Families say they put business first, but do they?

Family businesses will almost always say they place the business first, particularly in their hiring decisions. The best person will get the job, not necessarily the family member, so the saying goes. But a new report suggests they often put family first when it comes to their performance.

It might be business first when hiring a family member, but when a family member isn’t performing well it might not be business first.

The research was conducted in Germany by the business services group KPMG and Zeppelin University. The researchers found that when it came to the performance of family members they were judged at a lower threshold than non-family managers.

Alexander Koeberle-Schmid, a senior manager at KPMG in Germany, says the research found the business first approach is often loosely interpreted when it comes to family members. "For non-family members in a family business there is a clear definition of when this person should be dismissed - and it's usually fixed in their contract. But for family members, it is rarely, if at all, written in their contract when they should be dismissed."

He added: “Yes, it might be business first when hiring a family member, but when a family member isn’t performing well it might not be business first.”

The research suggests that nepotism still has a place in family businesses, despite what many owners say. If it is rare for family members to be dismissed for performance reasons then the performance of family businesses is likely to be compromised. Such nepotism can also undermine the morale of non-family staff.

The KPMG study spoke to 85 family businesses of varying sizes across Germany.