Make Nepotism Work for You

Without nepotism — which literally means giving preference or patronage to relatives — family businesses can't survive. Yet promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.

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It's a tough balancing act: how to successfully train and promote the next generation without alienating other employees. It takes a real commitment to maintain employee morale and also ensure that chosen family members get the experience and training required to justify their succession when the time comes.

Require Heirs to Work Outside the Family Business

Nearly a third of chosen family successors have no full-time work experience outside of the family business. Requiring the heir apparent to work outside the family business ensures relevant experience in an environment without built-in advantages. Your company also benefits from the family member's knowledge of other business practices. And you'll discover whether your chosen successor really has what it takes — before you hand over the company.

Once he or she is ready, hire the family member on at an appropriate level. Other employees, especially those in senior positions, may still feel resentful if the family member is brought directly into a top leadership role.

Promote Family Members from Within

When family successors are already employed in-house, you should take steps to ensure fairness and, even more important, the appearance of fairness as they work their way up. It's critical to treat family the same as everyone else in hiring, evaluating and promoting:

• Start family members in jobs they're qualified for, not senior management positions.
  
  
• Pay family members the same salaries non-relatives would receive in the same positions.
  
  
• Evaluate family members with the same criteria used for other employees.
  
  
• Don't force family members on your managers. Give your managers the same freedom to promote, transfer and fire "nepotism hires" they have with other employees.
  
  
• If nepotism is allowed for your family, it should also be allowed for all employees. Consider an employee referral program that rewards employees for recommending those ultimately hired, including qualified friends and relatives.

Merit and nepotism are not mutually exclusive. Following these steps should promote fairness and help family members earn respect within your company. It should also minimize perceived unfairness when the chosen family member finally takes the helm. And remember: ideally, the chosen heir is also the person most qualified to run the business.

— Greg Sterling