At AdviCoach, experience has taught us that one of the most difficult aspects of running a small business is finding and retaining top talent. If you’re running a family-owned and operated business, you’re probably looking for talent inside and outside the family pool. Given the fact that this is often a “least favorite” job, business owners are usually happy to pass the torch to someone who can take on the hat of human resources (HR), but it’s a delicate undertaking.

Traditionally, human resources is the department tasked with recruiting and training job applicants and handling employee-benefit programs. Not all companies have these departments, but as small businesses grow, they acquire the resources to establish these critical departments, which play a key role in helping companies deal with the human aspect of an ever-evolving business environment, not to mention filling an increasing demand for high-quality employees who will add, not subtract from the company’s culture.

Family Businesses Are Unique 

Human resources is important in all businesses large and small, but family firms are unique from non-family firms and have different challenges for reasons we can understand:

  • Family firms are inclined to treat all employees including nonfamily members like family. This can challenge business owners to handle HR issues with special care and respect – with professionalism.
  • When family members work in close quarters, the environment can be more volatile simply because family are more “comfortable,” but that can translate to uncontrolled emotions and decreased employee morale.
  • Family relationships are more vulnerable.
  • Reputations of family members are at stake.
  • The family members’ livelihoods are often tied to the business’s success, so they are motivated to maximize the business’s profits.

Because of the above factors, the HR head is confronted with issues that are not common in non-family firms. But there’s a silver lining – the HR function has the potential to bring balance to a family business and have a positive effect on the interactions between family and non-family employees alike.

HR’s Focus on Creating an Engaged Workforce 

From HR’s standpoint, the family business profits from a happy, productive, actively engaged workforce. After all, engaged employees lead to productivity, better sales, and excellent customer service, not to mention a better employee turnover and less absenteeism. While HR may seem like it’s all about hiring and firing and protecting the company from employment lawsuits, it’s much more than that.

A human resources department is essential for:

  • Finding top talent,
  • Retaining top talent,
  • Firing employees,
  • Treating family and non-family employees fairly,
  • Continuously striving to improve staffing,
  • Focusing on career development on behalf of employees,
  • Effectively managing the company’s people,
  • Maximizing employee productivity,
  • Keeping the company up-to-date on all employment laws,
  • Enforcing state and federal employment laws,
  • Protecting the company from potential employee lawsuits, and
  • Facilitating improved communication between employees.

In the traditional sense, HR involves managing all the employee-related policies and practices in a business. However, since family firms function more like a “family,” HR plays an even more important role, especially when family businesses take a different approach to hiring by selecting candidates within the family’s circle. Often, the approach to hiring can be softer, more casual, and less formal in these instances, but HR may suggest a more systematic approach to the selection process as a company grows.

Is it Too Soon for HR Management?

As a small business owner, you become concerned with HR management from the day you hire your first employee, whether it’s a family member or not. Even before your company can afford an HR department, your employees are your responsibility. Every manager in your family business should be aware of their role in assembling an All-Star Team, being supportive, and nurturing a strong company culture. This is easier to do when the company is young and still too small to justify a standalone HR department.

But what if you’re beyond that early stage? If your business has grown out of the startup stage and has established a dedicated HR department, you can still keep the entrepreneurial flame alive by leading from the front and remaining actively involved in the HR processes.

Family businesses can fail to utilize this valuable asset, relegating it to a dry “personnel function” that enforces routine policies, instead of making it a value-generating partnership. If you have a family business, don’t miss out on a potentially larger opportunity for creating value. The success of your business relies on your people, and HR is there to maximize the effectiveness of your team and its performance across the board.

At AdviCoach, our coaches believe that HR can be the true champion of a family firm’s resources, and we’re not just talking about the human ones. Even if you don’t have an HR department yet, senior management can still learn to utilize HR policies and procedures to foster an engaged and productive workforce. To learn more, contact us to begin the conversation with a seasoned business coach.