Most parents contend they love all their children equally, so naturally they want to treat them equally (which I can appreciate as a parent of three boys). However, there is a distinction that should be made regarding an equal estate distribution and equal compensation. Let’s face it, every person is blessed with a unique personality, unique talents and unique skill sets. Furthermore, every individual is motivated by different things. Doesn’t it stand to reason that individuals (including family members) should be compensated based upon what they do rather than who they are? I submit to you they should!

My experience has been that, while parents are alive to control the compensation issue, it rarely surfaces. But when the parents are no longer around to control the situation, the pent up anger and frustration that had been boiling under the surface finally erupts. 

Compensation in the family business arena can be challenging for all generations, as well as non-family member employees. Many business owners engage in “selective merit pay,” ignoring the concept that individuals should be paid at market rates, adjusted for performance, proving once again that blood is thicker than water. Family member employees who are willing to make a commitment, pay the price and meet or exceed performance expectations should be rewarded, not be penalized or held back by their less capable, less motivated, in some cases underperforming family members. As a result, family member employees should be compensated based upon the role they play in the business, not based upon who they are, their gender, their last name or their birth order.

The issues and challenges regarding compensation present themselves differently, but one thing is clear: how parents choose to compensate employed family members can have a profound impact on sibling relationships, intra-family communication, self-confidence of family member employees, the motivation of other family members (or lack thereof) and how non-employed family members measure and view the success of family member employees.

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