employees who come to work for these businesses understand and accept the fact that they’re working for a family. In fact, for many of those staff members, that’s a plus.

Employees who don’t agree with the way the family runs the business will eventually leave. You can try to convince owners to do things differently but when it comes down to it, it is their business. They’re the ones who bear the risks, who mortgage their homes if they can’t get a bank loan. They may be good or mediocre or bad employers, but if you work for them, you take them as they are or move on.

But for consumer cooperatives, social enterprises, not-for-profits, non-profits, and other community-owned organizations, family ties between the general manager, executive director or CEO and any other staff member, create problems that may be unsolvable.

Cooperatives, non-profits and other types of social enterprises have a mission that staff tend to align with. As a result, employees who disagree with the leaders are less likely to give up and move on to another job than they would if the business were family-owned. Instead, they are more likely to feel a sense of ownership themselves, to question the validity of the leader’s decisions and express their disagreements publicly.

Questioning and pushback from staff is par for the course for community-owned businesses. But if the manager/director hires a family member to work in the business or develops a relationship with one of the staff—or if the board hires the manager with family already on staff—in any of these cases, the board and management can expect trouble to arise at some point because there will be the appearance of possible conflicts of interest.

Will the GM compensate their relatives more advantageously than other employees? Will they allow policy infractions or performance problems that other staff are not allowed? Will they share with their relatives confidential information about co-workers?

Sometimes organizations attempt a workaround by requiring someone other than the top leader to directly supervise the family member. In large companies with multiple layers separating the GM and relative, this might work. But if the supervisor of the relative reports to the GM, how possible is it for that supervisor to deny a raise, issue a written warning, write a critical evaluation or even turn down a vacation request for the employee who is related to their boss?

Another workaround I’ve seen boards attempt is to review all the GM’s personnel decisions regarding the relative—pay increases, bonuses, promotions, evaluations or corrective actions. This arrangement means that the board has to take on management responsibilities but without a context for knowing if these decisions are consistent or equitable or in the organization’s best interest. Who else applied for this promotion and why are they being passed over? Is that raise in line with what other staff are receiving? Is the relative not getting sanctioned for something that other staff have been disciplined for? How can the board know the answers to these questions without becoming the de facto GM?

Even the most scrupulous and dedicated leaders can have blind spots. Once a GM said to me, “Why don’t the staff feel they can come to me when they have complaints about my girlfriend?” Then as I attempted to explain why, he grew defensive with me, the outside consultant. How much harder would it be for one of his direct reports to attempt the same conversation?

Another blind spot can be team dynamics. If both partners in a couple serve on the leadership team, they often don’t realize how they operate as a power bloc. Since they will usually be aligned on any major issue, their position automatically has more power than that of any individual team member. Yet I find couples are often unaware of how other team members feel outnumbered or intimidated.

Even when management conduct is above reproach, the mere fact of a family relationship can be weaponized at any time by a dissatisfied employee. Then who is the board of directors to believe? Boards can get pulled off their own agendas by trying to referee staff conflicts when they can’t just delegate the decision to the general manager due to the appearance of conflict of interest. It is amazing just how many hours of volunteer time board members can get sucked into donating when called on to sort out employee complaints about the GM’s relationships to other staff.

Over the years I’ve been asked as a consultant to help boards or GMs come up with policies and procedures to accommodate having a relative of the GM on staff. What’s true is that the spouse, lover, child, sibling or parent was often an excellent employee and asset to the organization. I wanted to believe it was possible to find a way, and yet…

Ultimately I’ve come to conclude that there is no solution for this conundrum. So here are my recommendations to boards of directors:

  • If you are hiring a new GM/ED/CEO, do not hire an internal candidate with a relative on staff unless
    1) your organization is large enough to allow two or more layers of management between the leader and the relative and
    2) the candidate has demonstrated a history of scrupulous fairness with regard to their relative.
  • Do not hire an external candidate with a relative already on staff unless the first condition can be met. (The second condition cannot be known since there will be no track record, so it means taking a risk.)
  • If your GM/ED/CEO develops a relationship with a staff member who reports directly to them, ask them to choose which member of the couple will stay in their position and which will leave employment with the organization or move into a lower-level position.
  • Create a policy to address GM/ED/CEO relationships with staff before you need it.

CAROLEE COLTER – Carolee has been consulting for co-ops and independents in the natural foods industry for over 30 years. She’s been leading workshops at Provender’s Annual Educational Conference for most of those years. As the leader of the HR Team of Columinate, she has surveyed thousands of employees in our industry and uses that data in her work to help make her clients the workplaces of choice in their communities.

(Note: Carolee and colleague Mark Mulcahy are teaching a 3-part workshop series in January 2021 for Provender on “Rewards of a Burnout-Free Workplace.” Find out more and register here.)