Nepotism

How to deal with the perils of having relatives on the payroll
If you’re among the 80% of small businesses owners who have relatives on the payroll, you may have already faced problems such as these:
— A relative who can’t perform up to expectations. But somebody else promised him a job years ago, and now you feel stuck with him.
— A supervisor who’s gun-shy about doing honest and thorough performance reviews for an employee who happens to be your cousin. The reviews are always positive, yet you know your cousin has several areas that need improvement.
— A brother who has applied for a higher position, along with two other employees who aren’t related to you. Your brother clearly has the best skills and attitude for the job. But you’re afraid that if you promote him, your other employees might silently accuse you of favoritism.
Smart business owners who want to pass along the fruits of their success to their children know they don’t necessarily have to recruit their children to work in the business, give them on-the-job training, then promote them. Instead, they hire professional managers instead of their children so they don’t have to deal with the baggage that comes when relatives are directly involved in the business. The professionals help contribute to the profitability, and the children – who might not even be interested in the family business — eventually are the real winners.
Not all business owners have that luxury. Often strapped for cash, those who own family businesses sometimes find it’s easier to simply recruit their children or other relatives, hoping that the day-to-day experience of running the business will put the next generation in a better position years later when they decide to retire.
But all kinds of problems result when that happens. A general manager, for example, might continue to accept poor performance from a relative and simply work around the problem. Eventually, however, good people leave the company because, unlike the general manager, they work closely with your relative every day and can’t ignore the problem like you can. So if you’re intent on job security for a poor-performing relative, you may do it at the expense of losing some of your best employees.
In one of the cases cited above, there’s an easy way around the problem of performance reviews. The supervisor can simply rely on 360-degree feedback. That means that in addition to the supervisor’s own review and the employee’s self-appraisal, the supervisor asks for feedback from those who answer directly to the employee being reviewed. Some companies even solicit feedback from the employee’s work team and other co-workers. These 360-degree reviews offer a much more comprehensive view of the employee’s performance. And it’s more difficult for the employee to blame the supervisor for a bad review.
If you have a relative on the payroll, or plan to hire one, here are some things to keep in mind:
— You must interview them, just as you would other job candidates. During the interview, emphasize the job requirements and skills. Be sure they know they will be tested, just like everyone else, so you can be certain they have what it takes to do the job correctly.
— If you hire them, treat them like every other employee. Absolutely no favoritism.
— If a relative has a senior-level position she has grown into, and there’s an opportunity for a promotion, let all the candidates know they will be evaluated solely on past performance, attitude and the skills needed to do the new job.
— When a relative truly is not capable of performing to the requirements to help the business be successful, you’ve got to take action and move that person out. You can take care of the relative financially however you wish. But if you want to be profitable, you can’t let that person languish on the payroll while you watch profits dip.
— If a relative in a senior-level position needs to be removed, you should call on an industrial psychologist to provide the help and support needed to prepare not only the relatives and family members, but the other managers, for the change.
— Don’t load the payroll with relatives from the same immediate family. If economic times are tough, or if the business fails, everyone in the family is affected.
One last word of caution. If you’re planning to turn the business over to one of your children who already has an important position with your company, never travel together for business or pleasure. I know a man who owns a business and hired his son who is now the vice president of sales. Both were traveling together and almost had a serious accident. It’s a purely practical matter.
Val Mayer chairs several groups for Executive Agenda, a Brookfield-based full-service executive development group for senior managers, and for TEC (The Executive Committee), a professional development group for CEOs, presidents and business owners.
Oct. 12, 2001 Small Business Times, Milwaukee