Let's Settle the Debate About Hiring Friends and Family Once and For All – Part I
Let's face it – as a small business owner, you've probably been tempted to hire friends or family members. Maybe you already have. It’s an “easy button” when you need immediate help.
Before age 30, nearly one-third of Americans will work at the same company as their parents and earn almost 20% more than they otherwise would. Hiring friends and family members is one of the most controversial topics out there. Some business owners swear by it, while others say it’s a recipe for disaster.
It's time to address this elephant in the room and break down exactly what you need to know about mixing business with personal relationships. So, what’s the real answer? Should you mix business with personal relationships? In this two-part blog series, we will break it down—the good, the bad, and how to make it work (if you dare).
Definition of Nepotism & Cronyism
Let’s give a few definitions before we go further. Favoritism is giving preferential treatment toward a specific group of people and is categorized into two types. Hiring family is referred to as nepotism and hiring friends is cronyism.
Favoritism can manifest in various subtle and overt ways within your business. Understanding the different forms of nepotism/cronyism can help to mitigate its potential negative impacts. Here are some common examples of how nepotism/cronyism can appear in a business setting:
Overlooking policy violations: A family member/friend consistently arrives late to work or repeatedly makes mistakes without counseling. Yet, others are reprimanded when they exhibit the same behavior.
Project selection: A family member is allowed to have input on the projects they work (like highly visible projects or confidential projects) when others do not.
Training Access: A family member is provided additional access to training and professional development opportunities, resulting in more skill development than other employees.
Accelerated upward mobility: An unqualified family member/friend is promoted through each level of the organization while qualified employees are overlooked for promotions.
Workload distribution varies: The workload is not distributed equally, resulting in some employees having heavier or less desirable workloads than others.
Resource distribution varies: Resources (such as supplies/tools, budget, or staff), are not distributed fairly, resulting in a family member/friend being better supported in the ability to do their job.
Critical feedback channels: Essential work-related information is shared exclusively with a family member/friend and their close co-workers.
Unfair recognition: A family member/friend may receive biased performance reviews resulting in more recognition, more rewards for their contributions, and even salary disparities.
Manager-employee relationships: You hang out with your family member/friend more than others while at work.
The Temptation Is Real
Hiring family and friends is so easy right? They are the first people who support us a small business owner. They are there to pick up the pieces on bad days. Some of the most common reasons we consider hiring friends and family are:
They are willing to help out in a pinch.
They’ve been there from the start and understand your vision.
They’re known quantities and you trust them.
They may sign up to work for less.
You want to help them out.
But here's where it gets complicated…
The Cons: Why It Can Go Wrong
There are hidden costs with hiring family and friends that small business owners fail to acknowledge that can lead to trouble down the line. Before you hand that job offer to your cousin, consider these often-overlooked impacts:
Legal Impact – While hiring family/friends is not illegal from a federal level, there may be state laws not listed here that make nepotism unlawful. Federally, you could be breaking one of the following employment discrimination laws if hiring friends/family appears to be discriminatory:
Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), and national origin.
Americans with Disability Act (ADA) prohibits discrimination based on disability.
Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) prohibits discrimination based on veteran status.
Age Discrimination in Employment Act (ADA) prohibits discrimination based on age 40 or older.
If an employee in your business belonging to one of these groups believes they have been snubbed by the hiring or treatment of family or friends (such as promoting an unqualified family/friend), they can sue your company.
Lack of Accountability – Can you hold your family/friend to the same standards as other employees? Performance issues become drama that can get out of hand and criticism can damage personal relationships. Will you feel comfortable giving honest feedback or disciplining them if needed? If not, other employees may perceive favoritism, and you may lose the respect of your other employees.
Blurry Boundaries – Work stress can spill over into personal relationships, creating tension, resentment, or even family drama. Family gatherings turn into unofficial business meetings and business decisions get clouded by emotional ties.
Difficult Terminations – If things don’t work out, firing a friend or family member is awful, can be emotionally devastating, and could damage your personal relationship forever.
Thwarted Communication – Healthy workplace cultures promote environments where all employees feel comfortable sharing their opinions openly and reporting potential violations of policy. Employees do not feel safe speaking up against a family/friend of the owner and you could be missing out on great ideas, knowledge, or misconduct that may be happening.
Damaged Workplace Culture – When employees observe preferential treatment of family and friends, it can become a significant distraction in the workplace. If the friend/relative is not qualified for a position they are promoted into, productivity is reduced. Employees may feel that they are not as valuable as friends/family and reduce their efforts while at work leading them to be unhappy at work.
Limited perspectives – Friends and family often share similar viewpoints, which can result in decisions being made from a more homogenous frame of reference instead of diverse points of view, resulting in decreased innovation in your business.
Less equality – Friends and family are typically offered more opportunities for career progression leaving other qualified employees with less career mobility.
Final Thought
In Part II we will discuss the pros of hiring family and friends and what to do if you decide to hire family and friends.
Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
