Tips for hiring family members as employees

Can hiring family work?  We see an example of this every day in the White House: President Trump counts his daughter and son-in-law as advisors. Is it working for him?  What about in a small business? Not surprisingly, the same issues can arise when you hire family members whether your business is large or small.  

Many small business owners who hire family members are hoping to build a legacy they can pass on to their children or help relatives by giving them a job.  But it often comes with difficulty — for better or worse.

Even in the best of circumstances, when a family member brings great ideas and needed change to the business, it’s often hard for the owner who built the company (through blood, sweat, and tears) to let go and accept the positive changes under someone else’s watch. 

In the worst-case scenario, when the family member is a drain on the business, terminating employment can make it difficult to maintain a personal relationship.  

All the pain and agony of hiring family members may not be worth it in the end.  According to the Harvard Business Review, 70 percent of family businesses will not last long enough for the second generation to take over either because they went out of business or were sold.  

Still going to hire a family member? For the many small business owners who have a dream to (or just the need to)  hire family members, here are a few tips to help you find success and keep your sanity.

Align family members’ strengths with the right position

Hiring a family member can be a perfect solution for filling a position that requires someone you trust, like bookkeeping or cash handling. Family members may also be the best option for hard- to-fill positions. Oftentimes the best source of a new prep cook is your current cook’s cousin or sibling referral.  Proceed with caution, however, because sometimes the very fact that you are family can mean that you can be blind to character flaws and could still be vulnerable to theft and embezzlement.  

Give your children space to fail and learn 

At the Queens Cups, a bakery in Massachusetts, a husband and wife team work for their daughter who started the business a few years ago. Barbara (the mother) says that the recipe for success is to allow your children the space to make their own decisions. Although she and her husband (who has a background in the food industry) give their advice, ultimately the final decision is their daughter’s. Queens Cups is doing incredibly well, but for Barbara, it is not easy to watch your children make decisions that are different from how you would have made them. 

Working with family may require prioritizing relationships over your ideal business decision.  To work with family members, you have to let go and give them the space to fail. We become wise through failure.  Watching your children fail is a part of being a parent. Watching your child fail in business can be excruciating. However, it’s important to think about your past failures and remember the life lessons they taught you. Enlist someone from the outside as a mentor for your relative so that you don’t bear the sole responsibility for steering family members on the right course.   

Sideline a bad employee

Family members destroy businesses far too often when the owner or manager doesn’t want to face the reality that their relative cannot perform. In the small business space, I advised many family business owners who needed to carve out a role for a relative who could not cut it as an employee.  As you can imagine, employee morale and teamwork breaks down when employees believe that the relative has not earned their position. 

Tasks like social media, networking, and developing community partnerships can keep that family member out of the office and away from irritated employees.  By allowing that person to continue in a position where they are not adding value, you are multiplying the negative impact on your business.  Cut your losses and create a role where the relative will be as least destructive as possible.  

Terminate With Caution

Letting an employee go is never easy.  But letting go of a member of your own or of another employee’s family is extra tricky.  It’s often most difficult after the troublesome employee leaves, if other family members remain.  If you terminate an employee’s family member, you may destroy trust and respect between the remaining employee and the manager, and it will likely result in needing to replace all relatives that you have been employing.  

You must let relatives know before hiring their family member that poor performance may lead to termination, and they should only provide references for family members they know can perform.  

Managing family is a delicate situation that requires less business and leadership knowledge and more personal relationship and conflict management skills.  The relationship will never simply be employee to employee. It will always be a family relationship first.