What is nepotism in the workplace?

Nepotism is a type of workplace favoritism shown toward family members. The Latin root of the word is nepos, meaning nephew. Nepotism can involve any relative, though, including those related by marriage.

Nepotism takes place when someone with power ignores more qualified candidates to hire or advance a family member. Nepotism also occurs when employers treat the related employee better than other workers. Some examples of this are:

• Ignoring the family member’s habitual lateness
• Assigning less work to the related employee than others
• Promoting a family member over other more deserving employees
• Not addressing the relative’s poor work performance

Other examples exist, but the prevailing theme is the preferential treatment of family members.

Nepotism in small businesses vs. large corporations

Where nepotism happens can affect how people feel about it. For instance, nepotism looks a little different in a small business versus a large corporation.

You expect small businesses to hire family members. The owners of a mom-and-pop restaurant may hire their children even if they’re not fully qualified. That often happens when parents want to teach their children the business so they can pass it on. This is nepotism, but it makes sense. The parents want to keep the business in the family, and working there is a good way to learn how to run the company. 

Even so, if the parents/owners promote relatives unfairly, other employees might complain. Small business owners can avoid this by making relatives work their way up. If you own a restaurant, you might hire your son as a server, then a shift supervisor, then a manager and, ultimately, the owner. This not only helps the children learn the business from the ground up but can also cut down on complaints of nepotism.

Nepotism within a larger organization could cause bigger issues. When people in managerial positions hire unqualified family members, there’s no ownership to pass on to the relative, so there’s no way to justify the hire. Employees will likely recognize favoritism as the reason. Employees want to feel as if they have the merit-based opportunity to move up. If they sense favoritism toward a relative, they could rightly accuse the manager of unfairness.

How to spot nepotism in the workplace

If a manager within your company hires a family member, is that always a problem? Not necessarily. It depends on whether the manager has favored the relative unfairly. When evaluating your organization for nepotism, be attuned to these common situations:

1. The related employee is under-qualified

One of the most obvious clues is hiring family members who are clearly unqualified for a position. In such a case, speak with the supervisor to learn more about the reasons for hiring the family member despite the lack of qualifications. For instance, you may learn that the supervisor believes the family member qualifies because of transferable skills and certain personal characteristics. A conversation can help employers determine if the reasons are valid or unethical.

2. The relative demonstrates unprofessional behaviors

A supervisor’s relative may behave unprofessionally at work. Maybe they’re rude to other employees or customers, or they’re insubordinate because they believe they won’t be fired. This shows that the employee doesn’t fear losing their job, which may signify nepotism.

3. The family member evades punishment

If managers aren’t reprimanding employees for those unprofessional behaviors, it could be due to nepotism. This is particularly egregious if the manager points out such behavior in other employees. 

4. Family members receive promotions when someone else is more qualified

When looking at employee promotions, family members might always be the ones to advance, even if they’re not qualified for the new position or another employee is a better fit. You might also see a relative moving up the ladder much faster than normal.

5. A relative always receives the best job assignments

The favored family employee may always get preferred assignments. This might include the best assignments with the most recognition or a lighter workload than other people in similar positions. 

6. The hired family member earns more than others in similar positions

Favoritism can come in the form of higher pay than a position normally earns. Review pay rates of relatives hired by the company to look for inconsistencies. Implementing pay transparency and having strict salary ranges can help prevent this.

7. Other employees have complained to you or HR

If your employees address their concerns about nepotism directly to you or HR, this is an obvious sign of nepotism that you must address. Meet with those employees to learn more about their observations. Let them know they’re heard and valued.

Keep a record of these events before making assumptions or taking preemptive actions. If the behaviors continue, speak with the employee and the person who hired them to determine the appropriate next step.

Negative effects of nepotism in the workplace

Nepotism doesn’t occur in a vacuum. It can hurt employers, employees and the entire company. Hiring unqualified family members may:

Create an unhealthy work environment

Employees may feel undervalued if they notice family favoritism at work. Imagine a loyal employee who regularly arrives to work early, performs their job well and gets along with coworkers. Now imagine that employee’s reaction when an expected promotion goes to the manager’s niece who always shows up late, never meets deadlines, performs poorly and treats colleagues with disrespect. 

This can create resentment and hostility. The ripple effect of nepotism can turn a once-healthy workplace toxic.

Reduce employee morale

Nepotism can reduce employee morale by making employees feel the deck is stacked against them. Employees may wonder why they should try their hardest if being the boss’ relative is the main criterion for a promotion. Their belief in the company’s mission fades. This can lead to employees giving the bare minimum rather than their best effort.

Increase employee turnover rates

Poor morale caused by nepotism has consequences. You may lose valuable members of your workforce. Talented employees who notice nepotism may leave the company. Replacing good employees isn’t cheap: Hiring expenses, including recruitment, job board fees, background checks, etc., and training new employees can be costly

Contribute to decreased productivity

Qualifications matter. Unqualified employees cause productivity to suffer. When managers hire or promote ill-equipped relatives, they’ll likely make more mistakes than other employees. Someone else then has to fix those mistakes, which slows productivity. Putting a number on the cost of lost productivity is difficult, but common sense shows that an unqualified employee’s salary is just one portion of the money that can be wasted by nepotism.

Decrease employee respect for leadership

Respect for managers is important for employee engagement. When those with hiring and promotion power make poor decisions, such as hiring unqualified relatives, they risk losing employees’ respect. Recent data shows that nepotism causes employees to view leaders negatively. Bitterness, insubordination and less dedication to the job are just a few possible consequences of lowered respect for company leaders.

How to deal with nepotism at work

Preventing nepotism is the best way to handle it. Here are some tips on how to deal with nepotism at work:

• Workplace policies: Have an official policy in place within the employee handbook. Include a code of ethics that addresses nepotism. 
• Reporting options: Add whistleblower protections and anonymous reporting channels for employees to report nepotism.
• Family employee guidelines: Rather than banning the hiring of family members, establish guidelines for these circumstances. For instance, it may be fine for two relatives to work within the same company as long as one doesn’t directly report to the other.
• Transparent hiring practices: Establish clear hiring processes to make sure they’re fair. Be open about the policy with your team.
• Training: All hiring managers should have training on nepotism and fair hiring practices. Make sure they’re clear on their responsibilities for hiring and the potential consequences of nepotism. 

FAQs about nepotism in the workplace

What is the difference between nepotism and cronyism?

Both nepotism and cronyism involve favoritism toward specific people. Nepotism refers to favoring a family member, whereas cronyism is favoring a friend or acquaintance. Both can have similar effects on employees and the work environment.

Is nepotism always wrong?

Technically, nepotism is always wrong, but “nepotism” and “hiring family members” aren’t synonymous. Nepotism is showing favoritism because of kinship. Nepotism is wrong because it’s based on choosing someone for reasons other than merit. However, hiring family members in and of itself isn’t always wrong, as long as no conflict of interest exists (e.g., one is in a position of power over the other).

Is nepotism illegal?

In some instances, nepotism is illegal. For example, certain government jobs have laws prohibiting nepotism. Also, nepotism can open a company up to lawsuits if it appears discriminatory. Title VII of the Equal Employment Opportunity laws prohibits discrimination based on race, religion, color, national origin or sex. If employees think an employer hired relatives to discriminate against one of those groups, they could sue that employer. Other than those instances, though, nepotism in the private market is not illegal. Some corporations have policies against it, though.