When a Manager Starts Hiring Family Members, and Those Family Members Start Misbehaving, What’s an Owner to Do?

Alders Jewelers is a third-generation institution in the Southwestern town in which Chuck Alders grew up. As the only child of an only child, there was no question in anyone’s mind — least of all his dad’s — that Chuck would take over the family business one day. With his mom’s support, Chuck chose to go away to college — to a school up north, where he studied journalism. He figured that if he was eventually going to come home to run the business he’d been working in since seventh grade, he might as well spend a few years studying something that spoke to his interest in things beyond the life he knew.

Right about the time Chuck headed off to school, his dad hired Mike Wolfe, a young guy from a nearby town, to work as a salesman and general right hand at the store. Mike had five years of experience working with a furniture company in a similar position and seemed to be a great fit. Mike was looking for a long-term career and was happy to do whatever was necessary to learn and grow. 

When Chuck came home after four years of college and several years of experience working for a publishing company, his dad was happy to have him back. Business had grown significantly, and though Mike was doing a great job as the general manager, it was clearly time to begin training his son to assume his role as head of the family business. For his part, Chuck respected Mike and the job he had done over eight years with the company. While he had come to accept that owning Alders was his destiny, he had little interest in the day-to-day management of a retail business. He envisioned himself eventually running the store as the cornerstone of an enterprise that would include other businesses that aligned more closely with his interests. He knew without a doubt that he would need Mike to continue in his role if he were going to make that happen.

Chuck and his dad had just over a year of working side-by-side before the senior Mr. Alders passed away unexpectedly. During that year, Chuck had spent his time learning about the mechanics and finances of running the business, while Mike had continued to handle the front-end operation. They appeared to make an ideal team. In the 10 years following his father’s death, with an experienced, top-notch staff (many of whom had been hired by his father), Chuck’s innovative thinking and Mike’s reliable execution, business grew exponentially. The store was moved into a brand new, much larger building, and big-name designers lined up for space in their showcases.

Chuck and Mike built a strong working relationship and a solid friendship. Chuck invested in several other local business ventures that claimed significant effort and energy over the years, but he was confident in Mike’s ability to assume a larger role in the store, and at each step along the way, he was careful to ensure that Mike was compensated appropriately. Despite his wife’s busy career as a physician and a pair of toddlers at home, he also saw that he kept a regular presence in the store, and that, without undermining Mike’s authority, he remained accessible as the owner of Alders Jewelers, for employees, for customers and for the community.

Last fall, Chuck was a bit surprised when he returned after a two-week vacation to find Mike’s wife Cindy working in the store’s newly expanded bead boutique. They had agreed that Mike would hire a manager for the area, but there had been no discussion about bringing Cindy into the role. Mike explained that Cindy had been unhappy in her previous job since the local bank had been taken over by a national entity, and that, in his opinion, she was perfect for the job. He didn’t feel that he had needed Chuck’s approval since hiring had always come under his purview. He also took the opportunity to tell Chuck that he had hired his 21 year-old son Jonah as the store’s newest salesperson, with the expectation that Jonah would take over the CAD design area they had agreed to install early in the coming year. Jonah had helped out in the store and had even worked part-time over several summers. Chuck knew that he had both sales ability and a great deal of computer knowledge, but he also knew that Jonah had some serious attitude issues. He had a reputation among Alders’ associates for appearing arrogant, entitled, moody and occasionally uncooperative. When Chuck challenged the sensibility of hiring his family members, Mike responded with uncharacteristic inflexibility. He reminded Chuck that Alders was a family business, so hiring family made sense. He said that since he had been given responsibility for running the store with little oversight or assistance, it was his call to make. He assured Chuck that both Cindy and Jonah were being paid at the company-established rate and that they would be held to the same standards as every other employee. Chuck left the conversation with the understanding that he was not pleased, but that he would respect Mike’s authority to make hiring decisions as long as company standards for professionalism and performance were upheld. He also made a commitment to himself to be a much more present owner in the coming months, so he could keep a careful eye on the situation as it unfolded.

Jonah and Cindy proved to be valuable assets on the sales floor through the holiday season, but it didn’t take long after that before the chatter started among the rest of the team. Cindy was bossy and difficult, Jonah was rude and disrespectful to his parents and everyone else, and Mike clearly favored his family members over the rest of the team. Several of the senior associates voiced their concerns to Chuck, but fearing retribution, asked that they not be identified as complainers. 

After expressing his concerns to Mike, Chuck found himself in a difficult situation. Mike strongly disagreed with the less-than-favorable review of his wife and son and cited jealousy over their strong sales performance as the reason others were creating problems. Chuck felt an obligation to his long-term employees, but he also believed that if he pressed Mike to replace Cindy and Jonah, Mike would issue an “all or nothing” ultimatum. Though he knew that he could manage the store in the short term and could probably find another manager, he recognized that losing Mike would mean major changes to both his larger business enterprise and his long-term plan for the store.

