If you have a family ranch, whether you know it or not, you have a family employment policy. At least your kids think you do. In the absence of a formal, written policy, kids often grow up with the expectation that regardless of their education, experience or talent, there will be a role for them in the family business. If that’s your policy, your ranch isn’t a business as much as it is a jobs program for otherwise unemployable family members. Good luck with that! That inevitably results in a poorly run business, turbulent relationships and deep, lasting resentments.
A family employment policy makes clear what job/career opportunities may exist for family members and what they must do to take advantage of those opportunities. It takes just three or four hours to determine and document your policy. The financial implications are huge. The implications to family relationships and your emotional well-being are even bigger.
A well-constructed family employment policy should define the experience and qualifications family members need, under what circumstances jobs will be available, performance standards and compensation. Here are some questions that will help you formulate a policy for your ranch in each of these areas:
Experience and Qualifications
What experience and qualifications are required to work on the ranch? Are kids expected to spend some time working off-the ranch before coming back home? Bringing kids back to work on the ranch too soon can create problems. It can be bad for the kids because their perspective about ranching and business tends to be narrower than kids who leave the family ranch to get experience elsewhere. It can be bad for Dad because, just when Junior is pushing to take on more management responsibility, Dad is in his managerial prime. And it can be bad for the business because Junior doesn’t yet have the training and experience to run a successful business through turbulent times.
What & When
Under what circumstances will positions be available for family members? If there is a non-family member in a role that Junior wants and is qualified to have, will that person be laid off to make room?
Standards
Will family be held to the same standards (dress code, drug policy, etc.) as non-family employees? How will family members be disciplined and under what circumstances will they be fired? Whatever those standards are, they should be documented. If a policy isn’t written down, it isn’t really a policy; It is just an idea, and it is impossible to hold someone accountable to an idea.
Compensation
Your family employment policy should also include a section outlining the compensation policy. What form(s) of compensation are provided? How will the salary be determined? Will it be paid now, or deferred? If deferred, how will interest accrue and at what rate? What other benefits and perks go with positions (e.g. health insurance, housing, vehicle, etc.)?
I strongly recommend against making sweat equity part of the compensation package. If you are including sweat equity, document the value of unpaid work. Someday, when the business is financially able, it should reimburse the worker. If the ranch is never profitable enough to reimburse the worker, you may have to take a loan out to pay the worker when they leave or reimburse the worker from the estate when it passes from one generation to another.
Personally, I don’t believe that we owe our adult children a living. I think it is a mistake to hire family members just because they are family. For what it’s worth, I think we owe our young children the guidance and support to develop their full potential and to become the people we would want to hire even if they weren’t related to us. When we do hire them, we should compensate them fairly for the work they do and hold them to at least as high a standard as non-family employees. But that’s me. You need to define and document the policies you believe are appropriate for your ranch, and you need to do it long before your kids are knocking at the door expecting to come back.
