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Too Close For Comfort

How to hire, fire and work with family and friends


illustration: istock

Teo Clemens, owner of Mauka to Makai Outdoor Gear Hawaii, once terminated an employee who happened to be a good friend. His advice to people in the same boat: “Make sure lines of communication are open and that nothing is misunderstood,” he says. Firing his friend was not easy, but he has learned from the experience.

Clemens’ company is unique in that Mauka to Makai’s employees either are related, or are referred by friends and family. His wife, Drae, and two sisters-in-law work at the store, located in the Ward Gateway Center in Honolulu. He and his wife regularly share their business dreams with their staff, and they even offer employees stock to “make them feel like they’re also owners,” he says. In return, employees are proud to work at a company carrying top-of-the-line products for the outdoors and cold weather.

What Clemens does not do is tap friends and family for loans, or capital to run the business. He strongly advises against the idea. Finances, he says, should be handled by the professionals. “Money is not as important as the relationships you have with your family,” he says.

• Pay family members based on their skills, experience and productivity, and not by their status or seniority. Don’t underpay them. But don’t grossly overpay them, either, or they might develop an inflated sense of self-worth.

• Before nego-tiating pay with family members, research salary data from the Department of Labor and trade associations.

• Entrepreneurs often make the mistake of hiring relatives who desperately need jobs. Be realistic, and ask yourself: How is that person a good fit for my company? Do we really need an extra employee? Would I hire this person if he/she weren’t related?

• Give a probationary period for family members who are hired, and write down a detailed job description so that expectations are met. After the probationary period, ask other managers to fairly assess the new employee before deciding to keep or terminate him/her.

• Create an advisory board comprised of nonfamily members or business consultants. Consult the advisory board when making major decisions, and meet with the board at least once a year, so they are aware of changes to the business.

• Nonfamily and family-member employees should be treated equally and with respect. Provide everyone with the same training programs, benefits, vacation hours and bonuses.

• If you and your spouse work together, separate your personal and professional lives. Restrict “shop talk” to certain hours of the day, such as when the children are sleeping. Regularly make time for family, and always make time for yourself.

• If you must borrow money from friends and family, have a contract in writing as you would with a bank loan. Create a payback schedule, and stick to it. Disclose everything. Be completely honest about the lender’s financial risks.

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