Asher's Blog

I have thought for a long time about family members working in a family business, not only children, but grandchildren, extended relatives and, in some cases, people who have become family through very close friendships. A founder who hopes to build an enduring company cannot avoid this question, because the business may eventually become one of the largest assets, institutions and sources of opportunity available to the family.

The instinct is often to make room for the people we love. That instinct is understandable, but affection is not an employment system, and inheritance is not evidence of competence. If a family business confuses love, ownership, employment and commercial patronage, it can weaken both the company and the relationships it was intended to preserve.

Some of my thinking was shaped by R.W. Nelson, who co-founded Kemin Industries with his wife, Mary, in Des Moines, Iowa, in 1961. When I last met him, he was already in his nineties. He gave me a book about adding zeros to a business—how a company producing ten thousand could think about one hundred thousand, then one million—and he privately shared aspects of his family’s business constitution with me. I will not reproduce that constitution, but some principles from that encounter have remained with me.

R.W. Nelson died in 2025 at the age of 98, after helping build Kemin from a small agricultural-ingredients operation into a global, family-owned science company. The lesson I took from him was not merely that family members can work successfully together. It was that the family has to develop rules strong enough to protect the company from entitlement and the relationships from ambiguity.

A family constitution is an act of love

People sometimes interpret written rules between family members as evidence of distrust. I see them differently. A family constitution allows difficult decisions to be made before a particular person, conflict or disappointment makes the discussion emotional. It says, in advance, what the family believes the business is for, who can enter it, how people will be evaluated, how ownership will be exercised and what happens when someone needs to leave.

Without rules, every decision becomes personal. If one child is hired and another is not, the explanation may be interpreted as favouritism. If a cousin performs poorly and is asked to leave, the employment decision can become a family dispute. If a relative supplies the company at an inflated price, challenging the contract may be presented as disloyalty. A written policy gives everyone a standard that existed before their individual case.

The constitution should not attempt to predict every future event, and it should be reviewed as the business and family evolve. Its purpose is to establish principles, decision rights and fair processes. It should be accompanied by properly drafted company, shareholder, employment and commercial agreements, because a family document does not replace the legal requirements of the jurisdictions where the company operates.

Ownership, employment and leadership are different privileges

The first distinction I would make is between owning shares, working in the company and leading the company. A family member may inherit an economic interest without having the competence or desire to work in the business. Another may be an excellent employee without being ready to become chief executive. A third may serve the family more effectively by becoming a responsible shareholder and pursuing a completely different career.

When these roles are confused, the surname becomes a job qualification, and senior leadership becomes an inheritance rather than a responsibility. That creates two classes of employees: relatives whose positions are protected and everyone else whose performance matters. Strong non-family leaders will eventually leave because they can see that their contribution has a ceiling, while weaker family employees may remain because nobody wants an uncomfortable conversation.

The family should be free to share wealth with its members according to its values, but compensation for employment should relate to the role and performance. Dividends are a return on ownership. Salary is payment for work. Board fees compensate governance responsibility. These should not be blended merely because the recipient belongs to the family.

This separation also gives a family member dignity. They can know that they earned the role rather than received a ceremonial title. Their authority becomes more credible with employees, customers and investors because it rests on preparation and results.

Education should be part of the entry standard

One principle I intend to adopt is that my children or other family members who want to work in the business should have a master’s degree. That is my family’s proposed standard, not a universal law for every family enterprise. There are exceptional people who build remarkable careers without postgraduate education, and a degree does not guarantee judgement, humility or performance.

The purpose of the requirement is preparation and discipline. A good education exposes a young person to ideas, deadlines, independent work and people outside the family’s immediate environment. Postgraduate study can deepen expertise and demonstrate the capacity to complete a demanding commitment. If the family business operates globally, education can also help the next generation build networks and understand standards beyond the country in which they were raised.

However, I would not treat the certificate as enough. The field of study should make sense for the person and the contribution they hope to make, while the quality of their work, curiosity, character and practical competence must still be evaluated. A master’s degree should be an entry condition, not a substitute for performance.

Families should also take education seriously long before anyone applies to the business. If we expect the next generation to steward a significant institution, we should help them attend good schools, cultivate intellectual discipline, understand finance and governance, and learn how productive work creates wealth. Succession preparation begins in childhood, but it should not become pressure that denies a child the freedom to discover a different calling.

Family members should first succeed somewhere else

The second principle is that a family member should work outside the family business for at least five years before joining it. This may be one of the most valuable requirements because it allows them to be assessed in an environment where the family name cannot protect them.

In another organisation, they have to apply for roles, respond to managers, work with colleagues who owe them nothing and earn advancement through contribution. They experience systems they did not inherit, learn what good and bad management look like, and bring back ideas that the family company may never have developed internally.

