Human CapitalDiligence
Informal Role
Also known as: Informal role, undocumented family employee, spouse-on-payroll issue
A role that exists in practice but not on paper — typically a family member performing real work without a job description, employment agreement, or non-compete. At exit, the buyer can't evaluate, bind, or price it.
WHY IT MATTERS
Many founder-owned businesses have a family member on payroll in a role that exists in practice but not on paper. No job description, no employment agreement beyond a decades-old offer letter, no non-compete. The role works because everyone inside the business knows what the person does. At exit, the buyer's HR diligence advisor asks for three documents — job description, employment agreement, non-compete — and finds none. Every absence was a reasonable decision at the time. The logic breaks at the exact moment the business is sold. The buyer's risk model doesn't care about the family member's intentions. It cares about structural retention risk: what you can contract for, not what you can hope for. The transition cost includes recruiting a professional replacement, the overlap period to transfer institutional knowledge, and the administrative buildout the family member handled informally. A non-compete signed on a Tuesday morning is HR hygiene. The same document requested during diligence is a different conversation entirely.