Family Biz: 5 Questions to Ask Before Hiring Relatives

Hiring relatives to work for your Family Biz can get quite touchy. Even if you need the extra help, there is always the risk that your family member might not be a good fit for your company, says Don Schwerzler, owner of the Lawrenceville, Georgia-based Family Business Institute, Inc. and, a multi-disciplined consulting resource for family-run businesses. Here are five things Schwerzler says you should consider before hiring a family member:

What is your motivation? Family businesses tend to be two distinct models: Family first businesses or business first businesses, says Schwerzler, who has 40 years of experience providing advice on the subject. The differences can be dramatically different. Are you hiring a family member because they are family and need a job or do they have a set of skills that the business needs? Be honest with yourself and with the relative about your motivation for hiring them.

Do they share the values of your company? Just because they are family doesn’t mean they have the same values that you have. They might have a different work ethic than what you expect. Also, if you consider yourself to be a family first business and they have a business first mentality, you might think you are offering them a safety net and they may see it as a trampoline or a stepping stone to get to their next job.

Are they being paid for what they are worth? Let’s say you bring in a family member to work as a manager, says Schwerzler. They were getting paid $60,000 at their former employer, but you have four managers and you pay them a $35,000 salary. Just because the family member is accustomed to earning more, doesn’t mean that will work for your company. The risk of paying a family member more or less than what they are worth can cause dissension between employees and cause problems with your profit margin.

Are they over-qualified or will they require a lot of training? If so, you may want to encourage your family member to work somewhere else. “One client thought that was a good idea because he’d rather have his kids make the mistakes…when they are on someone else’s payroll,” says Schwerzler jokingly. “But there is a lot of truth to that. There is something called the new nepotism. It might be better to invest time and energy helping them get a job somewhere else than to hire them.”

What will be the consequences if you need to fire them? It is always to tougher to fire than it is to hire a family member. As a precaution, formalize the employment agreement and put it in writing just as you would with any other employee, says Schwerzler. Make sure they understand the conditions of their employment, and whether it is permanent, seasonal, or temporary. Also, be clear that if they don’t live up to what you expect in terms of job responsibilities, performance, and attendance than their relative status won’t keep you from terminating them.

For further reading on family businesses check out:

9 Steps for Working Smoothly with Friends and Family

A blog about keeping family in the business mix

Right On Track

The story of two brothers who started a construction company together.

A Whopper of A Franchise

About owning restaurant franchise with family