Fire Your Family

And our international listeners, both of them, they just, they were sleeping. Yes. Yeah, absolutely.

Oh, well, what can you do? It's more like a hobby anyway. That is true. It's a lot of fun.

And there was a lot of talking. I apologize to everybody out there. We covered a couple of episodes in marketing, and clearly I've used my best ramblings to good effect.

There were over 30 minutes, and I think one was 50 minutes. So apologies out there, people, person. Yeah.

And if you haven't downloaded it yet, just play it on triple speed, and you'll get to the half an hour. Yeah. I speak slowly anyway.

So yeah, you can do that. Hopefully, there were a few nuggets in there. Hopefully, it was useful.

I had a lot of fun. So for me, it was great. That's all that matters.

I don't care about anything else. It really is. Absolutely.

It's all about you, John. Yeah. That's right.

That's right. And thanks for the new chair. You're welcome.

Yeah. The old one had to go, big time. Yeah.

Well, I get nervous in these things. It's true. Sorry, mom and dad.

Still get stage fright. Yeah. Yeah, exactly.

Well, we're potty training the little guy. It runs in the family at the moment. All right.

Let's get going. Ryan, the title is Fire Your Family. But when we chatted before, you said it's not really the point.

What is the point? So the title is provocative. It's clickbait, but it does mean something. The real message here is you've got to stop giving your family a pass on the standard everyone else has to meet.

Right. So let me tell you a little story. It's a composite story.

It's made up, but I've seen this thing happen a dozen times. Right. So we'll call them the Delgado family, eight million dollar mechanical shop, second generation, good, good business, good margins on paper, the whole nine yards.

So Maria, the owner, she's really sharp. And she's built it from her father's two million dollar shop to now eight million. Right.

And then there's Danny. Everyone loves Danny, her brother in law. He's the operations manager.

You know, he's been there for 15 years. Nice guy. Love that Christmas.

But the problem is, John, Danny can't do operations. Right. Jobs are running late.

Scheduling's a mess. And above all, two of the best field leads, they quit because of, quote unquote, the office. Maria knew everyone knew, but nobody said it because it meant saying it to her sister over dinner.

Right. And nobody wants to have that conversation. But Danny wasn't the problem.

The problem was Danny was the one person in that company that nobody was allowed to evaluate. That's really what most family businesses are about. It is that they have at least one Danny and the owner already knows exactly who it is.

And so do the other employees. Yeah. I mean, you say most companies like off the top of my head right away, I can think of a number that have this very problem that, you know, it's somebody that is close to them that they have a challenge with and it's preventing things.

So is it how common is it, you know, percentage wise? Do we see this in every business? Is it majority? Is it a specific size or type? It's it's not, but it's most of them, but not all. Right. And people hang on to their family because they're they're loyal.

They can trust them. You know, they they do this. They're not outsiders.

Right. And that's the detriment as well, is that they're also treated differently. Right.

They can show up for late, late at work. They can be absentee. They can not follow the process of the procedures and they get away with it.

But everybody else gets held accountable. Gotcha. Yeah.

I think we're going to dig in a little bit on on some of those things. But but absolutely. So, yeah, subtitle on this is really people in P&L break it down a little bit.

You know, what is this wrong family member or grandfathered for one of a different term a team member actually costing the business? They actually cost you twice. Right. One is in the actual P&L and one is the culture and the culture cost really is the bigger one.

Right. So typically what happens in the P&L is that they're getting above market pay. Uncle Ray is sitting to watch the gate to open up the lights in the morning, get the coffee on and getting me getting paid way more than what he should.

Right. And that's and that's the problem. And then you have, you know, if they're not very good at their job, rework, delays, errors, performance issues all the way down the stream.

Right. They could cost you hundreds of thousands of dollars. Right.

But the big part is the cultural cost. Right. So your best family members will eventually quit.

Non-family members will eventually quit. Right. Because of this double standard.

Right. That's the problem. And, you know, in the in this Delgado family case, they lost the two best lead technicians they had.

Right. Now, HR people will tell you, you know, you know, replacing them at, you know, thirty thousand dollars each. Right.

Is is an actual cost. But really, it takes nine to twelve months to get people up and running. Right.

So now you've lost really double that. And that's the actual cost as well. Right.

But there's also a moral tax. What's what's good. You know what what he can do and what I can do are two completely different things.

And that becomes training on people, especially your good people that are that are overperforming. But they're seeing that there's a there's a secondary line here. Right.

