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How to deal with nepotism as a business owner

If you're thinking about giving family members a job, read this first

Nepotism — unfairly giving jobs to relatives over others— among small businesses is often overlooked. Hiring family can be a money saver. It eliminates an expensive hiring process, hopefully ensures the employee is trustworthy, and can potentially allow the business owner to pay a slightly lower wage when needed.

The larger the company grows, the more hiring family becomes nepotism. In a culture where we’re urged to pull ourselves up by our bootstraps and promised that hard work and dedication will lead to success, the bias is a slap to the face. It’s an insurmountable barrier that employees have been barred from based on birth. Not an easy pill to swallow in a democratic country.

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Nepotism is a concept I’m very familiar with. I have a family member who is a successful owner of two businesses. Due to the fact that the majority of my family never attended college, most of the family has worked for him at one point or another.

My cousins spent their teenage years sorting and packaging nuts and bolts. I have two aunts who have filled a management role and another uncle who has been in several different positions within both companies. If you need a job and are family, chances are my uncle will hire you.

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Whether or not a family member getting a job will be a boon is really dependent on who they are. Some of my family took a pay cut to work for my uncle and waited for years to get a raise. Another was being paid more than other employees and would pull the “I’m related to the business owner” card when reprimanded by managers, letting him effectively get away with more than they should have.

This favoritism can severely hamper a company’s ability to hold on to their non-family employees. Employees often measure how well they’re doing within a company based on how their wage measures against other employees. Having a higher wage for doing better work can lead to less employee turnover.

Likewise, an unfair pay structure for family leads to employees wondering why they’re paid less.

In an effort to help employers navigate hiring family members, here are some guidelines:

  • Try to offer them what they’re worth. You’re doing no one any favors if you give them more money based on familial affiliation.
  • Have honest conversations about how chair filling hurts the company’s bottom line.
  • For hopeless family members, make it very clear that they shouldn’t share any hiring information with their fellow employees.
  • If an employee comes to you to complain about nepotism, don’t cave and offer them a raise. Yes, they’re right. Yes, it’s unfair, but if you give them a raise and that gets around everyone will want to earn more than the incompetent family member. That’s not sustainable.
  • Ensure, apart from the slight deviation, that there is enough ability to earn a higher wage or receive a promotion to alleviate the concerns about the preferential treatment. Steer clear of wage gaps based on other factors.

While nepotism is a reality, it’s not always seen as a positive one. Business owners should handle the practice delicately. As long as you offset hiring your family with an otherwise fair pay structure and management hierarchy, employees will understand that family — whether they're great or mediocre — is just a necessary evil they’ll need to deal with.

More: The best ways to give constructive feedback to your employees

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