Should Your Family Business Have a “No In-Laws” Policy?
Should in-laws, even if they’re highly qualified, work in the family business? While there’s no “one-size-fits-all” guideline, if you are considering involving in-laws in the family business, it’s important to think through some general policies in advance. Document a family work policy. The policy should define “family” and specific rules for how the different types of family can work in the business. There should be rules on reporting structures, succession plans, and who is allowed to revise such policies. Develop solid HR practices for reviews, bonuses, and terminations for all employees, as well as transparency around promotions and authority. Before you invite in-laws into the business, know how you will get them out. Most employees are at-will, but family isn’t at-will, so spell out your concerns in advance, document performance results, and have a predetermined trial period to review. This also creates an environment that feels safe and fair.
Separating work from home and business from love is complicated in a family business. In any business, management should have a strong say in who works for the company, but management shouldn’t have a say when it comes to who marries whom. It is extremely important to acknowledge that bringing in-laws into a family business and getting it wrong can damage both the family and the business. And bringing the boardroom into the bedroom can quickly become a toxic situation in any marriage.
Should in-laws, even if highly qualified, work in the family business?
In our research, families tend to have polarizing views on this. They either forbid in-laws from joining the family business altogether, keeping ownership rights and jobs for blood relatives, or they have an inclusive policy that welcomes in-laws. There are pros and cons for both scenarios.
Based on our own experience with family businesses, a policy against bringing in-laws into the business may be best, as it sets clear rules and expectations. There are frequently power struggles in family businesses, and this policy enables couples to have some aspect of their life that isn’t intertwined with the rest of the family. It also encourages the family to welcome and evaluate the in-law as a spouse, not as an employee. Having a policy in advance makes it less personal, whereas if you create one after an in-law whom you don’t like joins the family, it will breed resentment. Such a policy can also prevent friction between family members who were born into the business, as opposed to those who married into it. Having a clear separation between married life and work life minimizes pressure for everyone.
A policy against in-laws working in the family business also mitigates the risks if a divorce happens. It’s an important consideration, as divorce in a family business can have serious consequences that can affect ownership rights, employment rights, and reputations, and can be a huge distraction for the business. Families can’t safeguard against all of these risks, but it is prudent to have a prenuptial agreement that protects the ownership of the business, and in-laws should have employment contracts, just like non-family employees who have a non-compete clause in their contracts.
However, there are several wrinkles to the “no in-laws” policy. Inflexible, legally delineated rules can also drive blood relatives away. Most family businesses want to “keep it in the family”, and children often get “the call” to come home and join the business. Their spouses might be required to make career sacrifices of their own to support a spouse in the family business. And since family-owned business make up 80-90% of businesses worldwide, it could be difficult for in-laws to find meaningful employment if it’s not with their new family. Furthermore, the business may be missing out on competent trusted talent, as marriage can introduce highly qualified individuals to the business.
Many families with a “no in-laws” policy feel the need to support in-laws by giving them seed money for businesses of their own (often considered “go-away money”). But such a strategy often goes awry unless investments are based on merit, and results are clearly communicated.
One family business that we advised had a strict “no in-laws” policy, specifically created to prevent a disliked son-in-law from joining the business. When the managing father died unexpectedly without a family successor, the business fell apart, as the siblings weren’t united around a forward-looking plan. This dissolution might have been avoidable had the “rule” been to let in-laws into the business based on merit, as there was another son-in-law who was highly qualified to run the business.
We also interviewed a large beverage company in its tenth generation that has a “no in-laws” policy. Everyone understands the policy as gospel, and welcomes it. In fact, it has led to greater gender diversity within the company as daughters are taking the reins from fathers and more women are being groomed from childhood to be active in their family businesses, which span a variety of industries and geographic areas. Despite the large size of the family, this policy, along with other policies in the family constitution, have provided some necessary guardrails that have allowed the business and family to prosper.
Of course, there are plenty of examples of in-laws working in the family business that have proven successful. In one, a couple was faced with the unexpected illness of the wife’s father, who had been running the business. The couple moved across the globe for the wife to run the family business. Her husband (the son-in-law) jumped in as well, putting aside major outside career opportunities to assist the family business. The business has thrived, but sacrifices were made.
In another business, an in-law played an integral role in destroying a family business. The business had a father and son working together who came to blows. A son-in-law, Tom (identity protected), used this as an opportunity to get in with the father and push the son out. It worked temporarily, until the father and son buried the hatchet. They recognized Tom’s deceit and fired him. This led to an estrangement between the daughter, Sara (identity protected) and the family. Sara and Tom eventually divorced, but that wasn’t the full extent of the damage. Due to the lack of professionalism and the leadership vacuum, employees and clients started to leave the business. Sara had split her ownership of the company jointly with Tom. Subsequently, they were very slow to make decisions, as Sara had little knowledge of the business, while Tom tried to sabotage the company out of anger and vengeance. The entire family eventually lost the business.
There’s no “one-size-fits-all” guideline when it comes to having in-laws in the family business. But it’s important to clearly separate in-law ownership and in-law employment in the family business, as these roles have very different responsibilities and authority.
Every family business is unique, with their own family dynamics. It’s essential to think through the myriad issues before establishing a policy. To name a few, how will reporting, compensation, and evaluations work? Objective evaluation of a sibling’s spouse, for example, can be tricky. As the business and family grow, these issues only get magnified.
If you are considering involving in-laws in the family business, consider these general suggestions:
Regardless of what you decide in terms of in-laws working in the family business, they should be included as family members of the business, and should be updated on the business status and governance policies annually, and encouraged to ask questions. Demystifying the business will make things smoother at home. Be sure to also carve out family time where the business isn’t discussed, to create a strong family culture. In-laws can be a great source of strength and support. Often they are the biggest unsung heroes in a family and a family business, and if they’re included properly, they can be great ambassadors for the brand.
Family businesses that succeed in the long-term have a shared set of values, deep personal relationships, family pride, and trust amongst individual family members. It can be extremely difficult to penetrate this unity by bringing a new in-law — an outsider to the larger family — into the business. While there can be very positive outcomes, the process is fraught with risk and requires thoughtful analysis and policies.
Christina R. Wing is on the Faculty at Harvard Business School as a Senior Lecturer teaching Leadership and Corporate Accountability and Demystifying Families in Business. She co-chairs the Executive Education Program at HBS on Families in Business and is an active speaker and advisor to families in business globally.
Rohit K. Gera is the Managing Director of a third generation real estate development business in India and the United States. Based in Pune, India, Rohit has been leading his family business for the past 8 years and is active with many other family-owned businesses in India.
Should Your Family Business Have a “No In-Laws” Policy?
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