And that they're never going to be where Danny gets to because Danny's blood. And that's the problem. Right.

So it's it's not really the cost in terms of dollars. It's also the cost and what's going on with your employees that are non-blood. Right.

Yeah. I mean, we impress upon people leadership teams hiring based on values. Right.

And there's high integrity. I mean, we we break that down. We go through all the different value sets and define it for that organization.

And integrity and accountability is a huge piece of all of those. So, yeah, if you've got one person marching to the beat of their own drum and the rest of the business is held accountable, that can obviously create some discord. But is that just the cost of having a family business just come with the territory or.

No, John, plenty of family businesses run clean. Right. And the clean ones, they don't play like this.

Right. They're running a business here regardless of who it is. So it's really the exemption.

Right. It's really the. OK, well, nobody.

Danny's untouchable. Right. And that's what really kills the family business.

Got it. All right. Quick break.

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Same energy. Ha ha. We just made that funnier by ripping.

That's awesome. I'm laughing at you. That was your ha ha.

Somebody said you're actually funnier than me. I was thoroughly gutted. Yeah, I couldn't reach you for two days.

You're in the fetal position. Yeah. And it just cost you 20 bucks, didn't it? Yeah.

Wait to get the feedback. This episode. Exactly.

Revenge is mine. All right. OK, so we've got a framework for this.

And it's based on the Synergy operating system. Right people, right seats. Walk me through it and how it applies to families specifically.

All right, John. So we're talking right people, right seats. A lot of our listeners understand that if you're familiar with EOS and those kind of things, you might not practice it, but it really is a thing.

And so we want to talk about two different things here. Right person and then the right seat. The right person is someone who is a values fit.

You take it for values. Do they have them or not? Right. Is it innate in them? Are they making business decisions based upon that? Those kind of things.

So it's very easy. Lump up your your your core values. If you have five or if you're Dave Ramsey, you have 23 and keep going.

Right. It's kind of lumped around and you say very easy grading skill plus embodies it. You know, you point to them as the example, right to everybody else.

Plus minus sometimes they're culturable, but they want to have improvement. Right. Minus actively violates it.

It's a culture cancer. You know it. Everybody knows it.

And it spreads. Right. Here's the rule.

Anyone with a minus on a core value improves or leaves. Period. No exceptions.

Danny, nephew, doesn't matter who it is. Right. That's it.

Are they in the right seat? Right. And we call that GWC. Right.

You get it. You want it. You have the capacity to do it.

Right. And all three of these must be a yes. So do they get it? Do they understand their role? Right.

Not just the task, but understand what they're doing in that company. Do they want it? Right. Was it given to them 15 years ago because it was a void or do they actively want to be that in that position, helping that company in that role and their responsibilities capacity? Do they have the mental and physical capacity to do this? Right.

Can they actually do the job if it's a 50 hour week commitment? Can they put in the 50 hours? Right. Can they lift the boxes or not? That's the whole thing. Here's the thing.

Everybody loved Danny, right? He was a values fit. He was genuine, great human. Everybody thought he was, he was the greatest guy.

And if you thought of the core values of that company, you thought of Danny. The problem is, was he in the right seat? And the answer is no. Two lead technicians, you know, left because of the office, right? There's always delays.

There are always those kinds of things. So you can't teach a person to be a good person with the values fit, but you can teach them to be better in a professional manner, but not in the wrong seat. Right.

They just don't have the skill sets in that. And that's usually the family track, right? Is that uncle Rick is over on a Sunday afternoon. Dad gets a call.

We lost so-and-so. Hey, Rick, I need you to take this over. Right.

And, and, and is Rick really the person for that job? Right. That's, that's the question we come to. So we've got to make sure everybody across the board, family or not, are they the right person in the right seat? Got it.

I hear you got a fun fact. Fun fact, John. Okay.

And so I think my list, the listeners will, will appreciate this. The word nepotism is literally Latin for nephew and nepos, right? Renaissance popes kept elevating their nephews to Cardinal. And it got so out of hand that Pope Innocent XII had to ban the practice in 1692.

The first written anti-nepotism policy came from the Vatican. So if the Pope needed a rule for this, so do you. Absolutely.

Do not bring your nephew on whatever you do. That's right. All right.

So really the thing that paralyzes owners here, most of all, I think is the paralysis you get when you face these situations. You don't know what to do, especially when a family member is involved. How do you cut through all that? So John, I'm in a group and invite, you know, and a lot of business owners are there and the same guys.

