Talking about Nepotism in the work place can very quickly lead to a heated discussion. Is it good? Is it bad? While it’s clearly important to avoid the “lazy nephew” phenomenon- appointing an incompetent or lazy family member to an important position, there are obvious benefits to employing family members.
If it’s your family company you might say, “while I may not currently be the best performer, there’s no one that’s going to work harder than me, and no one that will care about the company more than me.” This narrative has been working for many of the top multi- generational family owned retailers in the US.
When speaking with NAMM members, I only heard great things about Amro Music and the incredible work Pat and Chip Averwater, (Chip is recently retired from Amro) are doing in preparing their sons Nick & CJ for more responsibility. You probably know that Chip has served as Chairman of NAMM and Pat is currently a NAMM board member.
Pat recently shared his thoughts with me on the topic of succession planning.
We are fortunate that we have 2 young people coming up in the business that have earned their stripes. They participate, they contribute, and everyone sees that these two individuals have the potential to lead the company throughout the 4th generation
While companies must not value family relationships over character and qualifications, few have a process to implement.
So, when Pat forwarded me this email, I immediately became a fan.
The following information is taken from our company business plan. I hope you find it helpful.
As our 4th generation, CJ and Nick have stepped up to insure the management transition is a smooth one. CJ has a Master of Business Administration degree and has worked full-time at Amro Music since 2004. He was named Vice-President of Operations in 2012. Nick has a Master of Business Administration in Finance and has worked full -time since 2012. Nick was named band department manager on January 1, 2016. The complementary strengths of CJ and Nick foster a bright future for our company.
AGREEMENT FOR FAMILY EMPLOYMENT
The arrangement with children who might want to enter the business is as follows: For the first ten years of work at Amro after college, a family member receives compensation consistent with what they would make for similar work outside the company. After working in the business for ten years after college, the family member becomes an officer of the corporation and participates in the splitting of officer salaries. The amount for officers’ salaries is split in the ratio of 58% for the senior corporate officer and 42% for the junior officer, there normally being about 10 years difference in experience between the senior and the junior officer. (In a case in which a family member chooses not to finish college, two years work at Amro could be considered the equivalent of one year of college. Thus a person who began work at Amro at 18 instead of going to college, would become an officer at age 36; had he finished college at 22, he would become an officer at age 32.)
Each family member bears the obligation of maintaining a high standard of responsibility and ethics inside and outside the business. Any actions or events that reflect poorly on family or company values could result in employment termination.
It’s clear that Pat and Chip have their expectations well-articulated. There is no room for confusion. The Nick and CJ know exactly what’s expected and are aware of the consequences if they fall short.
In many cases, nepotism is the policy Du Jour.
Serendipity succession- Nepotism vs. family business
This “agreement” is also essential for the Amro employees to understand. Client retention-
Nick and CJ share a tremendous burden. A burden they don’t share alone. Thanks to the outstanding AMRO staff of 64 that supports, even consults the owners trough the transition.
All eyes are on them. This is no small task. They have earned their stripes, and earned the respect of the employees recognize their leadership qualities. Amro employees recognize that Nick and CJ have the skills necessary to keep the business running and growing.
It might seem obvious, but worth repeating. You cannot pass a family business from one generation to the next, unless family members work and run the business.
Sabrina Parsons, the CEO of Palo Alto Software, a business her father started, said the following-
I think there are right ways to bring family members into a business, and there are wrong ways to do it as well. But I don’t agree that all nepotism is bad, and that family members should never hire other family members. I think its a strategic dance, and it has to be done for the good of the business, but it can be done well. And when it is done well it means the difference between the life or death of a family business.
Pat and Chip seem to be doing all the “right” things. The family is proud. The employees are excited. All eyes are on Nick and CJ. After all, Music does make you smarter. 🙂
Please note: Amro Music is not affiliated with BH Wealth Management or First Allied Securities.