Recognizing and Managing Nepotism in the Workplace

Nepotism, the practice of favoring relatives or friends, especially by giving them jobs or unearned perks, is a challenge that often rears its head in family businesses.

Though it might seem like a harmless act at the surface, nepotism can breed resentment, undermine morale, and stifle growth. In fact, as per a survey by the Family Business Institute, 88% of respondents believed family businesses were at risk due to nepotism. So, how can business owners identify and effectively deal with this issue?

This article will shed some light on the signs of nepotism, its impact on an organization’s culture, and strategies to manage it.

What Is Nepotism In The Workplace?

Nepotism is when someone in a position of power or influence hires a family member, and then favors them when making important decisions such as hiring, promotion, allocation of resources, or job perks. This favoritism typically disregards an individual’s qualifications, skills, or performance, leading to skewed and unfair outcomes. An example of nepotism at work could be a manager promoting their less competent nephew over more qualified employees.

While familial or friendly relationships are a natural part of human society, when these personal relationships influence business decisions, they can hinder the organization’s ability to foster a merit-based, fair, and inclusive culture. It’s important to note that the act of nepotism isn’t always intentional; nevertheless, its effects can be detrimental to both the individuals and the organization as a whole.

How to Recognize Nepotism in the Workplace?

Recognizing nepotism within the organization can be nuanced, as its signs are often subtle. Also, if you are owner and the one making such decisions, you might be unaware of your patterns and unintentional biases.

One clear red flag is when an employee is promoted or given privileges disproportionate to their skills, experience, or overall performance. This employee might be a friend or family member of yourself or another person in power. Even if you don’t see it this way, consider whether a third party (such as another employee) might conclude that you’ve prioritized a relationship over their actual job readiness.

Another sign of nepotism could be frequent and exclusive interaction between certain employees and higher-ups, leading to an inner circle within the company. These individuals may consistently receive beneficial assignments, access to confidential information, or enjoy privileges that are not performance-based.

A pervasive lack of transparency in decision-making processes can also indicate nepotism. For example, if promotion decisions are made behind closed doors and lack clear criteria, it could suggest that personal or familial relationships are influencing these decisions.

Finally, high employee turnover, especially of competent employees, often signals that there is a problem. If skilled workers are leaving because they feel overlooked or undervalued, it could be a sign that nepotism is undermining their career growth.

Types of Nepotism in The Workplace

Reciprocal Nepotism

Reciprocal nepotism is a specific form of favoritism that involves a mutual back-scratching agreement. Unlike the more traditional form of nepotism where one person in power favors a relative or friend, reciprocal nepotism involves two or more parties who are in positions of influence and use their power to benefit each other. This could be as simple as two managers agreeing to promote each other’s relatives or close friends, regardless of their experience or performance.

While this type of favoritism can seem like a win-win situation for those involved, it’s just as damaging as any other form of nepotism. It can lead to unqualified employees in key roles, hurt employee morale, and undermine the integrity of the company.

Addressing this 2-way nepotism can be more complex due to the multiple parties involved, and the fear of upsetting or losing too many people, but it is vital to maintain a fair and equitable workplace. Just like any form of nepotism, transparency, clear guidelines on recruitment and promotions, and an open culture where employees feel safe to voice their concerns are key to managing and preventing reciprocal nepotism.

Entitlement Nepotism

Entitlement nepotism is when family members or close friends feel they deserve preferential treatment based on their relationship with you, or someone else in a position of power. They may expect to be hired, promoted, or given special privileges, regardless of their competence or capabilities. This sense of entitlement often arises from an ingrained belief that familial or personal relationships should take precedence over professional merit.

For example, the son of a company owner might expect to be given a high-ranking position straight after graduation, bypassing the usual career progression path. Or a close friend of a senior manager might expect to be assigned to the most lucrative accounts, irrespective of their experience or performance.

