When I was the last of the three brothers to enter the family business, my dad said to me, “I owe you an opportunity, not a guarantee.”

Pretty frank, don’t you agree?

At first, I was a little annoyed. That’s because I felt I had been proving myself worthy for years. After all, I had been working in the business since I was old enough to dump waste paper baskets and push a broom — all for a free lunch and $10 spending money. I had been working at different levels in the business all throughout high school and college. There was no time off when I wasn’t in school, and I have nothing but gratitude for the education and opportunity I was given.

Still, as my dad insisted, I had to earn my place at the table. My dad didn’t feel it was fair to my other brothers or to the staff for me to get special treatment or to conduct myself in a way that would be detrimental to the long-term health of the company. My dad took his stewardship seriously, and he felt he owed it to all to keep the team strong.

You and your company may be facing the natural transition in your family business by bringing younger family members on-board to join your team. How they join the team makes all the difference in ensuring a successful transition to the next generation or sowing the seeds of destruction within the family legacy. It’s rarely anything in between these extremes.

What makes me qualified to talk about the good and bad of nepotism?

Well, I was the third generation in my family’s business. Now, my nephew is on-board representing the fourth generation, working side-by-side with his father (my brother, Richie) as they transition the shop. The systems and the structure my brothers and I put in place with my dad’s blessing, to me, has made this possible.

I have also been coaching a lot of owners I work with on how to bring new family members into the business the right way, so they too can avoid the pitfalls.

The wrong way

Let’s start by how things can be done the wrong way:

1. Not having an organizational chart in place so the family member can see where he/she is today and how he/she can work his/her way up that chart in the future. New family members can sometimes assume they are in charge when they aren’t (or at least shouldn’t be right out of the gate).

2. Letting family members skip over the bottom levels of your organizational chart will demoralize team members who felt they had earned their way to the top by starting at the bottom.

3. Pushing family members into leadership roles without having first demonstrated that they can follow other leaders at your company causes the whole team to suffer.

4. Treating family members differently by allowing them to break the policies and procedures you expect everyone else at the company to follow. People pay attention to double standards, and it crushes unity.

5. Not holding family members accountable for their actions or inactions.

6. Not spelling out objectively what family members will get paid and how they can earn future pay increases, bonuses and even shares in the business itself.

7. Not creating a proper set of expectations that are based on objective measurable things.

8. Letting family members run roughshod over the chain of command. It undermines the authority of those who already have earned their place at your company.

The right way

Now that you know how not to on-board family members, here are some tips on how to do it the right way:

1. Share with them what my dad shared with me: “I owe you an opportunity, not a guarantee.”

2. Create an organizational chart with all the boxes it takes to run your company and share it with the family member.

3. Match the organizational chart discussion with how he/she will be paid and how to work his/her way up the salary ladder. Also discuss your bonus structure.

4. Explain how and when the family member can earn an equity stake in the company.

5. Share how you are going to be providing special coaching to help him/her with the learning curve in each step he/she moves. Then, make good on your promises.

6. Set up the necessary outside training you will need to provide constant improvement to their skills for each level they will occupy.

7. Ask for input on how they see themselves fitting in and try to find a way to weave it into the path you’re creating.

8. Ask about their goals for the next year and share how this can be made to happen whenever possible.

9. Ask where they want to be three to five years from now, and put a long-term business plan together that helps him/her achieve said goals as long as it also benefits you and the company.

10. If you can’t be objective enough to review your family member’s performance [that means you’re either too easy or too hard on him/her], setup an independent committee of either high-level staff or outside experts to monitor their performance. (Note: If the committee is inside staff members, their input must remain confidential to avoid future reprisals).

I find it very gratifying to help a company welcome a new family member into the business and help make that person successful. It’s good for the family member, it’s good for their company, and I love helping them beat the odds by successfully passing a business from one generation to the next.

Do the right things, avoid the pitfalls, and watch your company springboard into the future with your business in trusty hands.