And I listened to this guy for six months complain about his brother and he wanted to get, fire his brother for six months. Right. And this was leading up from the last two years, right? It's been an ongoing thing.

It is really tough to cut through the emotion by doing the math, right? But you, you got to turn that feeling into a number. So let's do the Danny math here. Two field leads lost, hard to replace $30,000 of salary.

It really is about $60,000 each because of attrition and getting other people up to speed, right? He's making above market comp for the seat, right? His estimated throughput is, is, is lost to scheduling and delays, right? It could cost $120,000 in margin, right? The total drag is over $200,000 for a year on a business that's doing 8 million. That is real money, right? Because you don't want to leave behind a relationship. It's not cold.

It's the opposite. The math is what lets you be kind because if Danny wasn't in there, if it was somebody else, right? That it wasn't blood, you'd make that decision in a heartbeat. That's a $200,000 business decision, right? And that's the problem is that we have the emotion involved and it's going to be a tough Thanksgiving dinner or a tough Christmas dinner, or my sister might not speak to me for three months.

In my case, that would be a blessing, but that's the thing. Families always gets complicated. Yeah.

So, what you said there effectively is make the emotional decision a math decision. That's the move here, right? Like, you know, you got to turn it into a math decision and have that conversation based on what it's costing the business. And that's the move.

You know, take the name out of it. Take the person out of it. I've got A and B. A has cost me $200,000.

B is a stellar employee, whatever that is. Flip over the card. Who is it? Yeah.

Yeah. And just get it done. You know what? Honestly, the family member is probably feeling some of this and a lot of these conversations generally turn into a positive space anyway because if they're feeling something, they have pressure on them and they're not performing, right? They want something that works for them as well.

So, generally they do turn into a positive result at the end of the day. So, it's worth having those conversations. Don't hold back.

Okay. We're going to have a new segment that we agreed on. We don't know what to name it yet, but we'll call it the marketing tip of the week.

It allows me to put my big boy pants on each episode as well. So, here is your marketing tip of the week. Your best customers are hiding in your email list.

Acquiring a new customer costs five to seven times more than selling to somebody who's already paid you and knows you and trusts you. Yet, most owners spend everything on acquisition and let their customer list stagnate. A simple monthly email, one useful thing, one soft touch, one offer to people who already know and trust you is the highest margin marketing there is.

It's also why this is the first marketing tip of the week. It's the most ignored because it isn't shiny and no agency makes that much of a commission on it. So, your one step this week, export your past customer list, load it into whatever email tool you already have, and send one email, a genuine thank you, a useful tip, one low-key offer.

That's it. Don't wait to build the perfect campaign. Just outreach to your existing customer base.

All right, Ryan. So, let's flip it. Sometimes the family member is genuinely great.

How do you make that work without the rest of the team getting resentful? Family in the business is not the problem, ever. The problem is family who are never evaluated, who are on different standards, right, than the other folks. And when they pass the same test as everyone else, they're a tremendous asset, right.

And often, you're best one. And everybody knows that. And that's okay.

It's appreciated by all, right. So, Maria has another relative in the business, her cousin Rosa. She runs the books.

She's value plus, right. She gets it. She wants it.

She has capacity to do it. She lives the values. Nobody resents Rosa, ever, right.

The difference isn't blood. The difference is Danny was never evaluated. He was put on a different, he was put on the throne and everybody else is just there, right, being held to a different standard, right.

And that's what really makes the rules for family employment, right, is that there's four of them that you really should live by to make this thing equal across the board, right. And I like to call it Fresno, okay. First, F is fair market comp, right.

We're not paying Uncle Rick $50,000 more above market because he's retiring in a couple of years and we're trying to make up for him, right. Everyone gets comp fairly. That's the big key, right.

Real work, the R, right. A real set with real accountability, right. On the accountability chart, if they report to somebody who's non-family member, they have to be held accountable by that non-family member.

And the rules are the same, right. So they get to discipline them just like they would anybody else. There's no special treatment there, right.

Same review. They get the same performance conversations, the same scorecards with the same consequences, right. And then there's no side channel.

And this is where it goes off the bill a little bit, is that we have a leadership team. We're making decisions and then cousin and nephew or nephew and uncle, whoever it is, they're having side conversations outside of work. And then everybody else has to play catch up constantly because decisions are made between the two, right.

But we're supposed to have a leadership team, but we're supposed to have these people in there and making their money. And that's the problem, right. And also, don't bring your family issues at work.