I grew up in a family owned business and coach many family-owned businesses today, so I’ve seen firsthand how delicate this can be. While it’s natural for people to want the best for their loved ones, entitlement bahavior is incredibly damaging. It can undermine the morale of other employees, create a sense of injustice, and can even lead to accusations of discrimination by those who don’t receive equal treatment.

Dealing with entitlement nepotism can create many challenges, especially when the entitled individuals do not recognize their behavior as problematic.

I once had a coaching session with a multi-generation business, where the son stormed out of the room after the father (rightly) gave the son feedback that he was not yet ready to handle the level of responsibility and autonomy that he was seeking. Ultimately the CEO/father concluded that the best thing he could do for his family and his company was to establish clear agreements and expectations. Allowing his son to remain entitled up to that point had only damaged their relationship and set back his retirement plan.

As Brené Brown says, “Clear is kind.”

Setting clear expectations with accountability is the only way to protect both your company and familial relationships. Regular performance evaluations, clear policies on hiring and promotions, and fostering a culture of integrity go a long way in mitigating the impact of entitlement nepotism. It’s crucial that everyone in the organization understands the importance of merit-based decisions and respects the processes in place.

Cronyism Nepotism

Cronyism is a form of nepotism, but instead of family ties, it involves favoring close friends or associates. This occurs when someone in a position of power uses their influence to provide their cronies with jobs, promotions, or other advantages, regardless of their qualifications or performance. The term “crony” refers to a long-standing friend, indicating the personal nature of the relationship.

For instance, a department head might continuously assign the best projects to their old college roommate, ignoring the capabilities and aspirations of other team members. Or a CEO might appoint a golfing buddy to a senior role, bypassing more qualified candidates within the organization.

Cronyism can be as damaging as any other form of nepotism. It can demoralize other employees who see that their progress depends not on their abilities but on their personal connections. It can also lead to inefficiencies and gaps in skills, as key positions are filled based on personal preference rather than expertise.

Combating cronyism requires a commitment to transparency, fairness, and merit-based decision-making. Implementing clear anti-nepotism policies on recruitment and promotions, and encouraging a culture where employees can voice their concerns without fear of reprisal, can help to prevent cronyism. It’s also helpful to conduct regular audits of hiring and promotion practices to ensure adherence to these policies.

frustration among employees

How Does Nepotism Affect The Workplace?

Nepotism can have a profound impact on a company, shaping its culture, morale, and overall productivity.

When favoritism based on personal relationships supersedes merit, it can lead to a decline in employee engagement. Employees who perceive that their efforts and contributions are overlooked in favor of those with familial or personal connections may feel disheartened. This could lead to decreased job satisfaction, lower productivity, and ultimately higher turnover rates.

Moreover, nepotism reduces talent and innovation. When unqualified individuals are placed in positions of influence because of their connections, it can result in poor decision-making and inefficiency. This not only hampers the growth of the organization but also blocks opportunities for truly deserving candidates to rise through the ranks and bring fresh ideas to the table.

Nepotism harms the company culture too. Resentment and frustration among employees can lead to an unhealthy environment where conflict and tension are prevalent. This could further exacerbate turnover rates and harm the company’s reputation, making it hard to attract top talent in the future.

From a legal perspective, unchecked nepotism can lead to lawsuits for discrimination or unfair labor practices. It’s crucial for businesses to ensure their hiring and promotion practices comply with all relevant laws and reflect fairness and equality. A robust, transparent, and fair system of recruitment and promotion can help mitigate these impacts, ensuring a positive and inclusive workplace.

10 Ways to Deal with Nepotism in the Workplace

1. Open Communication

Leading by example with communication fosters a transparent environment where employees feel comfortable to voice their concerns without the fear of retaliation.

Creating a safe space for employees to voice their questions or worries about perceived nepotism is a crucial step toward curbing it. Employers can facilitate this type of environment by establishing clear channels through which employees can express their concerns, such as suggestion boxes, anonymous surveys, confidential hotlines, or one-on-one meetings with HR.

