Dangers of Poor Employee Communication in a Family Business

“We turned her down, and later found out she had approached the union, to stage the union drive, in order to win her job back.”

As family business entrepreneurs, we often tend to manage by hunch, figuring things out as we go along, especially in the earlier startup years. Many of the issues we face as our businesses grow; we plod through, without much advice from outside advisors. Surprisingly, most of the time it works out well. For our family business, this time it didn’t.

We had been in business for about 15 years, and our compensation plan was pretty basic; salary plus a holiday bonus. The bonus was pretty much automatic. One year we decided to revise the bonus portion, realizing that as longer-term employees’ compounded wages increased, it was increasing the bonus portion disproportionately. We decided to cap the bonus for the highest paid managers.

One of our long-term managers became upset with the new bonus program and decided to leave the company.

About six months later we had a group of employees, petition for a union organizing drive.  Coincidentally, it was in the same department as the former manager who had left. At about the same time, the former manager, asked if she could return to the company and assured us she could make the union drive go away. We turned her down, and later found out she had approached the union earlier, to stage the union drive in order to win her job back.

What did we do?

  • We moved the entire company into a larger facility and kept everyone under one roof.
  • Our family made a special effort to genuinely get to know all the employees by walking through every department every day.
  • We conducted an opinion survey with all the employees to receive feedback on their jobs and workplace issues (in hindsight we would not perform this again. Although helpful it tended to stir things up unnecessarily)
  • We hired an outside compensation and benefits advisory firm

The organizing effort failed.

The Takeaway

Now, you’re probably thinking the lesson learned here, was about compensation and rewarding key employees. The real lesson learned was the importance of communication.  The group of employees involved in the union effort, were in a department that had been recently relocated from our main building to a separate building in a nearby town. The employees felt they were less important and neglected.

As your family business grows, it’s challenging to maintain your unique corporate culture.  You become increasingly swept up in the harder side aspects of the business; finance and operations.  It’s easy to lose sight of the softer side issues of human resources and communication.

The key is to manage these hard and soft issues in balance as you grow. In a strange way, we were lucky to have had such a dramatic event occur, to alert us to the problem. In many companies it is more subtle and shows up as low morale, gradually bleeding a company’s productivity and ultimately it’s success.