If there were Ten Commandments of entrepreneurial success, surely one of them would be "Thou shalt not hire thy neighbor, thy neighbor's wife, thy wife's brother, thy sister-in-law, thy best friend, and, for absolutely sure, your Uncle Harry."
If the big boys (companies) have rules against nepotism because of potential conflicts, doesn't it make sense to suspect those same problems might also arise in a small or high-growth company? In addition to the common problems of misunderstandings, and problems such as firing friends, neighbors, and relatives, we also have to face potential company-destroying problems such as when you fire one relative, another may leave at the same time over hurt feelings and start a competitive company.Or, if you have a husband and wife team, say one working in sales and the other in the accounts payable department, problems of embezzlement or breakdowns in checks and balance systems may more easily occur.
Morale-destroying problems can also cause ripples up and down the company line when an owner's loyalty goes beyond just an employer/-employee relationship. What about divorces or infidelity among related employees? Problems of growing a business are traumatic enough without the additional challenges of fighting between friends and relatives.
I can't tell you the number of times I have heard heart-wrenching stories of sons needing to fire their father or mother, or fathers who have sons that are draining the company. Granted, occasionally hiring a relative or friend does work out. But, why tempt fate? By going into business for yourself, you are already fighting odds against success; why increase the odds of failure by thinking you are the exception and can get away with hiring a relative?
Unfortunately, not only are friends, family, and neighbors hired, but problems are often made worse by giving them stock or ownership in the new venture before you know what their contribution might be.
The mistake of hiring relatives is often compounded even more by a mistake more fatal to the fragile business than any other, that of not putting ownership agreements in writing. "We trust each other, so why should we spend the time writing things down or worse yet, hiring an expensive lawyer? We're too busy building the company," is the common rationalization.
An additional warning is the greater the number of layers of relationships outside the work place, the bigger potential for problems in the workplace.
Beware of same family, same church congregation, same social group, or even same neighborhood relationships.
These interrelationships get even more sticky when the inevitable happens: people are fired, money is lost, misunderstandings occur, or the biggest problem maker, unimaginable financial success, which often brings out the worst in people.
I learned this lesson the hard way. I hired my best friend once, the man that helped teach my children to ride a bike, make a pine-wood derby car, and put up tents on father-and-son outings. He made a great contribution to our 3-year-old company at first.
Then he started asking for more and more favors, such as extra money for special gifts for his wife and children and more time off than the company policy allowed. Soon, he was working less than a half day and refused to fill out sales reports and other company forms, demanding exceptions because of our friendship.
Finally, after months of my worrying about how I could fire the man who had once been my best friend, I had to look beyond the friendship. Even though he was the sole supporter for his family of eight children, my peace of mind, the company's future, and respect from my other employees was at stake. I had to fire him since he refused to change.
Talk about sleepless nights. But, I had to do it. Because he was my friend, I gave him a $9,000 severance package and cut the cord.
Out of at least 100 former employees, it is only he who I can not look in the eye, even though it has now been six years.
The need to fire a best friend or relative just isn't worth the chance anymore to me. I can't stand the pain.
Do your family and friends a favor hire the best qualified person for the position with the new company, not your best friend, or your wife's brother, and for sure, not your Uncle Harry.