[Management] Why Family Businesses Have high Turnover

Features - Business Strategy

Family businesses are wonderful if they continue on. But sometimes you have to put down some hard rules in regards to the “family” part of the business.

November 22, 2013
Lloyd Merritt Smigel

Sometimes when the second or third generation enters the business he acts as a very efficient flushing agent. He takes over the helm and all of the talented employees jump ship. On occasion, the second or third generation takes over and becomes an “excellent employee attractant” and people want to join the organization.

Family members and employees often have high turnover due to “family matters.” Let’s take a look at some of the problems I have seen and dealt with during my career.

The Good. On the plus side, I have seen new generations come in and take it much further than the previous generation. They seem to have more drive and education. But the best part of these entrepreneurs is that they also have people skills and truly care about their employees. This is a rare combination and is a pleasure to work with. They need some additional guidance and ideas and they take the ball and run with it WITH their employees.

One such company is S.O.S. in Kansas City. So as not to embarrass the owner, I will not mention Darryl Franke’s name.

This guy was brought up in the business and his mom and dad turned over the business to him in one fell swoop. Take it. And they happily went off into retirement. Boom — gone! Darryl gave me a call, and I have been working with him for a few years now, and I must say I’m impressed. He has steadily grown the company and created a wonderful, dedicated team. It hasn’t been easy, but through Darryl’s leadership he has proven to be an effective leader, and his key personnel are totally dedicated to him.

He works WITH his people and is always willing to share and learn. He invests in his people and his company and is growing in an overall poor economy. One of the tests I give to leaders in the industry is to ask the question: Would I work for this person? The answer is yes. He is fair and offers opportunity and education to his employees. Additionally, he has a great sense of humor, and he is often out there working with the employees. He puts in long hours, is dependable (has great follow-up skills) and doesn’t complain. A rare breed.

He does have turnover, but the good people have a tendency to stay with him. His turnover generally comes from not putting up with those going against company policies, those that prefer higher pay for no work or those that believe the grass is always greener somewhere else. So be it. Turnover is normal, but low turnover is always a good sign.

Note: There are no other siblings working with Darryl.

The Bad. On the other side of the family coin are companies that have so much in-fighting that good employees hit the door before it hits them in the butt.

Many family operations have their yelling, screaming, back-stabbing and bad mouthing occurring right there in the office. Lovely.

When interviewing the employees, they often tell me that they are forced to “take sides” and it’s a lose/lose situation. Many employees run in and out of the office. They try to get in early and leave early to avoid seeing any of the relatives. Some supervisors tell me that they get two different orders from different family members, putting them in a terrible situation.

Some of the relatives think they are hot ____ (fill in the words) because they are relatives. Some relatives feel that they don’t have to EARN respect because they can demand it or fire the employee if they don’t dance to his or her music. WRONG attitude.

This will weed out the good employees and the kissers will stay and praise them, then laugh behind their backs.

The BAD family situations usually have no preparation for incoming family members. No family mission statement and no rules of engagement. No objective planning defining success and/or failure and what either of those consequences mean. Nothing is written out.

So what you have is sort of a free-for-all and hope things kind of “work out.”

When you start losing longtime, good employees that helped to build the company, that should be a sign of upcoming disasters.

If nothing is done about it (getting help from outside sources) it gets worse, and a lot of really good people that helped build the company leave.

Many of these relatives feel as though they are above the law and have all the answers.

Some family businesses CAN be helped and some can’t and/or really don’t want to change. It’s easier to let the company fall apart than to anger the family members.

You see, some family members do not believe in accountability. Unfortunately, for those people, I do. They have to PROVE to the present owners that they can run the company properly. After all, the older generation will be betting their retirement on it.

The Future. In my 35 years I have helped many of these family businesses and presently I am working with Beebe Pest Control in Foley, Ala. They have lots of relatives working there — but they are all wonderful. Then Barnie called me and said, “It’s time.”

I told Barnie that when I am hired I do NOT represent him or any of the family members, but rather, I represent the continuation of the company and the employees’ continued job securities. He agreed to that.

In this case, all the relatives are hard-working and willing to learn, and it is a pleasure working with them. They have created a symbiotic relationship. They are working together to solve problems and meet regularly to help offset potential problems.

The Beebes are willing to change their old habits to keep up with the latest technologies as well as increase their communication skills with each other and their employees. Barnie can now relax more on vacations.

Each generation tries to maintain the firm’s culture but each generation also changes the way it operates. That’s called progress.

Family businesses are wonderful if they continue on. Leaving a legacy is great and everyone wins. The employees are happier knowing that there’s a succession plan. It gives them a more stable feeling.

You need to consistently change — and sometimes you have to put down hard rules within the family part of the business — just like the employees have to follow their rules.

Running a family business can be a wonderful experience. But if you have a high turnover of good employees (especially the ones that previously helped you become successful) — better look within or eventually, you will do without.


The author is a pest control industry consultant with more than 30 years of experience. He can be contacted at lsmigel@giemedia.com.