External experience also answers an important question: can this person create value without the family platform? If they have built a strong track record elsewhere, they enter the business with confidence and credibility. Employees are more likely to respect a relative who has already managed teams, delivered projects or developed recognised expertise outside the protection of the founder.

The five years should be meaningful rather than a waiting period. I would want to see increasing responsibility, measurable results, good references and evidence that the person can handle feedback. Simply occupying a role for five years does not satisfy the spirit of the requirement.

Where possible, the external organisation should be respected and relevant to the capability the person wants to bring back. It does not have to be a famous multinational, but it should possess standards and independent leadership. If someone hopes to lead finance, operations, science, technology or sales in the family company, they should develop real competence in that area before arriving.

A family member must enter a real role

When the family member eventually joins, there must be an actual job with a defined purpose, reporting line, authority, compensation and measurable outcomes. The company should not invent an executive title because the person is available or because the founder wants to keep them close.

I would prefer family members to work full-time. Full-time responsibility creates accountability and allows the organisation to assess the person’s contribution properly. A relative who appears occasionally as a vague adviser can exercise influence without carrying the burden of execution, which is unfair to the people who work in the company every day.

The person should report to the leader responsible for the function, even if that leader is not a family member. If every disagreement is appealed privately to a parent, grandparent or influential relative, the reporting structure becomes meaningless. Family access cannot be allowed to override professional accountability.

The role should also be competitively obtained. Depending on the level, independent directors or non-family executives can participate in the selection and evaluation. The candidate should meet at least the standard expected of a non-family applicant. In some cases, they should exceed it because their appointment will carry greater symbolic weight.

A family business that lowers standards for relatives sends a message to every employee about what truly matters. A family business that requires relatives to prepare, compete and perform sends a very different message: the family considers stewardship a duty rather than an entitlement.

Decide the conditions of exit at the beginning

One of the most important principles is that the conversation about exit should happen when the family member enters. It should be clear whether the appointment is for a defined period, part of a leadership-development path or intended to continue subject to performance. The agreement should state the conditions under which the person may leave voluntarily or be required to leave.

The conditions need to be objective enough that the decision does not become a referendum on whether the family still loves the person. They may include sustained failure to achieve agreed outcomes, misconduct, breach of confidentiality, conflicts of interest, refusal to work within the reporting structure or the elimination of the role. The process should include fair review, feedback and whatever protections employment law and the contract require.

The family member may also decide from the beginning that they want to work in the company for ten years, complete a transformation and then pursue something else. That should not be interpreted as betrayal. A planned exit can be a successful outcome if the company prepares a successor, transfers knowledge and honours the contribution.

Ownership after employment should also be addressed separately. Does leaving a role affect shares, unvested equity, board membership or voting arrangements? Can a former employee start or join a competing business? What happens to confidential information? These questions should be answered through appropriate legal agreements before the exit creates urgency.

A smooth exit protects family gatherings from carrying unresolved workplace resentment. The goal is to allow someone to cease being an employee without ceasing to be a son, daughter, cousin or trusted family friend.

Related-party consulting requires special caution

I would be especially careful about family members becoming consultants to the business. Consulting services are often intangible, and the quality or value may be difficult to evaluate before the outcome is known. If a relative starts a small advisory firm and receives a large family-company contract, employees and shareholders may reasonably ask whether the appointment was based on competence, price or relationship.

For this reason, my general rule would be that family members should not provide subjective consulting services to the business through firms they control. There can be a narrow exception if the relative works for an established professional institution—such as a leading audit, tax, legal, strategy or technology firm—and the firm itself is selected through a proper process. Another exception may arise if the relative’s company has independently become genuinely renowned in its field and can withstand objective comparison with the strongest alternatives.

Even then, the relationship should be disclosed, independently reviewed and approved by people without the conflict. The family member should not participate in choosing themselves. Scope, fees, deliverables, data access and performance standards should be documented, and the company should periodically test whether it continues to receive competitive value.

The concern is not that family members are incapable of excellent advisory work. The concern is that subjective services make favouritism harder to detect and performance harder to challenge. Good governance protects the relative too, because a transparent selection process prevents others from dismissing excellent work as patronage.

Tangible supply can be measured, but it is not automatically safe

I am more open to a family member supplying a physical product or clearly measurable service because standards, quantities, delivery times, defect rates and market prices can usually be compared. If a relative manufactures packaging, provides vehicles, supplies food or delivers a standardised technology service, the company can specify what it needs and evaluate whether the supplier meets the requirement.

However, tangibility does not eliminate conflict. A family supplier can still overcharge, receive advance information, bypass procurement, deliver poor quality or become impossible to replace without causing a family dispute. The contract should therefore be awarded through a process that would be defensible if the supplier’s name were made public.

