A long-standing rule in business says never hire friends or family. The fear is that personal or family relationships can too easily wreak havoc in the business environment. Although this may prove true in some instances, family and friends often make highly-motivated, hard-working employees and it is a talent pool you should not overlook.

There are simple steps you can follow to make hiring friends and family a smart and profitable decision. The advantages of hiring family and friends may include:

1. Increased loyalty and commitment
2. Quicker training periods
3. Reduced start-up costs
4. Tax benefits

Action Steps
The best contacts and resources to help you get it done

Hire for a specific job

Small business owners often hire family and friends without a specific job in mind, which can lead to confusion and problems down the road. It's best to give family and friends a detailed job description so they understand exactly what's expected of them.

I recommend: Write a job description that includes a job title, a job objective, a list of duties and a description of roles and relationships. Get step-by-step help for writing an effective job description from SBA.gov.

Hire only if qualified

Hiring someone who isn't qualified can ruin your business and your personal relationship. Bring family and friends on board only if they possess the education, training and experience necessary to get the job done. Before hiring, ask yourself if you would employ this person if they weren't a family member or friend.

I recommend: Purchase management forms that detail job qualifications for a variety of positions at the Job Results Management Institute.

Keep compensation fair

The salaries you pay friends and family should be in line with what you're paying other employees. Offering a high-paid, cushy job to a friend or family member sets a bad example. Conversely, taking advantage of pals and relatives with a skimpy salary can lead to resentment.

I recommend: Get a free look at average salaries for hundreds of job categories with the Salary Wizard. For a fee, you can get a more comprehensive view of salary ranges and bonuses at Salary.com.

Conduct performance reviews

Hold family and friends accountable for their job performance. Forgiving loved ones for consistently showing up late, not meeting sales goals or going overboard on expenses sets a bad example for other employees.

I recommend: Download performance appraisal forms for 10 types of reviews from Performance-Appraisal-Form.com.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Friends and family may expect special treatment and may think they're above the rules. Try to treat all employees equally.
• •  Encourage family and friends to keep business and personal lives separate.
• •  You must be prepared to terminate a friend or family member if they don't perform their job adequately.
• •  Outline steps for conflict resolution with family and friends to avoid escalating disputes.