As an investor, the one question that makes me cringe every time it is asked, is “What do you think of hiring my son/daughter-in-law/spouse/childhood friend/etc. to work in the business?” Over the years I have seen examples of family hiring family, whereby it ends up being a tremendous business success, but sadly this is not the norm over the long term. If the structure is not set up properly beforehand the impact of hiring a family member can have negative impacts on your business and its employees. Ultimately this will risk the value of your business and your employees down the road!

Here are two simple rules to follow for avoiding some of the pitfalls most companies make when hiring family members and close friends:

#1 – No Direct Reporting Relationship

Ensure the family member or close friend does not report directly to you and ensure there is structure put in place in regards to job descriptions and performance expectations. Setting the reporting structure up this way will ensure the family member/close friend succeeds based on their own merits and not on the basis of your relationship. If you ever have to remove that family member or close friend, having this reporting and job structure should improve the probability that you can maintain a solid relationship with the individual after the fact…albeit it is not always guaranteed!

#2 – No more than one!

Having no more than one family member or close friend working with you in the business ensures an environment whereby people know they will progress based on competence and not based on any particular relationship held with the owners of the business (typically referred to as nepotism). These optics will ensure a performance based environment is fostered and advancement is based on competence.

Article by Chad Robinson.

You can read more about Chad Robinson here.