Five Guidelines for Hiring Family or Friends

For many family-owned businesses, there is no choice but to hire family members, because the business was designed to support the family. Surprisingly, I know many successful family-owned businesses. Naturally, there are disagreements and squabbles.

If you are considering hiring family members and friends, you should set up a structure and rules. Having written guidelines in place enhances the chances of the company's overall success.

Here are the rules I have witnessed that work:

1. Outside Experience

The worst thing you can do to a family member is have them go from high school or college directly in to the family business. It is essential he or she experiences being someone else's employee. They need to know that their name won't carry any weight.

I once worked with a woman whose family founded one of the world's largest pharmaceutical companies. She was the director of marketing at an Internet company. I asked her why she wasn't working in the family business and she said her father wanted her to experience another corporate culture. He wanted her to be kicked around like any other employee.

On the opposite end, I had a family member who went directly from college into the family business. He talked down to the employees, left work early on Fridays for long weekends and, if the weather was good in the summer, he went golfing. Employees had no respect for him and began losing respect for his father.

2. Reporting to Non-Family/Friend

If you are going to bring in a family member or friend, make sure they report to a stranger. Reinforce that if there is a problem, they have to work it out with their manager and go up the chain of command. A friend of mine had a woman who reported to him who was the daughter of the chairman.

When she didn't like something she went to Daddy, who was experienced and smart enough to tell her he couldn't do anything about her situation. He told her work it out with her manager.

3. Set Expectations

Before bringing in family members or friends, set expectations. Let them know in writing what exactly they are expected to do and how their performance will be judged. Make sure you come to an agreement, so there is no miscommunication.

4. Money

Don't pay them any more than a non-family member or friend would receive. Conversely, you certainly shouldn't expect a discount from them because of their relationship with you. Pay them in-line with the position.

5. Cut Bait

As hard as this is to do if you have a family member or friend who isn't cutting it -- after providing the same support you gave everyone else -- you have to let them go. More than likely, they will be relieved. It's best to have someone else swing the ax in order to maintain the relationship.

Many great companies have been built using friends and family, but the trick is to not show preferential treatment. It's important to layout a plan that is fair and equitable to the person and the company.