Nepotism could be the only option if you want to employ into a position that requires trust. It is easy to trust a family member than an outsider. Also, a family member would carry the interest of the business on his neck than an outsider.
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Yes you have a point there, especially if it is in a situation where there are others more qualified for the job. What should be after is results in the business, which means it is best to hire who is more qualified, not who you know.When it comes to hiring, nepotism should not be considered because it's going to affect the business.