This is a big one. Some people are of the opinion that family members can’t be terminated under any but the most extreme circumstances like theft or doing something detrimental to the family. My view is that like performance bonuses, termination must also be linked to productivity. To allow the business to suffer losses because a family member is ineffective is to punish the whole family and all employees for the doings of one person. This is not only grossly unfair on everyone, but more importantly it vitiates the atmosphere of a results driven culture that we are trying to create. By such a policy we are at once undermining all claims to fair-play, justice and merit based career progression. So people who don’t deliver must go; family or no family. Such people must not even be put in some other part of the business for the same reason – their presence will legitimize ineffective working. Also more than likely they will create their own politics, especially as they are family members which can lead to all sorts of undesirable results. When you decide to terminate, the best way is to do it as quickly and decisively as possible. A clean cut with a sharp knife is always better, cheaper and kinder. The individual remains a shareholder and part of the family. It is just that they no longer come to the office. As I have said earlier, owning a business and running a business are not the same.
Keeping the Business Family intact – 5 Key Structures

I have suggested 5 structures that are most beneficial in achieving our goal: Making the business process driven while keeping the family together.
For details of that please read my book, The Business of Family Business (Serene Woods Publications) available in India on Flipkart and internationally on www.amazon.com

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Manbir Khurana
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Like firing of family members has to be based on merit, capabilities etc., so should "hiring" of family members. Has to be driven by objectivity and what is good for the business not necessarily by what is good for the family.

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Yawar Baig & Associates™ is an Organizational Development Consulting company specializing in helping organizations achieve their goals by aligning their structure and business processes with their Core Ideology.