“You’re only as good as the people you hire.” Ray Kroc

The inexperienced son of the CEO is abruptly put in charge of executives twice his age. The real estate developer’s wife, fresh from finishing an adult-education class on interior design, is brought in to buy furnishings for a $5 million spec home. We’ve all heard horror stories like this about nepotism in the workplace.

I have some stories of my own: a husband and wife team who would occasionally start screaming at each other during meetings… the brother of a publisher who almost single-handedly destroyed the business through a combination of arrogance and rudeness.

Better-known examples of failed nepotism might include Donald Trump’s efforts to make a TV personality of his daughter, Ivanka… legendary Florida State University football coach Bobby Bowden’s disastrous hiring of his less-than-legendary son as the team’s offensive coordinator… former New Jersey Governor Jim Greevey’s installation of his unqualified, secret “significant other” as his homeland security advisor (an action that led to his downfall)… and former World Bank President Paul Wolfowitz’s questionable decision to promote his girlfriend and give her a pay raise (which, along with other factors, forced him to quit).

Based on these examples, nepotism – favoritism based on a family relationship – clearly has its risks. But for the most part, I’ve had good experiences with it.

Many of the best employees I’ve hired over the years have been the brothers, sisters, spouses, cousins, uncles, aunts, and even grandchildren of other employees. At most of the companies I’ve owned or worked with, nepotism has not just been tolerated, it’s been encouraged.

The same has been true with respect to friends.

I have found that recruiting new employees through existing employees has been the single best way to find great people. And when I do a mental role call of the 30-odd senior people running the companies I’m involved with, at least a third of them were originally friends or relatives of existing employees.

It doesn’t surprise me that friends and family members make for good hires. Smart, hard-working, goal-oriented people tend to live in clusters – either natural formations created by DNA and family culture or social formations created at colleges or in clubs.

Back in the days when I was a CEO, I made it a policy to work the friends-and-family game whenever I needed to bring in someone good. I would speak personally to every superstar employee and ask them if they knew anyone who would be right for the job – “maybe a relative or friend,” I’d add.

Working the superstar network was always my first effort, because it was easy, fast, and produced good results. It didn’t always work – especially after I had pumped the well dry – but it was an advantage I had that my competitors who were scared of nepotism lacked.
Hiring good people is difficult. It is so difficult, in fact, that it is foolish to have a policy that discourages the hiring of friends and family members. If you want your business to grow as fast as it can, you should do the opposite. You should actively recruit from these pools of potential superstars.

A few simple rules can greatly reduce or eliminate the nightmarish problems that can arise.

Rule #1. Never, ever hire a friend or relative to work directly for you. You don’t have the judgment to evaluate them objectively – and if things go bad, you can ruin the primary relationship.

Rule #2. If you want to give a friend or relative an opportunity to work in your business, tell them about the job and recommend that they apply for it. You can also tell their future boss that you have suggested the connection. But be very clear that you will not interfere at all with the relationship. The hiring, firing, compensation, and other aspects of the job are entirely the supervisor’s decisions.

Rule #3. If that person is hired, refuse to get involved. Don’t even talk to them about work. Tell them ahead of time that you want to keep your relationship personal and hold them to it.

Rule #4. If you want your child to work for your business, start them at the bottom and let them work their way up the ladder on their own. Banish any expectations of their taking over the business. What’s best for them is to end up in the job that best suits them. Let the natural forces of your business decide that.

Rule #5. When relatives and friends are being interviewed by their potential boss, they must be scrutinized and assessed with rigor. The person doing the interviewing should:

  • Look for the right things.

Intelligence is important, but I’d list it third on my list of things to look for. I agree with Jeffrey J. Fox in his book How to Become a Great Boss that the two most important things to look for are attitude and aptitude.

  • Flee flaws.

Generally speaking, a job candidate is at his best during the interview. If something seems “wrong,” it shouldn’t be ignored – especially if it concerns qualities that are important for the job. Personal quirks are like the tip of an iceberg – what you see on the surface is a very small part of what you will have to deal with later.

  • Don’t worry too much about specific experience.

Of all the qualities that are important to look for in finding a great employee, specific experience is not very high on my list. Yes, it’s good to know that the person you hire can do the technical work from day one – but on day seven or day 14, you’ll wish you had opted for the better, though perhaps untried and unproven, prospect.

By working your network, employing tough standards, and insisting on keeping personal and business relationships separate, you will be able to fill your company with smart, hardworking people – sometimes without having to place a single help-wanted ad.

[Ed. Note: For more of Michael Masterson’s leadership techniques, pick up a copy of Power and Persuasion. ] [Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]

Mark Morgan Ford

Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Wealth Builders Club. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.