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How to Hire Family Members: Top 3 Tips

By Stephanie Rabiner, Esq. | Last updated on

Although 80% of all businesses are family owned, only about 13% are ever run by the third generation. The desire to bring family members into the mix is strong, but may not always be the best decision for the business. It's thus important to understand when and how to hire family members, and what to do when they're brought into the fold.

Here are the top 3 tips on how to make this process easier.

1. Draft a Family Employee Policy. To help family members understand their place in the company, it's important to put expectations and qualifications in writing. Not everyone is cut out for the family business, so you should set out hiring requirements. Do family members need specific skills or a set amount of outside experience? What are the educational prerequisites?

A policy should also contain responsibilities once a family member has been hired, according to Inc. List job descriptions and corresponding duties, compensation, review policies, and anything else you'd expect of a non-family employee. Let the family member know if you expect anything more from them, such as pitching in to cover when someone is out sick.

The magazine also suggests that the policy contain goals--how family members will move up in the company and how they should expect to do that.

2. Avoid the Sense of Favoritism or Nepotism. The worst part of hiring a family member is earning the ire of other employees. A seamless integration is key, notes Inc. The magazine suggests you poll other employees for ideas on how to do this, so they feel involved in the process. Also be mindful of family dynamics that may promote favoritism.

Other suggestions include utilizing a board of directives, business consultants, or joining a peer group as means to keep boundaries in place.

3. Focus on the Business Not the Family. Research shows that putting the business before the family nets higher profits, reports Inc. Don't use business funds for personal expenses or to fund family members. Don't allow family squabbles to impact how the business is run. And going back to the first tip, being a family member shouldn't automatically mean a job.

One of the best parts of running a family business is being able to create a legacy that provides for future generations. But if you don't know how to hire family members and keep the business working efficiently, that'll never be.

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