Small Businesses

Top 4 Drawbacks of Hiring Family Members and How to Overcome Them

 Hiring family members can have drawbacks, but these are the best ways to resolve them seamlessly.

  • 4 min Read
  • January 16, 2024

Author

Bhavya Agarwal
Bhavya Agarwal

Bhavya Agarwal is an ardent content writer who loves exploring the world of artistic expressions to create stories that are riveting. She has crafted fictive and engaging experiences for several renowned brands and helped them achieve their vision and mission. Besides storytelling, she can be found traveling the world, reading novels and watching anime to broaden her horizon of multiculturalism and studying different literary works.

Table of Contents

“Motivation comes from working on things we care about. It also comes from working with people we care about,” said Sheryl Sandberg, the author of ‘Lean In: Women, Work and the Will to Lead.’ This quote captures how motivation is fueled by two primary factors, i.e., working passionately and having a supportive network of colleagues. Considering this, hiring family members can be a great way to create a close-knit environment and achieve personal and professional growth in the business realm.

Inter-twining professional endeavors and personal connections bring opportunities and challenges. On the one hand, this employment dynamic might spark visions of reliability, collaborative work culture, and shared intent. On the other hand, it can lead to conflicts of interest, a lack of accountability, and strained relationships.

Schedule a call today

Strategic planning and following the best HR practices are needed to overcome these issues.  

4 disadvantages of hiring family members and how to mitigate them

1. Absence of accountability


Having family members as employees in your company can help you work with more dedication and soundness. However, sometimes, there can be cases where perceived favoritism towards family members can result in a lack of accountability and lower morale in the workforce.

Strategy: Establish clear expectations and guidelines

  • Prioritize and implement “clarity above all” as a sacred mantra in the organization. 
  • Ensure clear goals and policies concerning advancement prospects, hiring employees, accountability, and performance expectations are established.

These should be applicable and adhered to by all employees, regardless of familial bonds, thus promoting a culture of equity and unbiasedness.

2. Strained personal connections


Incorporating familial bonds into professional work can often negatively affect personal relationships. Workplace disagreements or conflicts of interest can lead to elevated tensions, disputes, disorientation, and more issues.

Strategy: Set boundaries and communication channels


Open communication is the key to resolving strained relationships. 

  • Establish boundaries between personal and professional interactions. 
  • Have designated channels for work-related problems to avoid strained relationships. 

According to the Pew Research Center 2023 study, nearly 4 in 10 workers see their job as central to their identity. The McKinsey & Company report also states that workplace relationships account for 39% of employees’ job satisfaction. The same report also says that relationships with management account for 86% of workers’ satisfaction with their interpersonal ties at work. 

Hence, clear communication and boundaries lead to more job satisfaction, heightened morale, and trust.

Talk to us about how Escalon’s essential business services can help your firm scale faster.

3. Effects on the decision-making process


Sound decision-making is necessary to set the stage for organizational success. However, appointing family members in managerial positions can impede employee development initiatives and the decision-making dynamics within a company. It can also make non-family employees unsure about expressing themselves or challenging family members’ ideas, hindering creative and diverse perspectives.

Strategy: Cultivate an all-inclusive atmosphere

  • Encourage a work environment where voicing different viewpoints and having open discussions are enabled. 
  • Motivate all employees to participate in decision-making to leverage individual innovative thinking, leading to increased productivity and employee engagement. 

4. Succession and future changes


If family members are in leadership positions, succession planning can become complicated. Seeking equilibrium between familial expectations and a firm’s goals and needs can create issues in grooming suitable successors.

Strategy: Devise an encyclopedic succession plan

  • Develop a comprehensive succession plan that reflects an enterprise’s future requirements and family dynamics. 
  • Offer opportunities for mentorship and skill enhancement to potential successors. This will ensure they are ready to take on administration roles. 

The final word


Despite the potential pitfalls of this employment type, family businesses are taking the world by storm. As per the 2023 EY and University of St.Gallen Family Business Index, the largest 500 family enterprises are growing faster than the transnational economy. They are generating a whopping revenue of US$8.02 trillion and employing 24.5 million people globally.

Remember, while hiring top talents, implementing fairness, transparent evaluation measures, inclusive decision-making, and comprehensive succession planning can help address these drawbacks effectively.

Schedule a call today

Want to know more about setting up best HR practices? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today

This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

People Management & HR

2025 Employment Law Updates: What to Know

As we step into 2025, businesses across the country face several important updates in labor laws and employee benefits. Staying...

Read More
Startups

5 Signs Your Startup Needs an Outsourced CFO  

5 Signs Your Startup Needs an Outsourced CFO   Startups often operate with lean teams, but as they grow, financial complexity...

Read More
Leadership & Growth

CG Startups: How to Keep Costs Low While Scaling Operations 

Consumer Goods Startups: How to Keep Costs Low While Scaling Operations  Scaling a consumer goods startup requires a careful balancing...

Read More
Press Releases

Escalon Expands Its Reach: Full Stack Finance and Early Growth Join Forces with Industry Leader 

Escalon Expands Its Reach: Full Stack Finance and Early Growth Join Forces with Industry Leader  In a strategic move that...

Read More
Taxes

Delaware Annual Review: What Series A-C Startups Must Know to Stay Compliant 

Delaware Annual Review: What Series A-C Startups Must Know to Stay Compliant  For startups incorporated in Delaware, staying compliant is...

Read More
Taxes

Tax Planning for Startups: Preparing for Your First Tax Filing

Tax Planning for Startups: Preparing for Your First Tax Filing as a Growing Business  For many startups, the first major...

Read More
Taxes

Unlock Tax Savings with the R&D Tax Credit

As a startup, managing cash flow and minimizing expenses are critical to your business's survival and growth. One often-overlooked opportunity...

Read More
Accounting & Finance

1099 Compliance for Early Stage Startups

1099 Compliance for Early Stage Startups As your startup grows from seed funding to Series A, B, or C, you’ll...

Read More
Accounting & Finance

Meet the Experts at Escalon: Ankush Sharma

Welcome to our new series, Meet the Escalon Experts, where we introduce you to industry leaders shaping your business’s future....

Read More