Allowing nepotism is not a good policy

June 13, 2014 

My dad became a soap opera actor, and I was an extra in a skating rink scene on the soap. I didn't audition. It was nepotism all the way.

-- Jennifer Aniston

Many firms have had success hiring relatives of employees. That said however, I believe not employing family members is the best policy. Hiring family members is wrought with difficulty.

Firstly, hiring a family member smacks of favoritism. Whether it is true or not, the staff will feel that the family member had undue influence over the hiring decision. In cases like this, the new hire is stricken with major issues from the very beginning.

Secondly, having two family members working in a business gives them too much influence. When I was teaching in a finance department, we had a married couple on the faculty. Whenever we took a vote on any issue affecting the entire faculty, the rest of us knew they were going to vote together as they had always done. This was a problem bwecause they had more power than any other individual faculty member and were not liked because of it. The morale of our department suffered the entire time they were employed.

A third problem is that these hiring decisions are often made based on the assumption that the relative is going to have the same attributes of the existing employee -- which is not al

ways the case. I have seen many businesses hire sons and daughters of employees for this very reason. Unfortunately, I have also seen the damaging results of these decisions.

In the case of one business I worked with, the son of a very good employee was hired. After about a year, the firm found out the son was an alcoholic. Not only was he drinking on the job, but he was also drinking while driving the company's vehicles.

This firm had no choice but to let him go with cause. However, the father felt the firm was being way too harsh and quit as well. Losing the father really hurt the firm's financial performance. When all was said and done, the firm wished it had never hired the son and immediately enacted an anti-nepotism policy so this could not happen again.

Yet another problem develops when a family member winds up supervising a relative. Again, this creates unavoidable issues because there will always be the perception of preferential treatment with related employees. Even if the supervising family member agrees they will not show bias in their decision-making and even if they actually live up to that promise -- which is hard to do -- the perception of favoritism destroys morale.

Another consequence of nepotism is the increased probability of being sued for discrimination or hostile work environment. This risk should discourage most businesses from allowing nepotism.

If you are still not convinced about the pitfalls of nepotism, just ask your staff what they think about hiring relatives. Unless they have a relative who is a potential employee, I am sure they will tell you that they do not like it or want it.

Consider establishing an anti-nepotism policy for your organization. There are many sample polices online to help you draft one.

Jerry Osteryoung, a consultant to businesses, is Jim Moran professor of entrepreneurship (emeritus) and professor of finance (emeritus) at Florida State University. Reach him at jerry.osteryoung@gmail.com.

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