That's a big thing too. Everybody feels the drama. It's just not you, right.

Everyone knows what's going on when mommy and daddy are mad at each other, right. So fair market comp is the linchpin, right. We're not padding somebody's pay because it's being seen as underpaid by everybody else.

Why is that person paid $50,000 more than me and does half of what I do, right. That's culture problems, right. The team doesn't resent competent family being paid fairly.

And that's the key, right. They're not going to resent that if everybody's on the same peg or someone's making more and they deserve it, right. They applaud that because they want to see that path for themselves as well.

Got it. So equitable throughout the entire organization makes it on a sense. Okay.

So the owner's done the math. It's real. They're prepped.

They've got the structure that you've just described. Now they actually have to have the conversation. So walk me through this.

How does it work? Okay. So the whole conversation turns on one move. We have to separate the person from the role, right.

You're not rejecting them. You're saying this seat isn't their seat. So let's talk about the structure of what happens.

You have to do it at work, not a family event. It's a business conversation and it needs to be done in a business setting, right. Don't ambush somebody at a barbecue, have a few too many.

And then you know what, if you've been ruining this business for years, get out of here. My wife, my daughter never liked you anyway, right. And you got to lead with the person, right.

I love you. Your family, that's exactly why I owe you honesty, right. And if it's your mother-in-law, your family, and you've had this coming, right.

Same kind of thing. Name the seat, not the person. This role isn't working for you.

It's not working for the business. You know, here's what I'm seeing. And then come over with concrete examples of what's going on, right.

I've been involved where a father had to fire their son, right. Who was supposed to be the heir apparent to the throne, right. It's not a good conversation, but it had to be happen, right.

And then bring the GWC, the core values and not your feelings, right. The capacity in this seat doesn't fit you, right. You just don't understand the role and what it's needed to bring this company forward, right.

That's not a character flaw. It's just a seat mismatch. We want people working in their strengths, not their weaknesses, right.

So offer a path if it exists, right. If they're the right person, but in the wrong seat, do we have a seat for them? Can we transition them over to something else that would be more suited to them? Okay. In your case, John, it would be watching paint dry, right.

We want to keep you away from others. And that's your strength. And you just let us know after your nappy nap that the paint's dry and we can go put on the second quote, right.

That's your strength. But here's the big thing. If there is no right seat, and sometimes this is true, this is time to cut the cord.

This is time that you have to have the exit talk, but with maximum dignity, give them a generous runway. But here's the key. It's got to be totally in private, right.

It's not in front of the folks. It's a discussion held in private. And then we don't discuss it with the rest of the family, right.

Because then it becomes an embarrassment. In this case, you might want to consider a neutral party. You know, one of those non-blood family members that's a part of the leadership team that can have that discussion for you, right.

Facilitates, advises, and gets it done for you, right. And that way, it doesn't feel like betrayal, depending on your relationship with that person, right. It's just a business decision that had to be made.

You know, you protect your relationship by being honest early and private forever. And that's how you're going to get through it. Awesome.

Awesome. Yeah. I mean, that conversation, especially navigated with a third party, makes a lot of sense.

Even that has to be sensitive as well, right. Like you've got to be able to be open with the family member. You don't want them coming back and saying, oh, you didn't even have the goal to have the conversation with me.

So that's, there's some nuances there, right, of having to navigate it all. But I think that's excellent sound advice. Okay.

I think it's time for another sponsor. Sponsor moment. Expo Marketing sponsored this episode.

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OK. Starting to wrap up here. This all gets 10 times harder when the family member is supposed to inherit the business.

That adds a giant wrinkle. How do you handle succession, honestly? Yeah, that's it. That's the biggest one.

Right. I am the heir apparent to the legacy, the throne. Right.

Here's the rub. Can your kid actually inherit that and run the company? Right. Are they destined to follow your footsteps or not? And those are separate decisions that need to be made.

Right. It doesn't mean they can't own the company. But can they own it and run it? That's the economics.

Right. So and I have a factoid after this of a good family office that's been doing this is that some people just aren't their parents. They don't they don't have the minds that their parents do.

They want to do something else with their lives. Right. So why would we want to put that burden on them if they don't want it in the first place? But it doesn't mean we have to ruin the economics of that success that we've built up.

Right. We can own the company, hire an experienced operator to run it, have a leadership team there to do those things while they go off and pursue something that makes them happy. Right.

Now, you might have hit the jackpot if they're the right person.