Managers should also proactively communicate about the organization’s policies regarding diversity, equity and inclusion, ensuring all team members are aware that promotions and opportunities are based on merit and performance, and that all qualified candidates will be considered. Consistent and clear communication helps to dispel any misconceptions and reinforces the organization’s commitment to a fair and equitable workplace.

2. Never Lose Your Professional Values

In the face of nepotism, it’s crucial to hold onto your professional values and principles. No matter how tempting it might be to conform to the prevailing culture or adopt practices that do not align with your beliefs, maintaining your professional integrity is paramount. This includes being honest, reliable, and dedicated to the mission of the company, irrespective of the circumstances.

It’s also important to demonstrate respect for all team members, making an effort to connect and build relationships at all levels. Treating everyone fairly and equally promotes mutual respect and a healthier work environment.

Moreover, standing firm in your values sets a positive example for others, and you’ll earn their respect as they consistently see you act with integrity. You can inspire and encourage those around you to uphold the same values, fostering a culture of fairness and integrity.

3. Nepotism And Discrimination Training

Acts of nepotism and discrimination could carried out subconsciously, out of ignorance more so than ill intent. Perhaps a person was raised with certain ideals or biases, and might not be conscious to how their behaviors are negatively impacting others. Educational workshops and seminars can offer employees and management an in-depth understanding of what constitutes nepotism and discrimination, and bring awareness to where current behaviors might need to be adjusted.

Be sure the training is engaging and interactive, and use real-life scenarios to help participants better grasp the concepts and implications. Proper training equips employees with the right knowledge and tools to recognize and appropriately respond to potential instances of nepotism or discrimination. It also reinforces the organization’s commitment to a fair and equal workplace, boosting employee confidence and morale.

At the managerial level, this training can focus on the development of fair and objective recruitment and promotion practices and the understanding of the legal aspects related to these issues.

4. Confide in Someone You Trust

If you’ve witnessed or been negatively impacted by nepotism, confiding in someone you trust can provide support and valuable perspective on how to approach the situation. This person could be a mentor, a colleague, or even a professional counselor.

Sharing your experiences and feelings can help you manage stress and gain insights you might not have otherwise considered. They can also act as a sounding board for your thoughts and ideas on how to navigate the situation.

However, it’s essential to ensure that the person you choose to confide in respects confidentiality and has your best interests at heart. Remember, the aim here is to seek guidance, not to engage in gossip or fuel a negative environment.

5. Take Care of Your Mental Health

Dealing with nepotism or other acts of discrimination can be quite stressful and mentally exhausting. It’s essential not to ignore the impact this may have on your mental health. Take steps to ensure you’re taking good care of yourself emotionally and psychologically. Engage in activities that replenish your energy and promote relaxation. This might be reading a good book, going for a walk, practicing meditation, or simply spending time with loved ones.

It’s also important to maintain a healthy work-life balance. Avoid overworking yourself and ensure you have time for relaxation and leisure. Remember, even if you’re the business owner, it’s okay to disconnect from work and focus on your personal life.

Don’t hesitate to seek professional help if you’re finding it hard to cope, or feeling burnt out. Therapists and counselors are trained to help you navigate difficult situations and can provide tools and strategies to manage stress and foster positive working relationships.

positive teamwork

6. Track Your Achievements

Keeping a record of your accomplishments – individually and as a team – serves multiple purposes when dealing with nepotism, or trying to resist your own temptations to engage in nepotistic behaviors. Not only does it boost your self-confidence, but it also creates a tangible record of the contributions of others. High performers tend to feel like we can never do enough, and that can be exacerbated in an environment that is not relationally healthy.

In addition to the “big wins,” don’t overlook the smaller victories. Consistent performance, progress on a difficult issue, positive teamwork, or even successfully managing a tricky situation all count as achievements. This will help you evaluate personal and team performance more clearly and objectively, and remind you to give credit where credit is due.

