Family Members as Employees

Should You Hire Your Parents?

A handful of business duos around the country explain what happens when traditional family roles are turned upside down—and the CEO hires his mom

by John Tozzi

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Daniel Negari, the 22-year-old founder of the high-end Los Angeles mortgage brokerage Beverly Hills Mint, set a strict ground rule when he hired his first employee last year: "She doesn't refer to me as her son. She's actually not allowed to."
The rule helps Negari and his mother, Berta, 47, keep their family and company roles separate. The Negaris are one of a handful of business duos around the country we spoke with to get a sense of what happens when a young entrepreneur hires a parent (BusinessWeek.com, 3/19/07). The consensus is mom and dad can become key employees who bring a combination of loyalty, honesty, and experience that would be hard to find outside of the family. Of course, hiring a parent turns traditional family roles upside down, and that can strain both families and companies if not handled properly.
To convince Berta Negari to leave Bank of America (BAC), where she earned a six-figure salary as a broker, Daniel showed his mother that he made $250,000 in commissions in his company's first year and argued that she would earn more working for him. He also offered her equity in the company, although he retains majority control. In return, he landed an employee he knew he could trust to broker deals and help oversee the 14 contract salespeople who work for him on commission. "I would so much rather hire my mom and let her make good money with me, rather than hire someone I don't know and don't even know if they're going to do their job," he says.
"Not Pulling Your Punches
Beyond loyalty, having a parent in the company permits a level of candor that can help entrepreneurs evaluate business decisions. "If you do everything together under one roof, you get real good about not pulling your punches," says Don MacAskill, the 31-year-old founder of Mountain View (Calif.) photo-sharing service SmugMug. He brought his father, Chris, a 54-year-old Silicon Valley veteran, on board his startup in 2002 as an investor and first employee.
The pair's "open spirited debate," as Chris calls it, set the tone for a company that now counts seven other family members among its 40 employees (BusinessWeek.com, 1/10/08). "All of the employees know that they can walk into my office and yell at me if we're doing something stupid," says Don. "They've all seen my father or my brother or someone do that to me."
Parents can also offer young companies needed management experience. Chris MacAskill brought the lessons learned from his own three startups to his son's venture. He handled finances, legal issues, marketing, and the nitty-gritty details of running the company so Don could concentrate on developing their product.
Lorraine Earle plays much the same role a her son's company, Johnny Cupcakes. Earle, 52, a former manager of a Boston law firm, spent years helping her 26-year-old son John run his Hull (Mass.) T-shirt business pro-bono. She joined Johnny Cupcakes full-time in 2006 and handles all the financial management, human resources, and legal issues. "I do all the stuff that he doesn't have the desire or the expertise to deal with," she says.
For some young entrepreneurs, having a parent on board provides credibility they otherwise might have trouble earning. Bryan and Steve Sims, the son-and-father pair behind financial education company Brass Media, say their relationship adds value to their product, a financial-literacy magazine for students that is sponsored by financial companies. "If you have sponsors in a program in high school, they look very much at what kind of company it is," says CEO Bryan Sims, 25. Having his father with him demonstrates a level of integrity that helps convince schools to work with them, he says.
Keeping Roles Distinct
But despite the advantages of hiring a parent, the situation can backfire if family members allow personal issues to cloud business decisions, says Carol Ryan, membership director at the Loyola Family Business Center in Chicago. To prevent such conflicts, she says, families need to keep work roles distinct from familial roles. "Suddenly they're going to have to be able to accept that in this context I'm not your father [or mother]," she says.
That's why entrepreneurs who hire parents have to set clear boundaries to distinguish between the parent-child relationship and the CEO-employee relationship. Even though Don and Chris MacAskill split the equity in SmugMug at Don's suggestion, they both agree that Don, as the CEO, has the last word. The Sims family leaves work discussions at the office: "If we're having a family dinner, we try not to bring up business-related items," says Steve Sims, 57.
And for Daniel Negari, one key is in how he and his mother address each other. "When she's here, I never use the word 'mom' or 'mother.' It's just a known thing in the office that she's not my mom during the day," he says. "Sometimes I forget even at home, and I call her Berta."