Understand, identify, and address nepotism at work

There has been a lot of talk over the past year about nepotism and “nepo babies” in the entertainment industry. Whether it be an actress from a famous family or a model following in her mother’s footsteps, Hollywood is filled with these so-called “nepo babies”. Some are genuinely very talented and have proved that they are stars in their own right, while others may fall a bit flat and it can feel like nepotism may be taking away opportunities from more qualified or hard-working individuals. But the entertainment industry isn’t the only place where nepotism can be spotted. In fact, if you take a close look you may be able to spot some nepotism hires within your own organizations.

Nepotism at work happens in every industry. Sometimes it’s more understandable; a family-owned business may have their teenage kids wait tables or work the reception desk on the weekends. In other instances, it’s more problematic, such as an unqualified candidate getting a high-level job or promotion over other qualified applicants because they are related to one of the company’s owners or executives.

To prevent nepotism at work from harming your company culture, explore the definition of and signs of nepotism at work below. We’ve also laid out some steps that you can take to prevent nepotism from creating a toxic work environment or causing poor hiring decisions.

What is workplace nepotism?

Workplace nepotism is the act of providing preferential treatment or favoritism towards family members in a workplace setting. It can be considered a form of workplace discrimination. The key here is that it is unfair or preferential treatment based on family relations rather than qualifications. If a family member is the strongest candidate for a specific role, promotion, or project assignment, it’s not necessarily nepotism to select them.

Hiring or providing preferential employment treatment to friends or others based on personal relationships may also be considered nepotism under some definitions, but it is typically referred to as cronyism rather than nepotism. However, organizations should still keep an eye out for this as it can also be a serious problem and also harder to track. After all, many people become friends with their coworkers and it’s not unusual to recommend a past co-worker for a role at your current organization. Like with nepotism, the key issue here is whether decisions are being made based on merit and qualifications or the personal relationship.

Types of nepotism at work

Workplace nepotism is often grouped into one of two forms of nepotism:

• Reciprocal nepotism. Reciprocal nepotism occurs when someone within the organization offers employment to a family member (or extends another offer such as a raise or promotion) and the recipient accepts it due to cultural norms, financial interdependence, loyalty, or to strengthen that personal relationship.

• Entitlement nepotism. Entitlement nepotism occurs when someone feels entitled to preferential treatment due to their relationship with a boss or leader within the company.

Reciprocal nepotism often occurs within family businesses, where a family member joins the business to help out the owner or out of loyalty to the family. You may also see reciprocal nepotism between spouses or members of the same household who are financially intertwined. If someone is laid off, an employed spouse or family member may try to help them get hired at their company to keep the household afloat financially. These instances tend to be easier for businesses and their employees to navigate compared to entitlement nepotism in which the hired family member may expect that they can get away with lower productivity, poorer performance, or breaking policies.

Examples of nepotism at work

Here are some common examples of workplace nepotism that employees, leaders, and human resources staff should all look out for:

• Making hiring or promotion decisions based on family relationships. This is one of the most commonly discussed forms of nepotism where someone is given a job because they are related to someone else in the company or industry who is influential or holds a position of power.

• Giving raises or higher pay to family members. If raises, bonuses, or higher starting salaries are being given based on family connections as opposed to merit, that is a form of nepotism.

• Giving preferential treatment to family members in regards to workload distribution. This may include putting them on desirable projects with more visibility or higher commissions, giving them a lighter workload compared to other team members, or giving them more desirable tasks and shift assignments.

• Sharing key information with family members but not other employees. If the family owns the business, it may make sense for family members to be privy to sensitive information or closed meetings that other employees may not have access to. However, in most circumstances, sharing information based on family relations is a bad idea and can harm the workplace culture. If a high-level manager is giving their family member advanced information on upcoming promotional opportunities or projects or exclusive insights on anything that has come up in leadership meetings, that can give the manager’s family member an unfair advantage over other employees in the workplace.

