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Is nepotism in the workplace bad?

You’ve seen it happen, or had it happen to you: someone less competent is promoted above you, paid more, or given special treatment because they are related to the boss or in the right clique.

Google defines nepotism as “the practice among those with power or influence of favoring relatives or friends, especially by giving them jobs.” Simply put, nepotism can be a form of special treatment only available to the few.

Horror stories of nepotism in the workplace abound, but it isn’t always a bad thing. While receiving a promotion because of favoritism is an unhealthy business practice, simply being a friend or relative of people in power doesn’t take away from someone’s qualifications.

The debate is tricky, requiring a considerable amount of good judgment for something a million bylaws can’t legislate perfectly. Below are several negative aspects of nepotism, but also a few positive benefits.

An Absence of Fairness

The biggest outcry against nepotism is that it flies in the face of fairness. Western capitalism rests on the principle that wealth and prosperity are derived from an individual’s application of talent and effort, not from favoritism and special treatment.

Capitalist businesses protect this idea vigilantly. Harvard Business Review contributor Gill Corkindale puts it succinctly: “Nepotism conflicts so fundamentally with basic American values of egalitarianism and merit that some companies have instituted formal anti-nepotism codes.”

These policies don’t only exist to protect capitalist ideals. They also act as a buffer from lawsuits by disgruntled employees who will take legal recourse to protect their own efforts.

From paper manufacturing companies, to high-stakes stock brokers, all kinds of companies have anti-nepotism codes written into their bylaws to protect both their employees and their own interests. Even educational institutions such as Princeton University have written measures protecting their establishments from this kind of favoritism.

To be clear, there is a difference between nepotism and good networking. Your mentors always say “It’s not what you know, it’s who you know,” but good networking definitely falls on the side of the spectrum inhabited by the individual’s efforts. You went to school to make those connections; you suffered through an unpaid internship for that job contact. You aren’t simply the nephew of the hiring manager. But once networking crosses the threshold into privileged treatment, coworkers will shout, “Unfair!”

Lower Employee Morale

Regardless of fairness, nepotism can have adverse effects on a company’s atmosphere. Employees dealing with nepotism in the workplace often suffer from a decline in morale. If employees feel like their workplaces promote inequality, their attitudes will likely suffer.

The Houston Chronicle notes that employees will react to this inequality in one of two ways: either they will “undermine the favored worker’s capabilities,” resorting to backstabbing and sabotage, or they will develop an “attitude of defeat,” where they will no longer give their best as they see their efforts go unrewarded and unnoticed. Either reaction is a festering, hostile cancer dragging down the culture of the workplace.

When it comes to the bottom line, employee morale is a direct reflection of leadership. The boss sets the atmosphere and culture of a work environment, and if all the employees are distrustful and resentful because of nepotism, the fault lies with those in charge.

Commodity trader Chris Young recalls his own unfair exposure to nepotism and how it changed his view of leadership, saying, “I quickly lost respect for this manager. I was there in body – but not in spirit. I did not care about the manager personally and did nothing to help him professionally.”

Toxic bosses allow a harmful culture to drive potential employees away and cripple previously hard-working team members. Motley Fool writer John Maxfield calls this scenario a “self-interested violation of [an] executive's fiduciary duty – that is, the duty to put the company's interest above their own.”

If leadership is ok with rampant nepotism, chances are they are putting their own interests ahead of the good of the company.

Lower Employee Productivity

In addition to lowering morale, nepotism can trickle in and negatively impact employee productivity. Obviously employees with lower morale will perform worse, but nepotism’s potential ill effects reach wider than that.

HR Hero points out, “Employees who are rewarded and promoted because of their relationships with management are likely to be underqualified for the positions they are expected to fill.”

This is the logical conclusion of nepotism: if an employee is promoted or rewarded based on anything other than merit, that employee may not be able to develop the skillset to thrive in a higher position.

A vicious cycle then ensues: if an incompetent worker receives an undeserved promotion, it places them in charge of previous coworkers. A culture of nepotism emerges, and leadership – which now includes the incompetent employee – does nothing to discourage the bad vibes, poor morale, and lower productivity that result.

The Case for Diversity personal-1087838_1280.jpg

The other major strike against nepotism is a lack of diversity.

The term “diversity” gets thrown around like confetti in today’s society, and many don’t like it shoved down their throats, thinking that diversity for diversity’s sake has no bearing on profitable business.

However, Gallup research shows that “workplaces that are perceived as diverse have the highest levels of employee engagement, and engagement is crucial to the financial health of any organization.”

Diversity in the workplace ensures that ideas can be pooled together from the widest collective experience. It is the classic case of unity over uniformity: if everyone is the same, ideas grow stagnant.

In many situations, nepotism can be the enemy of diversity. According to one HR Simple article, “The recruitment of current employees’ relatives tends to perpetuate the racial, religious and ethnic characteristics of the existing workforce.”

The same could be said for recruiting unqualified friends. The essence of nepotism is a common bond outside of work between an employer and employee. If this common bond – blood relations, golfing buddies, whatever the case – is the reason for special treatment, diversity in the workplace will decrease.

Diversity can be the powerhouse of the workforce when properly harnessed. In order to do this, leadership must establish trust with employees by creating a culture that is open to everyone’s ideas and background.

In this case, “fairness” is renamed “discrimination,” and leaders who make it clear that discrimination won’t be tolerated will be able to tap into the powerful resource of diversity. If nepotism is standing in the way of this, it’s bringing down the workplace.

Benefits of Nepotism

With all of nepotism’s pitfalls, can any good come from hiring or promoting friends and family? The simple answer is yes – but it all depends on the situation. The ramifications of nepotism look vastly different in huge companies with a hundred thousand employees than they do in small family businesses. So in what cases is nepotism beneficial?

Management Issues conducted research which identified seven different types of companies: modern, closed niche, fraternal, atomistic, traditional family, sweatshop, and paternalistic. They found that “in ‘fraternal’ firms that had an established niche, workers were often hired through word-of-mouth,” indicating that the business hired friends of current employees.

In addition, they found that “family resources often helped to sustain the business and workers were often treated as the equals of managers.” In a fraternal business setting, nepotism can be a good thing – it encourages like-minded people to strive for the same goal, creating more harmony, rather than smothering ideas.

Nepotism also functions differently as companies grow, keeping your human resources department on its toes.

The legal aspect of nepotism is two-sided. Businesses who have drafted anti-nepotism codes sometimes have their own policies hinder them.

Forbes contributor Klaus Kneale gives an example of a company that could be charged with sexual discrimination because of its no-nepotism policy: “Such policies often weigh most heavily on women in the workplace, who get edged out or held back when they marry co-workers and are suddenly in breach of policy.” Writing a cure-all policy to avoid favoritism rarely works; most incidents need to be judged on a case-by-case basis.

When all is said and done, social behavior supports the benefits of nepotism. Author Adam Bellow has frequently written about our increasingly-nepotistic society, where huge numbers of children decide to follow in their parents’ footsteps to become doctors, lawyers, and politicians.

Careers have functioned this way for centuries – sons and daughters learned the trades of their parents and contributed skilled labor to their societies. Human biology has not changed simply because the marketplace has.

The previously mentioned lines between “connections” and “favoritism” did not exist in the past as they do today. Kings handed over their kingdoms to their sons, popes were succeeded by their most fastidious disciples, and generations of workers derived their last names from the legacy of the family trade.

Nepotism can be extremely harmful or it can be extremely beneficial. The circumstances all depend, and a discerning mind must always make the choice.

Do you have any stories about the benefits or consequences of nepotism? Let us know in the comments below:

Images, Pixabay, Pixabay

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