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Family Perks: Benefit or Boondoggle?

 

By Chris Eckrich, Ph.D. and Stephen McClure, Ph.D.

Those who own and manage family enterprises are often drawn to and appreciate the perks that their participation brings. Even in good economic times, perks can be a sensitive issue, raising the eyebrows of employees who feel equally committed to the success of the business. In challenging economic times, and in an era of cost-cutting and employee reductions, perks can create great bitterness among employees who see family members as abusing their positions within the business. Clearly, a healthy dialogue among family owners and/or managers can help the family think through the impact of these perks and determine if their current policy needs a revamp.

Examples of normal family manager perks include cars for family employees, club memberships and use of company credit cards. While most families are quiet about the perks not afforded to non-family employees, in the current economic environment, when hardworking employees see family employees using corporate dollars for what appear to be personal expenses, they often feel a sense of injustice.

A thoughtful client recently stated that when thinking about perks, the primary question should be, “How will this impact the business?” So often, families are focused internally on the subject of perks, exploring whether perks are distributed fairly throughout the family. In light of the challenges involved with motivating an employee workforce during a time of cutbacks, families would do well to consider not only the broader impact that their perks have on the organization, but also the trust level between employees and the owning family.

While there are many instances in which certain perks are legal, families are cautioned from letting feelings of entitlement blur their sensitivity to the detrimental effects on employees’ morale and their trust in family management if those practices are seen as abusive and unfair.

Examining the Perks Policy

Here are some signals to the family that the perks policy may need attention:

  1. There is tension between family members (spouses, siblings or cousins) over the business perks given to family employees who work in the business. Frequently, those who do not work in the business will be sensitive to a lack of fairness, particularly when a family member in the business receives a perk that is not given to other employees. This implies that the perk is based only on the person’s family status. If it is determined that family status is the primary motivator, then it is a clear message to those family members not in the business that they are not of the same status, and this causes tension for the family. When this issue surfaces, it is a good time to review the purposes and motivations behind the perks.
  2. Non-family employees are verbalizing frustration about certain family perks that may be taken. In our experience, frequently this discontent is voiced about a specific person who may not be performing well within the business. Rather than disregard the concern as being an inappropriate statement on the part of the employee, care should be taken to make sure there is a sound basis for the perk being taken.
  3. A family perk is justified because of the low compensation paid to family members working in the business. Nothing stirs up more distress in family enterprises than family employees being paid at a discount rate because they are family. Our experience shows that paying market rates is generally seen as the most fair and appropriate compensation practice, and doing so often makes it unnecessary for certain perks to be used as a balancing mechanism.
  4. You have not checked to make sure that the perk is legally solid, according to your CPA. Many families take perks as an ownership or management benefit without an awareness of the legal implications of the practice. Identify all perks that family members receive and ask your CPA if there are any concerns about the perks. If the answer is yes, the matter should be addressed immediately.

Keeping a Healthy Dialogue

Perks are tricky issues, and the family business unit needs to consider many scenarios. Is it appropriate to have company employees, vendors or suppliers do work on a shareholder’s personal home? What are the expectations for payment for those services? Is there a discount? Is it free? Credit cards and gas cards for family employees are common perks. Does the person’s position require that he or she hold a credit card or a gas card in order to perform their job, and does the business have a clear policy on whether personal expenses need to be reimbursed? It is important to give care and attention to these and other situations that might exist within your perks policy.

Perks are a source of conflict and tension, not only among family groups but also between different stakeholders in the business. A healthy dialogue among owners about appropriate perks and the policies that govern them can help reduce and avoid conflict in the family enterprise. It might also motivate your employees to a greater sense of commitment knowing that you care about the health of the business as much as they do.

 

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