Mother, father, and daughter sitting in office.

Family-owned and operated businesses are a time-honored tradition, but it’s important for family business leaders to focus on merit-based employment over entitlement, which typically leads to more risk and less reward, according to our business coaches.

“Are entrepreneurs born or made?” is the popular question. Some family members could show a strong interest in entrepreneurship at a young age, while others may develop these inclinations later in life. Either way, the owner of the family business must discern between authentic hopes and dreams and “wishful thinking” that will never be supported by effort. In other words, family leaders must be careful to avoid thoughtless placement of relatives within the family business.

Family Businesses Are an American Tradition

According to experts and our business coaches, family-owned and operated businesses control a large part of the US economy. In fact, about one-third of the companies in the S&P 500 index are controlled by families, reports Business Insider.

The top 10 largest family businesses in the US according to Business Insider, include household names, such as: 1) Wal-Mart, 2) Ford Motor Co., 3) Cargill, 4) Koch Industries, 5) Carlson Companies, 6) Comcast, 7) News Corp., 8) HCA Holdings, 9) Bechtel Group, and 10) Mars. So, how do everyday business owners successfully pass a business down to another generation when it can prove to be challenging?

Our coaches have observed time and again how family business owners can have difficulty staying objective while hiring family members, especially when it was their own son or daughter. But they have to be smart about ascertaining family members’ strengths and weaknesses before hiring them on.

You may have an extremely shy daughter who is taking business courses, but she doesn’t enjoy interacting with people or taking on leadership roles. You probably don’t want to go around saying you’re grooming her to be your next CEO if the idea terrifies her. Likewise, if your son is a great people person and he’s taking the college required accounting courses, but he hates crunching numbers, it’s unlikely he’ll be your next CFO. The idea is to play to people’s strengths and steer clear of placing them in roles that don’t make sense.

Next Generation Survival

While a large number of US companies are family-owned, a small percentage of them are passed down to a third generation. Why the low survival rate? According to many business coaches and consultants, it’s because they fail to establish strategic plans and guidelines, and because some families just don’t manage to work well together. Want to improve the chances of your family business “staying in the family” for generations to come? Follow our expert tips for hiring family members:

  • Consider having family members learn the business from the ground up.
  • Have family set goals to be accountable and to earn respect from peers over time.
  • Do not run an entitlement program where your last name guarantees family members a job and a paycheck. One of the reasons why family businesses have failed in the past is because people were hired by birthright. In other words, people have to earn it.
  • Set clear goals and expectations for family employees.
  • Adopt a written employee policy that spells out what is expected when hiring family members, regardless if they are taking on an entry-level or an executive position. If Aunt Barbara wants her son, Joe, to work in the business, you can say, “This is our employee policy.”
  • Create an integration plan for bringing the family into the business. What is this person’s career path going to look like?
  • In addition to letting teens work in the business around their school schedules, establish summer internships; create a bonified mentoring program, which can involve family and non-family mentors. A teenager can be mentored by an older relative and learn the ins and outs of a particular area of the business.


A lot of family business leaders send a child to college and hire them immediately upon graduation. While this may seem like a good idea, it’s not always the best way to go about it. Often, it’s better to let an adult child get some industry experience while working for another company before bringing them into the family business.

When people hire a child right out of college, they’re often overpaid and heavily scrutinized, especially by nonfamily employees. In contrast, when a college graduate works outside the company for a few years, it not only builds their confidence, it allows them to make mistakes and learn from their experiences before they come on board.

Running a family business has its unique challenges, but it can be much easier with the guidance of a business coach. To tap into our expertise, contact AdviCoach today.