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Friday, September 22, 2023

Marrying Money: The In-Law Dilemma

I was once asked in a TV interview anchored by Michelle Ong of ANC (ABSCBN) what my thoughts were in recommending in-laws to work in the family business and my quick response was straightforward, “If family owning businesses can afford professionals, there is absolutely no need to hire in-laws!”


In my years of doing consulting work for my firm, Wong + Bernstein Family Advisory, one significant variable in family enterprises is the effect that in-laws have on family owning businesses. They can either be a positive contributor or can be a huge burden to the family and the business. And I have encountered dozens of family businesses threatened and impaired by the actions of in-laws.


Business owners must realize that they will never know who their children will choose as partners.  Not even the most controlling family business owner can determine his children’s final choices. So no matter how you look at in-laws, they will always play a huge role in the way your children will manage the business and the family especially when you are no longer around.


But while you are still at the helm, owners must recognize that unity, governance, wealth transition and legacy building efforts should always be in place before proceeding with your plan in bringing in-laws to the business.


In Asia, hiring in-laws is correlated to culture and necessity. For start-up businesses where resources are limited, in-laws are usually relied upon to help in the business and fill the void. Their engagement is significant as they not only play a pivotal role in the growth of the business but they end up becoming a natural extension of the founder’s trust. In a latter’s circle of trusted people in the organization, in-laws are classified as part of the “cheap labor” pool of relatives and friends.


However, problems generally surface when the business transitions from a mom and pop venture to a bigger and complex organization. Despite the transition, the owners often disregard the importance of establishing rules and policies related to in-law entry.


For Dr. Steven Berglas, management consultant, faculty of Harvard Medical School and author of “The Success Syndrome”, he asserted that “hiring in-laws into the family business can be a “kiss of death”. The reason?  They become too familiar to the point that they believe the business is their own.   They then proceed to prove their value to the company by changing the way it’s run.”


To help the family weigh in on the pros and cons of hiring in laws, I am enumerating issues and concerns that every owner must consider as he or she navigates the perilous journey of balancing family and business with in-laws:


1.    Should the in law be subjected to the same treatment as family members or should they be treated differently?

2.    How do you compensate In-laws working in the family business?

3.    Will they have the same benefits as any ordinary non family professional? Or have perks similar to that of the children?

4.    Will they be made to sign an employment contract and be subjected to the same performance metrics?

5.    What are the consequences for an underperforming in-law? Can he or she be suspended or terminated?


I have warned dozens of owners about the potential risk that exists when they carelessly and hastily employ in-laws minus entry rules and policies. It is not only unfair to the in law but a selfish act committed by the business owner which if left unmanaged can cause serious implications.


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