Living Entrepreneurship Blog / Babson Entrepreneurs

Working with Family and Friends

Starting a new business can be lonely. It is no surprise that many entrepreneurs seek to find teammates for their ventures to help them get their idea off the ground. But what happens when you enlist family members or friends? Where do you cross the line between personal and professional? On Tuesday, December 2, the Butler Venture Accelerator hosted a lunch and learn session on nepotism.

Having family and friends in your venture can have some benefits. These include:

  • Lower recruiting costs
  • Lower turnover –> increased stability
  • Loyalty
  • Confidentiality

However, having family and friends can bring some challenges to the organization, such as:

  • Feeling of entitlement
  • Difference in perspectives and values in generations
  • Favoritism
  • Avoiding bad news

Not only does the organization have challenges to face, but so does the individual!:

  • Credibility
  • Tied to family/friend connection
  • Work on the business 24 days, 7 days a week, 365 days a year
  • Privacy and lack of segregation

So when does nepotism actually add value? There are two types of nepotism, entitlement and reciprocal. When looking at reciprocal, there is a sense of interdependence and support obligations between team members. There may be some previous interactions between the team members. These all are the foundation for trust-based exchanges between employees, which enables reliable knowledge transfer within organizations. Management within these organizations can then make strategic decisions in hopes of getting a competitive advantage in the industry. Firms with higher exchanges tend to have employees that are committed to the company, stay longer and affiliate themselves with the company.

If you are considering bringing on family or friends into your new venture, remember to be objective. Nepotism can add value but act with caution. In order to ensure a company culture that is reflective of the values you want in your start, treat everyone fairly from the moment you hire them.