7. Employee Feedback

Employee feedback is a crucial element in fostering a healthy work environment and preventing nepotism. It involves an open exchange of information on an employee’s performance, behavior, and opportunities for improvement. This feedback can be both formal, through scheduled performance reviews, and informal, as part of day-to-day interactions.

In addition to traditional feedback systems, consider a 360-degree feedback approach, where feedback comes from multiple sources including superiors, peers, and subordinates. This holistic approach not only provides multiple perspectives on an employee’s performance but also promotes a culture of shared responsibility for improvement.

However, employee feedback should always be constructive and solution-based. It’s not about pointing fingers or assigning blame, but about encouraging growth and improvement, and being a supportive leader. Also, feedback should be a two-way street. Employers should also invite feedback from employees on management practices, company culture, and other ideas to improve the company. This reinforces mutual trust and respect and ensures everybody knows their opinions are valued and considered.

In the context of nepotism, an effective feedback system can is a mechanism to ensure a fair assessment of performance and eliminate bias and favoritism. It can also provide a platform for employees to voice their concerns about nepotism, and for management to address them in a constructive manner.

8. Transparent Hiring Policy

A transparent hiring policy is a cornerstone of fairness and impartiality in the workplace. By being open and clear about the hiring process and criteria, companies can avoid nepotism and ensure all candidates are evaluated on merit alone. This involves the clear articulation of job requirements, qualifications, and the process by which candidates are evaluated and selected.

One way to ensure transparency is to involve multiple people in the hiring process. By having a human resources team or panel responsible for interviewing and assessing candidates, businesses reduce the likelihood of hiring decisions being overly influenced by personal relationships. Furthermore, using standard scoring or ranking systems for candidates can also help maintain fairness and objectivity.

Making it standard practice to provide feedback to candidates, whether successful or not, also contributes to transparency. This means giving constructive feedback regarding their performance in the interview process, specifically noting their strengths and areas for improvement. This can also help dispel any perceptions of bias or favoritism.

Similarly, internal promotions and transfers should also follow a transparent policy. Clear criteria for promotions and pay scales, and a well-defined process for employees to express their interest in open positions can help ensure fair opportunities for advancement. It sends a clear message that the company values individual and team contribution, and is committed to providing equal opportunities for all its employees.

9. Create Anonymous Communication Channels

Creating anonymous communication channels might feel like an extreme step, but it can be a powerful tool for encouraging an open and honest feedback, especially when it comes to addressing sensitive issues like nepotism. These channels provide employees with a safe space to voice their concerns and report nepotism or any other type of unethical behavior within the company without fear of retaliation.

The most common form of an anonymous communication channel is an old fashioned suggestion box where employees can drop their written concerns. Although technology now offers many more solutions, like anonymous email systems, hotlines, or web-based platforms which increase accessibility and ensure immediate delivery of the message.

These channels should be handled by a third party to guarantee impartiality and confidentiality. This can be an ethics committee, an external consultant, or an ombudsman. Their task is to review and investigate the issues raised and provide recommendations on the appropriate course of action.

That said, establishing anonymous channels is not enough on its own. The company must actively promote its use and assure employees that their voice matters. Employees should be educated on the purpose of these channels, how to use them, and what to expect once they raise a concern. This includes the assurance of non-retaliation policies to protect those who come forward.

10. Principle of Fairness

The principle of fairness, often regarded as the backbone of any enduringly successful organization, involves the equal treatment of all employees regardless of their background, personal relationships, or other non-merit-based factors. This principle is anchored on the belief that every employee should have an equal footing in terms of opportunities for growth, learning, and advancement.

Fairness in the workplace can be fostered in several ways. One of these is through merit-based evaluations and promotions. Here, employees are evaluated and promoted based on their performance, skills, and potential, rather than on factors of favoritism or bias. This requires having objective evaluation processes and criteria, which are clear, measurable, and uniformly applied to all employees. Performance review feedback can be substantiated, not merely the leader’s personal opinion.

