All in the family: Nepotism in your company

One of the many benefits of entrepreneurship is the ability to make your own decisions about how to grow your company. Those choices include who to hire, who to fire and who to promote.

Many business owners embrace the age-old practice of hiring family members (spouses, siblings, offspring) to fill key positions in their company. You name it, and I’ve seen it. I consider co-founder spouses — both fulfilling senior management roles — as falling into the same category. More companies have foundered or died because of marital dissolution than I care to remember. I’ve been a vocal opponent of employing family members, for any role, and, to my surprise, have taken a lot of criticism for it. I’m touching on the subject to encourage you, as an entrepreneur leading and growing a company, to explore the subject and consider its potential negative impact on your venture.

Nepotism has been widely panned for its adverse influence, yet I see so many entrepreneurs still practicing it. I’ve yet to see any good come from it. Here’s the bad and the ugly.

Hiring family members is unfair, or it at least undermines the perception, among employees, of fairness. This leads to job dissatisfaction and low morale. You could quite conceivably invite a lawsuit, based on discriminatory human resources practices, or an equally disruptive claim of constructive dismissal.

Nepotism will also lead to an erosion of confidence that will impact your effectiveness as a leader if employees perceive that underqualified relatives are being gifted positions in the company or promoted over those who are more qualified. Your best people may simply resign. If nothing else, it leads to discomfort among your other employees, and that decreases productivity and increases toxicity in the workplace.

Tread carefully as you explore human resource recruitment for your venture. Even if your sister is the most qualified for the role. Are you willing to weaken the confidence of all your other employees and general morale in the company by making the appointment?

Additional resources

By Gregory Phipps