• Applying policies differently for family members. Enforcing workplace policies uniformly is essential in maintaining a positive work environment and steering clear of any legal or compliance issues. Letting a family member get away with cutting corners or behaving inappropriately rather than enforcing all policies and expectations creates a major liability for the company and will also hurt employee morale as other staff will notice the favoritism.

Is workplace nepotism illegal?

No, nepotism is not expressly illegal within the private sector. Business owners are well within their rights to hire family members. Though organizations participating in more rampant nepotism may face accusations of discrimination, because families are often the same race and thus nepotism can result in preferential treatment being given to a certain race or ethnicity while applicants or employees of other races receive unfair treatment.

While otherwise not illegal, nepotism at work is often a violation of company policy. Many businesses do have policies specifically against nepotism. Many of the examples of nepotism discussed above may also violate other company policies. It’s also worth noting that government roles often have more stringent rules and regulations in regard to hiring, promotional eligibility, and nepotism.

Negative effects of nepotism at work

Workplace nepotism can be harmful to organizations and their employees. Here are several negative consequences to keep in mind.

Lowered employee morale

Employees are incredibly observant and will spot any favoritism within their teams or workplace. That favoritism is going to be a lot more obvious and easier to spot when it’s happening due to familial relations. If employees perceive that they are not being treated fairly or that their career trajectory is being stilted because promotional opportunities will always go to nepotism hires. Increased employee turnover may also occur due to lowered morale or because employees may feel that they need to leave the organization to gain fair access to training or promotional opportunities.

Decreased diversity

Having a diverse employee population as well as diverse leadership is genuinely beneficial to the organization. When you make hiring decisions or promotional decisions based on familial relations, your company will end up with a lot less diversity.

Family members are often the same race and ethnicity and may have similar backgrounds in regards to where they grew up, their education, their religion, and their family’s socioeconomic class. Ideally you want your company’s leadership team along with each individual department or team to be made up of employees with diverse backgrounds and perspectives so that they can come together to challenge each other, explore different approaches, and create innovative ideas. Even within the same culture or demographic, people can have different experiences

Hiring and promoting less qualified candidates

It’s one thing to hire family members and make them work their way up, but hiring relatives or friends in roles that they are not qualified for or promoting someone who is not the strongest choice for the role can negatively impact the company.

Family-owned businesses and nepotism

Nepotism can have a lot of negative consequences, but it’s not always an inherently terrible practice. Family businesses often rely on nepotism and family hires to keep the business running, so the issue of nepotism may need to be handled differently at a small family-owned business compared to a large corporation.

Is nepotism in small family-owned businesses inherently bad?

A local family-owned business hiring additional family members is a fairly accepted practice. Often small business owners hire their children to work at the company so that they can gain work experience and learn the ins and outs of the business that they will someday inherit. This is still nepotism as they are hiring employees based on familial connection, but it’s not necessarily bad.

People tend to create and build small businesses with the goal of building a better future for their families, so it’s not surprising that they would want to provide employment opportunities for family members or pass the business on to their children when they retire. As such there may be more leeway in allowing nepotism in hiring decisions at a small family-owned business. However, these businesses should still be cognizant of whether preferential or unfair treatment is being given based on familial relations. Keeping the business in the family shouldn’t mean that other employees experience poor treatment, have unequal workloads, or are always assigned the least desirable shifts or tasks.

What about large family-owned businesses?

Even major corporations can be family-owned. One of the largest corporations in the United States, Walmart, is a family-founded business and the Walton family still owns about 50% of Walmart’s shares. However, nepotism in larger corporations is typically viewed more unfavorably. There tend to be more moving pieces to manage in large corporations (and more steps to climb to get to the top), so you want to make sure that high-level roles are being filled based on merit and strong qualifications rather than family ties.

Nepotism also does not serve as much of a practical purpose in larger family-owned companies. A local restaurant owner will need to pass on ownership to a family member or sell the business when they want to retire. If ownership of a small business is not passed on or sold, the business will generally have to close.