Communicating openly and transparently is also fundamental to fairness. It ensures that every employee is well-informed about decisions that affect them, the reasons behind these decisions, and their rights and responsibilities within the organization. Open communication encourages trust, respect, and a sense of belonging, which are essential for a fair and inclusive company culture.

Open communication with employees

Pros and Cons of Nepotism

Pros of Nepotism

Nepotism may offer perceived advantages to an organization, although the benefits listed below are unlikely to outweigh the potential damages of nepotism.

  1. Rapid Decision-Making: With family members or close acquaintances in key positions, decision-making processes can become more streamlined and efficient. This is because mutual trust and understanding can lead to less time being spent on discussions or disagreements.
    Warning: beware of the dangers of “groupthink”, as there is value in diversity of opinions that you might be missing out on.
  2. Long-term Commitment: Family members or friends are often more likely to have a greater commitment to the success of the business. Their personal attachment to the organization can foster a sense of loyalty and dedication that might not be as strong in unrelated employees.
    Warning: in situations of nepotism, this can also keep people in positions where they don’t belong. This can be damaging both to the individual, who is not performing to their potential, as well as to the business.
  3. Ease of Succession: When it comes to leadership succession, working with family can provide a straightforward solution. Family run businesses, in particular, often see the next generation as a natural part of their succession planning, allowing for a smoother transition of power.
    Warning: Nepotism could blind family members to what’s actually best for the business. The rule of 30-13-3 states that 30% of family businesses transfer to the second generation, 13% survive to be passed down to the 3rd generation and a mere 3% make it to the 4th generation.

Cons of Nepotism

Despite the perceived benefits, nepotism in the workplace harms the company’s culture and overall success.

  1. Decreased Morale and Motivation: When employees don’t feel valued, or are even treated unfairly because of nepotism, it can lead to resentment and demoralization. This can result in decreased productivity and higher turnover rates.
  2. Risk of Incompetence: Family members or friends might not always possess the necessary skills or qualifications for their role, leading to subpar performance and inefficiencies.
  3. Potential for Conflict: Personal relationships within a professional setting may lead to conflicts of interest and tensions. These can be harmful to the work environment and can create divisions within the team, and the family.
  4. Reputation Risk: If an organization is known for favoring family members or close friends, it could harm its reputation among customers, clients, and potential employees. This can affect the company’s public image and its ability to attract and retain top talent.
  5. Limited Diversity: Nepotism can limit an organization’s diversity, both in terms of demographics, experience and ideas. A lack of varied perspectives can stifle innovation and hinder the company’s ability to adapt in an ever-changing business environment.

Examples of Nepotism in the Workplace

Nepotism can manifest in various ways. Here are some examples:

  1. Job Opportunities: An owner or high-ranking executive might hire or promote a relative or close friend, regardless of their qualifications or experience. For instance, a child or cousin might be selected for a lucrative position, overlooking more competent and experienced candidates.
  2. Favoritism in Assignments: A leader might provide preferential treatment, giving their family members or friends the most exciting or prestigious assignments, while leaving the more mundane or difficult tasks to other employees.
  3. Unfair Salary Increments: A business owner might award a substantial pay raise or bonus to a favorite niece or nephew working in the company, despite their average performance. Meanwhile, other employees don’t get comparable pay adjustments commensurate to their experience or contributions.
  4. Negligence of Employee Grievances: A manager might dismiss valid complaints against a relative or close friend, allowing them to escape accountability for their actions. This can lead to a toxic work environment where employees feel their concerns are not being addressed, or that they are being discriminated against.
  5. Unjustified Succession: In family-owned businesses, an unqualified offspring might be appointed as the successor solely based on their familial ties. This action might overlook more experienced senior executives who have a proven track record in the company, or even the option to sell to a qualified new owner.

Why Does Nepotism in the Workplace Happen?

