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Is Hiring Your Friends and Family a Good Idea For Your New Business?

If you are about to launch your new business, or have gotten to the stage where you can finally hire employees, you are likely to have friends and relatives to thank for their support along the way. Perhaps they’ve even put in hours for you, working for free or for very little pay, and now when positions are opening up, they might feel it’s payback time.

In your new role as an employer, you may now have to face some tough choices: are your friends and relatives the best choices for your needs, or can you afford lesser performances from them, in order to avoid disappointment? Or perhaps they are the best choices based on their resumé. Either way, it’s a difficult decision and one you shouldn’t approach lightly.

Family Matters

The result of familial hiring and bringing friends on board, aka nepotism, can be strained relations not only with that individual, but also with your whole extended family. Of course, working with loyal people who know you well and share your vision can be a wonderful choice as well.

There are some benefits to hiring employees you know. People with a personal connection to the boss are likely to be more committed to the company, as well as more trustworthy, since you already have an established relationship. You don’t need to do background checks on family members or longtime friends, and you are likely to know if they are lying on their resumés.

You also know if they are reliable, and you know how it is to have them around all day. There are plenty of examples of extremely successful family businesses, some which have lasted for generations, and several that has grown to become among the largest companies in the world. Business Insider listed 21 such companies , including household brands such as Walmart, Nike, Samsung, Facebook and Volkswagen.

Is It the Right Fit?

Now for the cons. The most obvious concern is the transition from your former relationship into the new, working relationship. Friends and family may expect professional and personal freedoms that they would not expect from a boss with whom they have no relationship. This is especially true if they invested time and effort in you when you struggled to get your business going—perhaps they helped out with loans, favors, or even unpaid work, and they may now feel entitled to special treatments such as extra time off, coming in late, going home early, and a greater tolerance for making mistakes.

If you have other employees, your friends or relatives may intentionally or unintentionally undermine your leadership with them by not taking you seriously. Perhaps they will assume more authoritative roles than those for which they are hired. Finally, if all top positions in your company are occupied by friends and family members, other employees will feel discouraged since nepotism makes those positions unattainable for them.

My Way or the Highway

Loyalty goes both ways. If collective sloppy work ethic or incompetence are threatening your company’s profitability, how much are you willing to see before taking action. It’s hard to keep a relationship on a professional level when it’s not. Repercussions will likely be taken personally, and firing a family member or a dear friend is beyond awkward. How can that not affect your relationship outside of work?

Top entrepreneur Richard Branson of Virgin Airlines advices to hire people you need, and not people you like, while acknowledging that most of us would rather work with people we like than people who are competent. According to Kissmetrics Blog, Branson says it’s best to stay away from working with friends , because if it doesn’t work out, it will be very difficult letting them go.

So, what can you do to ripe the benefits of employing family and friends while avoiding the pitfalls? One way to get a feel for how a friendship or family relation will survive in a business environment is by working together on a project basis. If you are not working well together, you don’t have to fire your friend or family member, but simply refrain from hiring them again. Communicating is important, and taking the time to determine your common goals. You have to address each other’s expectations thoroughly during the hiring process and understand that even so, you may be surprised by how easy it is to fall back into previous behavior and how difficult it can be to separate the relation you have inside and outside of work.

Entrepreneur Mike Repole, of the soft-drink brand Glaceau, has successfully hired 10 to 15 friends, according to USA Today, because success is best when shared , and “there’s nothing better than sharing success with friends and family.” He advices to be consistent with when and where: “From 7 in the morning to 7 at night, Mike is president of this company,” and “After 7 p.m., he’s Mike from Queens.”

Perhaps the wisest thing to do before hiring a family member or friend, is to consider the worst-case scenario. If this is something you feel you can handle, then there is no reason not to reap the benefits of working with the ones closest to you, and who you can expect the most care and loyalty from in return!

Matthew Stevens, crushthefinancialanalystexam.com, is a finance industry veteran who prides himself on being abreast of any emerging trends in the workplace. Knowing the rigors of the CFA exam, he seeks to ease the test prep process for future charterholders. Outside of work, Matthew enjoys crafting new wood masterpieces in his shed and taking in the natural wonders of the world.

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