Hiring relatives of employees can be a dangerous policy for many reasons. Early in my academic career, the small department where I taught hired a husband and wife as teachers.

Though they were good for the department in the sense that they were both incredibly smart people, they always voted in unison on departmental matters, which meant they had double the vote of any other faculty member.

Needless to say, because of this issue, they were not well liked or trusted by most faculty members. Morale remained low as long as they were in the department.

In another example, a very successful firm hired the son of one of its most productive – if not the most productive – staff members. For the first year, everything seemed to go along fine, but then the son started to miss more and more work.

The son’s performance issues were caused by a drug problem, which was a serious liability for the firm. When the firm fired the son, the father also quit to show support for his son. In this case, nepotism ultimately caused the firm to lose its best worker.

Another firm had a husband and wife working in separate departments. They were both great workers, but tended to gossip about things going on in each other’s departments. Much like my first example, this caused morale trouble. Colleagues no longer wanted to be open around this couple.

No matter how good the hire looks on paper, nepotism is a risk best left not taken. I recently gave a business I was helping that very advice.

The mother of an employee came in to interview for an open position. She was very well qualified and were it not for the family relation, I would have recommended her without hesitation. She would have been a super asset to the firm’s top management team. Still, despite her outstanding credentials, I advised the CEO not to hire her.

Nepotism is always disruptive in the workplace. Even if there is no preferential treatment, there is a perception of unfairness that you cannot erase.

Bottom line: not only does nepotism affect morale – a significant enough problem in its own right – it can have serious legal and economic ramifications. All of these problems are tough for a firm to overcome, so it is better to simply avoid them.

To eliminate this risk altogether, many firms have anti-nepotism policies in their employee manuals. This clears the air by being open and upfront about the company’s stance on this issue before a hiring decision is at hand.

Now go out and make sure you have an anti-nepotism policy in your employee manual and that you strictly follow it.

You can do this!

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Other small business advice columns from Dr. Osteryoung are here.

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an Amazon.com bestseller. He can be reached by e-mail at jerry.osteryoung@gmail.com.