At minimum, there should be comparable quotations or a documented market benchmark, a written contract, quality standards, service levels, normal payment terms and consequences for failure. The related party should be disclosed to the board, and independent decision-makers should approve material transactions. If the relative cannot accept these conditions, the company should not enter the arrangement.

Family patronage should never become an invisible tax paid by the business. The company exists to serve customers, employees, owners and society over generations; it should not be weakened to protect one person’s income.

Friends and their children require the same rules

Sometimes a founder has friendships so close that the friend’s children or relatives are treated as part of the family. Affection may be genuine, but the company’s standards should not change. If anything, using the same rules protects the friendship.

The person should meet the educational and external-experience requirements, compete for a real role, accept normal reporting lines and be evaluated against agreed outcomes. If they supply the company, the related relationship should be disclosed and the transaction independently assessed. Nobody should be placed in a position where professional feedback feels like an attack on the friendship.

The rule should follow influence, not only blood. If a relationship is close enough that employees might reasonably fear favouritism or decision-makers might struggle to remain objective, the governance process should treat it as a potential conflict.

Family employment must be fair to non-family employees

One of the largest risks in a family company is losing the trust of excellent people who do not belong to the family. They need to believe that their work can lead to responsibility, recognition and fair compensation. If every important role is eventually reserved for a relative, the company will struggle to attract the leaders required to grow beyond the family’s existing competence.

This is why the family constitution should address whether the chief executive or board chair must always be a family member. My preference would be that leadership belongs to the most capable person who is aligned with the values and can produce the required results. A family member should be eligible, but the surname should not settle the question.

The family can preserve purpose and responsible ownership without occupying every executive seat. In fact, professional leaders may help the business survive a generation in which no relative is ready or interested. Stewardship sometimes means knowing when not to take a role.

Performance management should therefore be consistent. Family and non-family employees may have different long-term relationships to ownership, but the standards attached to their jobs should be comparable. Compensation should follow market value and contribution, while family wealth is handled through dividends, trusts or other ownership arrangements outside payroll.

The constitution should govern the family as well as the company

A durable framework should include more than employment rules. It may define the family’s purpose as owners, the process for educating younger generations, how information is shared, who speaks for the family, how shares can be transferred, how spouses are treated, how disputes are resolved, and how philanthropy relates to the enterprise.

It can establish a family council separate from the board. The family council discusses family expectations, education and ownership matters; the board governs the company. This distinction prevents family concerns from consuming management meetings and prevents executives from being forced to mediate private relationships.

Younger family members can be introduced gradually to the history, values and economics of the business without being promised employment. They should understand that the company was built through productive work, customer trust and risk, and that ownership creates obligations as well as benefits.

The constitution should also explain how it can be amended. A rule appropriate when the founder has three children and one company may not fit a later generation containing dozens of cousins, several businesses and shareholders living across countries. Change should be possible, but it should require a process strong enough that rules are not rewritten to favour the person currently asking for an exception.

The purpose is continuity without entitlement

Family businesses can carry purpose, knowledge and patient capital across generations in a way that many other organisations cannot. A family willing to think in decades can invest through cycles, protect important values and build an institution much larger than the founder’s lifetime. That is a remarkable advantage.

The same long relationships can become a weakness when love makes accountability feel cruel, ownership becomes entitlement or commercial decisions are used to settle family loyalties. The answer is not to keep relatives completely outside the business. The answer is to establish standards worthy of the institution they may one day inherit.

My principles are therefore straightforward. A family member who wants to work in the business should be properly educated, should have built a credible record elsewhere for at least five years, should enter a real full-time role and should be accountable for measurable results. The conditions of exit should be understood from the beginning. Subjective consulting relationships should generally be avoided unless independent quality and selection can be demonstrated, while tangible supply arrangements should still be transparent, competitive and governed as related-party transactions.

These rules are not designed to make family members prove that they deserve love. Love is unconditional. Employment, leadership and the use of company resources are not.

A strong family constitution protects that distinction. It allows the family to remain a family when a job ends, enables the company to choose competence without apology, and gives the next generation an inheritance better than an automatic title: the opportunity to become capable stewards of something built to outlive all of us.

Further reading

• John L. Ward, Keeping the Family Business Healthy, on governance, succession and the disciplines required for continuity.
• James E. Hughes Jr., Family Wealth, on developing human, intellectual and financial capital across generations.
• Kelin E. Gersick and colleagues, Generation to Generation, on the overlapping systems of family, ownership and business.
• Randel S. Carlock and John L. Ward, Strategic Planning for the Family Business, on aligning family aspirations with business strategy.