Nepotism Can Be a Good Thing in Family Business—If You Get These 4 Things Right

It’s a critical time for business-owning families considering the merit of offering jobs to their new grads. Many families may hesitate because hiring them at this career stage might be based more on genes and their name than specific skills or qualifications. In other words, it’s nepotism.

That’s not necessarily a bad thing.

Yes, nepotism is far from popular in U.S. culture and public opinion. “Nepo baby” is now firmly fixed in American lingo thanks to nepotism in the entertainment industry. The Varsity Blues admission scandal and, more recently, the Harvard legacy admissions lawsuit have only added to the negative perceptions. That shade is justifiable, and nepotistic practices should always get scrutiny.

But I’m staking a claim that nepotism, done with caution and care, can be a good thing in family business—including for employees who aren’t family members. Skeptical? Stay with me.

The Benefits of Nepotism in Family Business

Core to the nepotism-can-be-good argument is the idea that family business is meant to serve the family in addition to the need for the family to support the business. Implemented correctly, a little bit of nepotism ultimately serves both family and business. Here’s how.

• Working for the family enterprise benefits next-generation members by providing meaningful experience and exposure to business-related capabilities, such as strategy, marketing, operations, human resources, and governance. The experience builds their résumé and lays the foundation for the future. This is true even if they don’t end up working for the family in the long term.
• Creating opportunities for the next generation demonstrates to the broader family that the business provides benefits to family members beyond dividends. This is especially true for shareholder parents who will recognize that the business is providing opportunities for their children to learn and grow, strengthening desires to continue to support the business.
• Effective nepotism improves the longevity of the business by helping to foster an emotional attachment to it among the next generation. Those who work there early on are more likely to develop a personal connection to what it does and those it impacts. Real experience in the business can create an appreciation for the importance of the business to its many stakeholders beyond the family, including employees, customers, and the broader community.
• Working with the business prepares next-generation members for many future roles within the business. When considering early roles for the next generation, families should recognize that there are many future roles that family might play: employment, management, leadership, board participation, family council, and work in a foundation. Direct experience with the business provides insights and skills to help them perform better in any of these roles.
• Bringing the next generation in early enables two-way assessment—for the new employee to gauge how much they enjoy working with the business and for the business and family to understand if that family member brings the right capability and character to the enterprise, enabling them to catch rising stars and steer away poor fits earlier rather than later.
• Done-right nepotism signals the importance of family to the broader ecosystem and community within which the business operates. Customers and suppliers will likely feel more confident the business will continue into the future as they get to know the next generation and see that they are being actively prepped to operate it.
• Next-generation members brought into the business get the chance to work with and be mentored by key stakeholders: management, directors, customers, and suppliers. If these family members are likely to be involved with the business later, it’s best for them to get to know these people and build strong relationships with them earlier.

But to reap all those benefits, nepotism in family business has to be done right.

4 Moves to Get It Right

Here are practical steps to practice strategic, effective nepotism in family business.

— Do it with purpose. I’m not endorsing painting the family business with a broad nepotistic brush or practicing nepotism for the sake of nepotism. It’s about understanding the benefits you’re looking for, then selectively choosing people and arrangements more likely to bring those about.

— Think short term. A customer-service internship for high-school or college-age family members. A part-time job on the factory floor. A two-year rotational program for newly graduated members. The job shouldn’t be a long-term, management-level role—reserve those for family members who fully meet stricter family employment policies.

— Use your business network. As an alternative to direct employment in the family business, consider placing a next-generation member with a supplier or customer of the family enterprise. Family businesses in the same ecosystem could even have a reciprocal arrangement.

— Maintain accountability. Providing opportunities with your business connections does not have to imply special privilege. Set clear expectations and objectively measure the performance of anyone hired under this arrangement. That will help them know what to expect in later roles within or outside the family business. Further, it can help both the business and the next-generation member make the best decisions for the future.

A Personal Perspective

Looking back, I owe tremendous thanks to my father for hiring me my first year right out of college, not to mention for the multiple high school jobs with clients of the family business that happened to come my way. I can tie most of my career opportunities, as well as my interest in this field, to the experience he gave me. Further, it strengthened our relationship.

Strategic nepotism can be a good thing in family enterprise. Don’t be afraid to welcome those new graduates into short-term, structured roles, with clearly understood expectations. Done with care, these arrangements provide more benefit to both the family and business than avoiding the question by turning the next generation away.

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This article originally appeared in Inc.