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Nepotism: Negative or Nice?

30th March 2015 Wayne Rivers, Family Business Institute Inc

Nepotism does not have to be negative! Some closely held businesses actually promote nepotism to the point that they encourage the practice among employees.

The very mention of the word nepotism conjures up images of unworthy relatives drawing exorbitant salaries and benefits while doing little to deserve what they receive. Family and closely held businesses tend to be nepotistic by nature, and this trait can be a negative to non-family employees in the company while also causing poor business performance.

In some companies the dangers are considered so great that anti-nepotism polices are established. Family members cannot be hired. Husbands and wives cannot work in the same firm even if they were not married when both were initially employed.

Nepotism does not have to be negative! Some closely held businesses actually promote nepotism to the point that they encourage the practice among employees. Perhaps the best indication of employee pride and loyalty can be found when employees recommend that other family members join the company.

Employees who help members of their families land jobs feel some sense of responsibility for making sure the new hire learns the ropes and becomes a valuable addition. Lower risk of failure is associated with such a hiring decision. Chances are good that the person recommended by a current employee will also become a good team member. After all, it would be a poor reflection on an employee to recommend a family member who didn’t work out.

Handled correctly, family firms can encourage nepotism rather than prohibit it.

What are the best policies to establish if you choose to encourage the practice?

1. Policies must be put in writing for all employees and family members to read and understand.

2. These policies must be fair and evenly enforced.

3. No entitlements. Just because you are a member of the lucky sperm club and have the same last name as the founder or owner, you are not entitled to extraordinary consideration. Great companies do not put unqualified people in positions in which they cannot function.

4. Nepotism must be encouraged for all employees, not just members of the owner’s family. If everyone has the opportunity to recommend a member of their family for a position, the playing field is level. Many companies actually pay a “finder’s fee” if an employee recommends someone who is ultimately hired.

5. Family members (both those of the owner and of other employees) will be considered and hired only for the positions they are qualified to perform. If the owner’s child is best qualified for data entry or working on the loading dock, that is where they are placed.

6. Family members will be paid the same as anyone else who would fill the position.

7. Performance alone must be the criteria for advancement and promotion.

8. Family members should not report to other family members.

9. Members of the family are never forced on managers. Supervisory personnel must know that they have the freedom to hire, fire and promote family members just as they do other employees. Family should not be favored or discriminated against because of who they are.

One company which has boasted of its favorable policy towards nepotism is Thomas Publishing Company, a 100 year old family firm with over 500 employees. Like so many other family firms, Thomas proudly states that the company is a big family; in truth it is. There are more than 30 examples of nepotism throughout the company. Five Thomas family members, including the president and chairman, work in the business. Several husbands and wives met and married while working there. Many examples of mothers and daughters, fathers and sons, sisters and brothers, and other related employees are found on the payroll. Nepotism is a trademark of Thomas Publishing and is used as a marketing tool for the company.

The horror stories stemming from nepotism come from firms which don’t insist on fair and evenly enforced policies. Blood may be thicker than water, and it is understandable that the owners would want to hire and promote their own - after all, they have invested many years of time and resources into building their kids as well as their companies. But bad blood will result from the placing of incompetent family members in positions in which they are neither qualified nor able to live up to the expectations of other employees. It sends a message that management either doesn’t know about or doesn’t care about profitability or efficiency. Those family members who are performing well develop bad feelings for those who fail to do their jobs, understanding that it reflects on them and the rest of the family.

If you are considering hiring relatives, take the time to think through the situation and establish entry rules before making a hiring decision. To do otherwise might risk family relations, employee morale and company profitability. Properly designed nepotism policies can help improve and strengthen businesses. Will nepotism be negative or nice in your company? You can control the answer to the question, Is nepotism negative or nice?, by considering these points. 

About the Author - Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success. 

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