It's not uncommon for small business owners to hire family members, which can provide a number of advantages. However, the potential for favoritism (nepotism) and conflicts of interest still exists, whether real or perceived, and can have a negative impact on the workplace. Here are some guidelines for preventing nepotism from negatively affecting your workplace.

Do's:

Treat all employees fairly.

If you hire family members, make sure they're qualified for the role and reinforce your commitment to a fair and equitable workplace. Stay out of decisions affecting their employment as much as possible and instruct their supervisor to hold them to the same performance and conduct standards as other employees. Don't let personal conflicts seep into the workplace and always treat them professionally. Additionally, maintain transparency about what objective criteria your company uses to make hiring and compensation decisions.

Consider a written policy.

Look at your company culture and applicable laws to decide what type of policy makes sense for your business. Many employers limit the policy to situations in which an employee would have control over a family member's employment (such as hiring, promotion, and termination decisions), work responsibilities, performance evaluations, or compensation. Most anti-nepotism policies define family member broadly to include not only spouses/domestic partners, parents, siblings, and children, but also household members, grandchildren, aunts, uncles, nieces, nephews, cousins, and in-laws.

Consider addressing personal relationships.

Some nepotism policies cover other close personal relationships, such as individuals in a romantic relationship. While you might have difficulty enforcing an outright ban on all workplace dating, you may want to discourage workers from entering relationships when there might be a conflict of interest, such as a supervisor-employee relationship, or an HR-manager relationship.

Evaluate your options.

If a situation has the potential for nepotism, consider which options may help resolve the conflict. For example, the supervision, evaluation, and discipline responsibilities for one of the employees could be transferred to another supervisor, or you may consider transferring one of the employees to a different department. Make sure your decisions don't violate nondiscrimination laws and consider consulting both employees for input on how best to resolve a potential conflict.

Review all employment decisions.

Make sure all decisions related to hiring, promotion, discipline, pay, and termination are reviewed by more than one individual who does not have a conflict of interest. Make decisions based on legitimate business needs and ensure the same standards apply to all employees.

Don'ts:

Violate state protections.

Many states prohibit employers from discriminating against applicants and employees based on their marital and/or family status. In these states, a blanket policy that bars any relative from working with the company may violate state law. Some states prohibit employers from taking adverse action against employees for lawful off-duty conduct, which may also protect employees in some situations. So, make sure your policy complies with applicable state law and focus on preserving the integrity of employment-related decisions, maintaining a productive and fair work environment, and preventing conflicts of interest.

Take shortcuts.

Even though you may know the candidate (because they're a family member or an existing employee's family member), you may not know the specific job-related information necessary to make an informed hiring decision. Follow all the steps of your typical hiring process, including an interview, background check, and drug screen, if applicable. Consistency is also important in order to comply with nondiscrimination laws. For example, you can't subject some candidates to certain screening and selection practices but not others. If an employee recommends a family member for an open position, direct the family member to apply using the company's standard procedures.

Rely exclusively on employee referrals.

Solely relying on employee referrals when deciding who to bring in for interviews may increase nepotism and create a barrier to equal employment opportunity for groups that are not already represented in your workforce. Employee referrals should be just one part of a diversified recruiting effort.

Conclusion:

An effective anti-nepotism policy can help employers avoid perceptions of favoritism. Make sure all hiring, promotion, compensation, and other employment decisions are based on objective factors, including an individual's qualifications, ability, and performance history.