Expanded Real Deal Responses

Ira K.
Tallahassee, FL

a  Chuck is partly to blame for turning over a large part of the operation to Mike. That said, nepotism isn’t the best thing, but the damage of Mike’s hiring of Cindy and Jonah is done. By Chuck’s own admission, Mike has done a terrific job over the years, and Chuck can’t just clean house. I would sit Mike down for a talk and remind him that everyone has to work nicely with everyone else to keep the business growing. If Mike is as good as he seems to be, he will get the message to his wife and son.

Mike B.
Kennesaw, GA

a  As someone who grew up in a family business, I have no problem with hiring family if they are qualified, but they must understand they have to play by tighter rules than the other employees. While Mike does all the hiring, he has an obligation to talk to Chuck before those decisions are made. Chuck has every right to be upset and can absolutely use his authority to request a change be made by Mike. If Mike does not comply, then Chuck will have a decision to make, but in my opinion it would be an easy one. While Chuck would hate to lose Mike, he would have no choice but to let him go along with his family. If Mike doesn’t agree, then he’s not the professional that Chuck thought he was.

Garry Z.
Chicago, IL

I’m not opposed to hiring family members, but this does pose some unique problems. If one is not happy, you risk losing all. Here you have a good manager who took advantage by hiring his wife and son without first discussing this. My first thought is that they are planning on opening their own store and using this as a training ground. Everything that I’ve read says too many cooks (bosses) ruin the stew. Dissension among the rest of the staff needs to be addressed immediately prior to a wholesale mutiny. Both the wife and son need to be given proper expectations and job descriptions, and given a finite period of time to accept and improve or out they go. Now is the time to start planning for the inevitable.

Dan F.
Sequim, WA

Mike should have run that by Chuck. If it’s not your business, common sense says hiring family is a line you don’t cross without permission. It’s OK to hire family but they must be a good fit with the rest of the staff and perform as good or better.

Yes, risk losing Mike anybody can be replaced. It is still Chuck’s store and Mike works for him. The bossy wife can stay but she must realize she’s not in charge. Others have been there longer and know more about the business than she does.

The rude son has to go. He is bad for business and will not change. Mike needs to do his job and fire the son.

Brenda S.
Woodstock, GA

Ethically, although Mike had been running the store and making hiring decisions, he probably should have conferred with Chuck before hiring his family. I’ve been in a family business before (not jewelry related), and the adult children did act entitled and did not abide by company policies. Management was afraid to discipline them for fear of their own jobs. In the end, the company was sold to the manager but not after lots of strife and hard feelings.

Just because Chuck’s father established a “family” business, it was his family that invested the sweat and financial equity to build the company. It was not Mike’s family business.

Chuck could offer the company to Mike for purchase and Mike could manage it however he sees fit. If Mike thinks his management style is flawless, then it would be a win-win for Mike and Chuck.

Ralph H.
Richmond, IN

This situation is likely not unusual in small, family owned businesses. Chuck may be in a position where he could lose control of the jewelry business if he does not take some of his attention from his other interests. If the jewelry store is still important to him, he could hire an outside professional manager, give him authority over the store (subject to Chuck’s final approval on specified matters), and stand back. (or he could actually take control himself). In either event, policies should be in writing, as part of an employee contract, signed, respectively, by each employee, and by Chuck.

Are Mike’s new “employees” pushing him in a dangerous direction? Time will tell. Agreement to, and compliance with, the new written policies must become a condition of employment. Various members “understandings” about their authority can no longer control. These “understandings” will create misunderstandings which will flow down to the perceived treatment of customers, and really cost the store in lost business.

Time to decide, Chuck. “Who’s the boss?”

Brenda S.
Woodstock, GA

Although he acted within his authority, it was also pushing just a little too far and asking first to avoid appearance of impropriety would have been best route. I think setting ground rules for hiring family on case by case basis since knowing the person you might better understand the potential pitfalls. Certainly Mike can regain control but telling the manager what he has decided for the best of the company is all he needs. Done in a thoughtful way of course. Yes, he should risk losing Chuck as it still is his company and needs to be able to make ultimate decisions. Again thoughtful discussion would do wonders and much direct is ok as well if that does not work.

Patrick M.
Harrisburg, PA

Although he acted within his authority, it was also pushing just a little too far and asking first to avoid appearance of impropriety would have been best route.

I think setting ground rules for hiring family on case by case basis since knowing the person you might better understand the potential pitfalls.

Certainly Mike can regain control but telling the manager what he has decided for the best of the company is all he needs. Done in a thoughtful way of course.

Yes, he should risk losing Chuck as it still is his company and needs to be able to make ultimate decisions. Again thoughtful discussion would do wonders and much direct is ok as well if that does not work.