When it comes time for a work at home mom or other entrepreneur to expand a small business empire, it's tempting to hire the people who are most accessible, which is usually friends and family, but hiring family members sometimes comes at a price. There are some significant benefits as well as disadvantages to putting family members in charge of various job roles in your small business enterprise. Here are some of the pros and cons of this kind of hiring practice.
In general, many family businesses and other small businesses profit from employing individuals informally, and most of the time, that means using family members. Young adults often work in family businesses at lower pay rates, adding to the bottom line of a small business and allowing more profit for growth.
When it comes to family "hiring," the fact is that much of this employment is done "under the table" without the kind of red tape that comes from hiring a formal employee or even a 1099 contractor. Less red tape is a major benefit of keeping business "in the family," but the business leaders have to always evaluate whether their choices are strictly legal according to local, state and federal law.
In many different kinds of small businesses, family members hire each other on a work-at-home basis. This is often due to a higher level of trust than what generally exists within the job market. It means that individuals who are hired by a family member within the business startup can often enjoy more freedom in their job roles.
In many cases, small business leaders who hire family members by default do not do a good job of matching them to the jobs that they are good at. This can cause major problems and lead to uncomfortable situations later.
One of the reasons that family hiring or "nepotism" in larger businesses has gotten such a bad name is that, in many workplace environments, someone who was hired as a family member rather than strictly by merit behaves as if he or she is not tied to his or her job performance. This can also cause situations where productivity suffers and other workers may question the choices of a business leader.
Another mistake that some startup business leaders make is hiring family members with whom they have an existing relationship based on specific power dynamics. Including a "employee-boss" relationship in the mix can cause all sorts of interpersonal strains and resulting issues.
Other misunderstandings between family members can arise from different perceptions of "the bottom line" for a business and how profit sharing should occur. It can be exceedingly difficult to determine how to pay salaries out of a common business pot, especially if that information is not kept secret or at least intentionally vague by the leadership of the business. Finding the equitable balance can be a lot harder when the whole family is in it together.
Think about all of the above when deciding whether to hire family members for an existing business.