When Business Becomes Personal: What is a Conflict of Interest?

By Darren Hockley, Managing Director of eLearning provider, DeltaNet International.

As a people manager, is it possible to balance personal relationships with business? Is it even ethical? 

This is a tricky subject for many of us since – as we all know – businesses are built on good relationships. However, for many company leaders, hiring friends or family members into the organisation has proved to be a bad idea.  

Many suggest that doing so is a surefire way to create suspicion and resentment amongst members of staff who may feel that the new employee is there as your ‘eyes and ears’, relaying instances and office discussions you wouldn’t otherwise hear about. 

Employing those close to you could also land both of you in a sticky spot when it comes to performance expectations, confidentiality, and maintaining boundaries inside/outside of work. Sadly, there’s more than one example of this floating around business forums for those interested in the subject. 

What is a conflict of interest? 

Part of the issue here is that many people don’t really understand what a conflict of interest is and the impact these relationships can have on the entire workforce. 

In short, conflicts of interest arise when a someone’s personal and/or financial activities have the potential to influence, or are perceived to influence, their decisions and actions.  

A simple example might be a hiring manager whose close friend applies for a job at their organisation. In this case, the hiring manager could be perceived to be providing him or her with an unfair advantage over other candidates. This is because, as a friend, the hiring manager will already like and trust this person (as we tend to when it comes to our friends!) and, of course, we want to hire people we can count on.  

It’s important to remember that whether or not the manager in question intends to treat their friend any differently doesn’t matter. The fact they are perceived to be in a position that could influence the outcome of who gets the job is enough to make this a conflict of interest.  

As such, one of the main problems with conflicts of interest in the workplace is the imbalance they create when it comes to the office dynamic – and the tension and suspicion that occur as a result. All of which can be decidedly damaging in the long term. 

To help you avoid and deal with any conflicts of interest that’s arise in your business, you might want to consider the following: 

Assign a person to ‘own’ your conflict of interest policy 

HR is normally the best place to oversee your conflict of interest policy as they will be up-to-date with current employee-related legislation and best practice. Determining a specific person or department to draft and keep the policy updated ensures accountability and this makes it easier to instill and maintain the integrity of your workplace.  

Define who the policy applies to 

In order to be fair, your conflict of interest policy needs to be specific and ought to include everyone working in and for the company. List every category of employee included in the policy: all level of employees, upper/senior management, external contractors, etc.

Provide types and examples of conflict of interests. 

Make sure you detail what constitutes a conflict of interest specifically in your policy and list different situations considered to be a conflict of interest, giving examples in practice. It’s a good idea to follow up each example with an explanation as to why the behavior is unacceptable, providing your employees with a basis for understanding and cooperation. Include a provision stating that the list is not exhaustive and that the spirit of the policy will be followed if a conflict of interest arises that is not already covered. 

Provide methods for disclosure 

Your conflict of interest policy should detail ways for employees to be upfront and disclose potential conflicts of interests at the offset. It’s good practice to provide more than one way for employees to report conflicts of interest, so you might think about using an online tool as well as a written form, e.g.   

Your conflict of interest policy should also make provisions for those who want to report behavior that could adversely affect your business and its reputation.  The person reporting the suspected behavior should have the right to anonymity and must also be free from any repercussions for speaking out. 

Further considerations 

Of course, developing a policy is just one way to deal with conflicts of interest in your business and it’s important that your leadership style (and that of your management team) reflects the same standards you expect your employees to adhere to. 

To this end, it’s best to avoid conflicts of interest such as hiring friends/family where possible and/or ask another manager to step in where you could be at risk of unconscious bias. Modelling positive behaviour in this way is known as ‘setting the tone from the top’ and it’s something I advocate for all business leaders. 

It goes without saying that offering your employees training about conflicts of interest will help safeguard your business. Understanding what constitutes a conflict of interest, and how they can negatively affect the business, will help members of staff exercise good judgement and keep resentments from forming.