How and when to fire a family member from the family business

In my career as a family business consultant, there’s a single piece of advice that is both the hardest to hear and (sadly) the best advice I have had to give to some of my clients: It’s time to fire a family member. 

While it’s not a common occurrence, it’s not quite uncommon either. I’ve had to consult on this issue several times in my career and it’s never easy for me, let alone the family business leader. For them, likely one of the toughest decisions they’ll ever make. The decision is agonizing — but in many cases, necessary. 

How to know when it’s time

Letting a family member go from the business should always primarily be a business decision. But make no mistake, it will affect the family. I counsel family business leaders to live by the motto “run like a business, feel like a family.” Your priority must be to the business. After all, the business is feeding the family! 

So, what are some reasons for firing a family member? They come in three general categories:

Negative impact on the business: If a family member’s actions or performance at work is hurting the bottom line, the decision is clear. Whether it’s underperformance, a history of damaging mistakes, poor relationships with clients or a toxic attitude, there are clear cut reasons to cut ties when the issue hurts the business. 

Negative impact on the team: In a family business, nepotism is assumed. But it can be dangerous if left unchecked. Your team understands that you are going to hire family members. But those family members must pull their weight, or risk losing the respect of the team. A lack of respect quickly turns to a lack of trust, low morale and ultimately a lack of belief in leadership. 

Negative impact on the family: Not every decision to fire a family member is strictly a business decision. When family relationships at work deteriorate, they tend to deteriorate at home, too. With multiple family members in positions where one is another’s superior, things can get emotional. As much as family businesses try to separate business from family, they are forever interwoven. If a family relationship at work is threatening to derail the family, it might be time to make a move. 

What's next

If any of the above examples feel familiar, and you have that “feeling” that something must be done, then it’s time to think it through. The first question you should ask yourself is: Is it a will or skill problem?

Said differently, is it their attitude or their ability that’s causing the issues? If it’s the latter, can they realistically be trained and coached to become sufficient in the skillset? If they can (and they have the right attitude), it may be prudent to start with a performance plan rather than cutting ties immediately. Conversely, if a toxic attitude is the reason for the problem, not the skill, it can be harder to justify keeping the person around. The cost to the company culture and trust in leadership can be too high. Too often, I see companies doing the opposite — placating the bad attitude/high-skill person and jettisoning the skill-deficient employee with a great attitude. It should be the opposite. Of course, some necessary skills can’t be taught, and some attitudes can be adjusted. Every situation is unique. 

The risk of waiting

Because the decision is so painful, too many family businesses avoid doing what needs to be done in a timely manner. But waiting will only exacerbate the issues leading to a separation — especially the cultural and morale issues. If you’ve made the decision in your heart and mind, don’t wait. You only risk more damage. 

A final note

I have had to advise on this subject several times in my career, and I can’t emphasize the following point enough — don’t be petty about a compensation/severance package. In fact, be as generous as possible. This is a decision that can affect your family relationship for years to come. Don’t let money get in the way of maintaining a good family relationship going forward. It’s only money.