Meanwhile, large companies can continue to operate without needing a new owner. A CEO will be appointed to take over and the initial owner can retire and hold on to their equity in the business. That equity can be passed down to their children, so the family will continue to benefit from the business for generations even if the owner’s kids and grandkids aren’t granted high-level roles within the company.

How organizations can reduce or prevent nepotism at work

Here is what organizations and employees can do to address the issue of nepotism in the workplace.

Document and be aware of potential conflicts of interest

The human resources team and company leadership need to be aware of any potential conflicts of interest that could result in nepotism or general favoritism when it comes to hiring and employment decisions. Many companies include a question on their employment application asking the applicant to disclose if any family members currently work for the company. You may also want to inquire about and document any family relationships when employees provide referrals or references for applicants as well.

This doesn’t mean that an applicant needs to be automatically disqualified if a family member already works for you. If Deborah from accounting recommended your company’s marketing internship to her niece who happens to be attending a nearby college, it’s fine to interview the niece as long as she is held to the same process and standards as other potential interns. On the other hand, if the son of your Sales Manager applied for a Sales Representative position, you’re going to run into a larger issue as that Sales Manager would be a decision-maker during the hiring process and their family member’s supervisor if hired.

Consider implementing anti-nepotism policies

Many organizations restrict the hiring of family members within the same team or department through anti-nepotism policies to reduce potential conflicts of interest like this. This can provide a solid middle ground where employees can still refer family members to open roles but preferential treatment is less likely. Be sure to put any anti-nepotism policies in writing and include them in your employee handbook.

Have HR investigate all complaints

Being objective about the people closest to you, like your family, can be hard. That’s why the HR department should be involved with any major complaints or conflicts that may arise within the team, particularly when there are any family connections in the team. Often nepotism creates employee complaints of favoritism, or it can result in a manager or leader not properly addressing complaints of a specific employee’s inappropriate or unprofessional behavior.

If you hire your brother, for example, you may write things off as “that’s just his sense of humor” or “he always makes jokes like that, it’s no big deal” because you know him and are used to this behavior, even though he may be making jokes or saying things that could make employees uncomfortable or be perceived as a form of harassment.

Having a third party manage and investigate employee complaints is a good practice anyway. Even without nepotism, team leaders may show some favoritism (consciously or unconsciously) based on which employers are top performers or simply who the manager tends to get along with better personality-wise. HR can typically be more objective when complaints arise as they offer a more outside perspective to team conflicts.

Maintain organized performance management records

One issue that arises frequently for smaller businesses is not having an organized and consistent performance management process. When you don’t have clear documentation on an employee’s past performance to support their eligibility for a raise or promotion, decision-making can be less objective and may be more easily swayed by nepotism or cronyism.

Have a set performance management process in place, so that current employees’ performance is evaluated and documented on a regular schedule. Consider 360-degree reviews so that one manager’s opinion isn’t fully influencing the reviews, and be sure to track the completion of any productivity and training goals. Having all of this on file will help keep promotional decisions fair when it’s time to decide who will move up.

Have a standardized process for accepting and evaluating candidates

Before accepting or reviewing any referrals or internal applicants for an open role, be sure to create a clear job description and list the specific qualifications that you are looking for. Consider things like education level, certifications, skills, and years of experience. Lay out what is required and what qualifications are just nice to have. Consider how you’ll rate candidates during the resume screening and interview processes, and create a rubric if desired.

Sometimes when word gets around that someone is leaving and a role will be opening up, employees will start putting names out there for consideration. Don’t evaluate internal applicants or take a look at the resume of an employee’s close friend or family member who happens to be looking for a job before you create a set job description and hiring criteria for the role. You want to ensure that an applicant or promotional candidate checks the boxes on your required skills and qualifications before you move them on to the interview process.

It’s also best to have a policy of posting the job and considering external candidates and those that aren’t referrals for each opening unless there was an established succession plan with an internal team member already trained and prepared to take over the role. Opening roles up to a wide pool of applicants helps ensure that the hiring process remains a meritocracy.