Owning a small business presents many challenges: Who are the ideal clients? Who should we never work with? How do we get the service we need from vendors and subcontractors? How do we keep overhead at a manageable amount? When will we make a profit?

One of the biggest challenges is how to manage the company’s relationship with employees. Particularly when the number of employees is small, the tendency is to regard the employees as part of the family. Why does this happen?

A Craftsperson Who Accidentally Started a Business
You start a business because there is more opportunity than you can satisfy working on your own. Now you are a businessperson. You find yourself thinking, “How did that happen?”

The objectivity that is necessary to making good business decisions is a skill that you need to develop, as you are used to looking at things more subjectively. Subjectivity can get in the way of making business-driven decisions when managing employees. Using a few simple metrics as the basis for a decision instead of simply going with your gut, for instance, is essential for success.

Lack of Experience Being an Employer
Being an employer is weird. Think about it: You live in kind of a never-never land. Not quite a friend and not quite a relative, you wonder how are you supposed to deal with the employees.

You might be too open with your first employees, overloading them with information they don’t need and don’t want to know. Or you might be too restrained, leaving them wanting more information.

The School of Hard Knocks is the only educational institution at which you can learn the lessons that will help.

You Hire Relatives
Why not? After all, you can trust them, right? That depends. When it turns out you can’t, you find yourself stuck.

The deal is when you all go to work you have to look at everyone as professionals who work in the same company. When you are not at work, you are relatives who have life-long relationships.

Part of this deal is holding your relatives to the same standards as all the other employees. That means setting expectations clearly and measuring their performance accordingly. It also means having performance reviews for every employee in the company, especially relatives.

Employees as Family
Where it can get tricky is regarding your employees as family. After all, they are people who you spend a lot of time with. You care about them and, of course, they care about you.

Those premises are true only up to a point. Think about it: When the company has no money, who is going to pay the overhead costs? Likely not your employees, family or otherwise. You as the owner will. When the company has no money, who is going to keep on paying employees’ wages on the bet that work will come? At least in your early life as an owner, you will.

After spending our personal savings on employee wages during a couple of slow periods, we finally realized we were not being business people. What we could do during the slow periods was keep our employees informed about our efforts to get work. We continued to have weekly company meetings, for which our employees were paid to attend. At those meetings, we encouraged our employees to help each other find side work or work on their homes. What we did not do is pay them simply to keep them employed with us. They were employees, not family.

A Business, Not a Care Home
I admit I am results-oriented. At the same time, I do care about people. The thing is, clients pay for results. If someone is working for you and they do not produce the desired results, then you need to free up their future, whether or not they are a relative.

Set clear expectations for the performance you want. Hold everyone, including yourself, to those standards. Praise publicly the employees who meet or exceed the standards. Do your best to coach privately those who don’t. But not until the end of time. Remember, those who work for you are not family. And you are running a business.

Learn the needed lessons early and your business will be successful sooner than later. Avoid what you know is true and it never will be. The choice is yours.