Nepotism in the workplace can take root due to a variety of factors. One of the most common reasons is the human tendency towards favoritism and preference for familiarity. People generally have an inclination to favor those they know and trust, especially if those individuals are family members or close friends. This familiarity can lead to biased decision-making, often giving way to nepotism.

In some cases, nepotism can be a byproduct of a lack of proper checks and balances within the organization. Without clear guidelines and policies in place to prevent unfair practices, nepotism can creep in unnoticed.

In family-owned businesses, nepotism can be driven by the desire for control and succession planning. Business owners may feel more secure passing on the reins to a family member, believing (perhaps incorrectly) they would be more invested in the company’s success.

It’s worth noting that some organizations may see nepotism as an easy solution or a cost-saving measure. Hiring family members or friends might seem like an easy way to quickly fill a role, or that perhaps a spouse or close family member might be willing to work for a little less pay for the good of the business and their legacy. However, as we have seen, the long-term repercussions of such choices can often outweigh any immediate benefits.


Is nepotism illegal in the workplace?

Technically speaking, nepotism is not illegal. There are no federal laws in the United States that prohibit employers from hiring a close friend or family member. However, where it becomes a legal issue is when nepotism infringes on anti-discrimination laws. For example, if an employer only hires their male relatives, leaving qualified female candidates out, it may violate gender discrimination laws.

Similarly, if nepotism interferes with an employee’s right to a workplace free of harassment and retaliation, it may become a legal issue. It’s also worth noting that some companies have internal policies against nepotism to ensure fairness and avoid potential conflicts of interest.

Is nepotism a form of discrimination?

Yes, nepotism is unethical and can indeed be considered a form of discrimination. Discrimination, generally speaking, involves treating a person or group unfairly based on certain characteristics or affiliations. When a person is favored or disadvantaged based on their familial or close personal relationship with someone in power, it mirrors the basic structure of discrimination. Other qualified individuals may be overlooked due to this favoritism, which is inherently unfair and counterproductive in a professional setting.

The distinction becomes crucial when nepotism results in a negative impact to others based on protected characteristics such as race, gender, age, disability, or religion. It is important to note that not all forms of nepotism are legally actionable as discrimination, but even if it does not cross a legal boundary, favoritism is always a poor business practice.

Is nepotism always wrong?

Working with family and providing opportunities for relatives or close friends is not inherently wrong. In small, closely-held businesses, for instance, family members might naturally take on various roles. Family run businesses may even thrive on the dedication and trust shared between relatives. Similarly, in certain industries or cultures, hiring within one’s network, including family, might be common practice.

However, problems arise when nepotism leads to favoritism and inequity, sacrificing merit and competence. This behavior will stifle growth, breed resentment, and can even lead to legal issues. The key is to ensure that all employees, whether related to management or not, are treated fairly and assessed on their work performance. In conclusion, while there can be a difference between nepotism and providing opportunities to family, be sure you handle these situations with transparency and fairness to prevent negative repercussions.

How to prove nepotism in the workplace?

Proving nepotism can be tricky, primarily because it necessitates tangible evidence of unfair treatment or favoritism based on familial or close personal relationships. Here are some steps you can take:

  1. Document Instances: Keep a record of specific instances where you believe nepotism has occurred. This could be a situation where a family member or close friend of a manager was promoted over more qualified candidates, or an unfair distribution of tasks.
  2. Gather Evidence: Accumulate any relevant evidence, such as emails, memos, or other documented communication that supports your claim.
  3. Witnesses: If there are colleagues who have also noticed the nepotism, they could potentially serve as witnesses to validate your claim.
  4. Consult the Company Policy: Review the company’s policy on nepotism, if there is one. Some organizations have strict rules against relatives working in the same department or being in a direct reporting relationship.
  5. Seek Legal Advice: If you believe that nepotism at your workplace is infringing upon your rights or leading to a hostile work environment, and you have been unsuccessful with getting support from within the company, it may be time to seek legal counsel.