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The Pros and Cons of Hiring Family Members in a Small Business While conventional wisdom discourages small business owners from hiring members of the same family, there are actually smart and strategic reasons to do so — but there are still drawbacks to consider. Here's what you should know about hiring employees who are family members.

By Nellie Akalp

Key Takeaways

  • While many small business owners may avoid hiring family members, there are millions of family-owned businesses in America — so it can be done successfully.
  • There are plenty of pros and cons to hiring family, you just have to decide what's right for you.
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Opinions expressed by Entrepreneur contributors are their own.

Even though we already had four children, when my husband Phil and I started CorpNet, our goal was not to create a dynastic family firm. Yet here we are, 14 years later, with two kids on the payroll.

That's not unusual; there are over 5.5 million family-owned businesses in America. Like most small businesses, family-owned companies struggle to find skilled employees. To meet this challenge, small business owners should ignore conventional wisdom and explore all avenues of finding good workers. One way to find the employees you need is to do what we did — hire family members, whether your own or relatives of your current staff.

While this may be perceived as nepotism, hiring family members has several strategic advantages.

Related: 5 Tips to Successfully Manage 'Friends and Family' Hires

The pros

1. Shared vision and values

Family members often share similar values, work ethics and long-term goals. In PwC's 2023 U.S. Family Business Survey, 90% of respondents of all generations say, "Growth is important because it enables them to invest in their company's future."

Your kids likely share your values and goals. But look beyond that. Let's say you have a high-performing employee that fits your company's culture — they may have a sibling or a spouse with the same traits. Hiring them (of course, you should vet them as you would any new hire) can save you the time and money of searching for a new employee and the concern that your new hire won't fit your company culture.

When employees (related or not) share values, it's often easier to work toward achieving common goals since they're invested in each other's success.

2. Trust

For small businesses to succeed, your team must trust one another. Family members have a pre-existing foundation of trust, and that attitude can spread to other employees, creating a strong team bond.

Trust among your staff enhances communication, collaboration, goal-setting and decision-making. And 91% of business executives surveyed in PwC's 2023 Trust Survey say maintaining trust improves the bottom line.

3. Loyalty

Employees want to work for companies where they know their opinions are respected. When your hire a relative of a current employee, they feel valued that you trusted their recommendation, deepening their loyalty.

Family members likely enjoy working together, which further cements their loyalty to your business.

4. Efficient communication

Family members typically communicate more easily and effectively due to their familiarity and shared experiences. This streamlined communication minimizes miscommunications and misunderstandings.

5. Lower recruitment costs

Recruitment can be costly and time-consuming — especially today when many businesses compete for the same employees. Small business owners can reduce recruitment expenses, such as paying for job listings, recruiters or employment agencies, by hiring their kids or employees' relatives.

Also, since your children and the relatives of current employees are already familiar with your business, the onboarding process is shorter, reducing training time and costs.

Related: The No. 1 Reason You Should Hire a Family Member

The cons

Of course, hiring family members can have some potential drawbacks. Here's what to look out for:

1. Appearance of nepotism

Whether you're hiring members of employees' families or yours, other employees may resent these new hires, assuming they're not qualified for the job. Transparency is essential. Tell your staff about the familial relationship and why you think the new worker will make a great team member.

2. Preferential treatment

It is critical that the new hire does not get preferential treatment. Family members should avoid inside jokes, telling secrets and any other behavior that would cause resentment.

Job responsibilities, wages and paid time off for similar positions should be the same. Even a hint of special treatment will increase resentment in the rest of the staff.

3. Emotional baggage

Family members may bring emotional baggage and existing conflicts into the workplace, creating tension and making it difficult to work together. Those tensions can permeate throughout your company, negatively impacting growth.

Regular communication is key to resolving family conflicts. The 2023 North America Family Business Report from Brightstar Capital Partners and Campden Wealth reveals that 49% of respondents experienced family conflict on the job, which for 41% resulted in a communications breakdown, impacting the entire company.

Before family members join your company, you or your HR manager should set boundaries between the related employees (including you and your family). Explain what behaviors are not acceptable in the office. Consider adding a section about this to your employee handbooks.

Related: The Do's and Don'ts of Involving Family in Your Business

Tips for hiring family members

When hiring relatives, you need to:

  • Be clear about your expectations. Set clear expectations for the new hires so they understand their roles and responsibilities. When hiring family, it's key to temper your expectations. Don't expect them to be perfect or to think exactly as you do, and be patient. Give them time to adjust to their new roles. Also, if applicable, explain your expectations to the employee who suggested you hire their relative. If things don't work out, you don't want to lose your other employee as well.
  • Be fair and impartial. All employees should be treated equally. Favoritism is never acceptable.
  • Hire the best person for the job. Never feel obligated to hire relatives (your own or an employee's) simply because they're family. Make sure they're qualified for the job.

Before making a final decision, weighing the benefits of hiring family members against the potential drawbacks is critical.

At my company, we have hired relatives of our employees and found that they work hard, quickly fit into our company culture and help us focus on growth and success. And while my kids work at CorpNet now, I don't have unrealistic expectations. We're not grooming them to take over. My children have aspirations and want to start their own businesses.

Nellie Akalp

Entrepreneur Leadership Network® Contributor

CEO of CorpNet.com

Nellie Akalp is a passionate entrepreneur and mother of four. She is the CEO of CorpNet.com, the smartest way to start a business, register for payroll taxes and maintain business compliance across the United States. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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