That’s where the challenge for HR leaders and executives lies: preventing nepotism from negatively impacting your organization’s culture, reputation, and financial success.
What is Nepotism in the Workplace?
Narrowly defined, nepotism is the practice of showing favoritism and giving something of value to relatives and family members. In the workplace, nepotism can affect who your company hires, who receives promotions and raises, who’s assigned to projects, who receives positive performance reviews, who gets special favors, and who receives disciplinary action.
The word nepotism comes from the Latin word nepos, meaning nephew. It originally referred to how Catholic popes would favor their nephews by awarding them jobs in the church. Luckily for everyone, the Vatican outlawed nepotism in 1692.
When it comes to HR, there are two types of nepotism you’ll want to watch out for.
Reciprocal nepotism: This is where both parties entering the employment relationship benefit from each other.
Entitlement nepotism: One party is entering into the employment relationship expecting favors regardless of qualifications or performance.
Unfortunately, both of these types of nepotism can harm your organization.
Employment Nepotism Hurts Business
As Resume.io’s research shows, nepotism hurts more than employees who are trying to get ahead but don’t have family ties at your organization.
Here are some of the major effects nepotism has on business:
54 percent of workers say nepotism negatively impacts “everything” in the workplace from team morale to diversity efforts, productivity, and innovation.
As you can see, turnover is a huge concern. Research from HR Acuity found that employees who have experienced or witnessed inappropriate workplace behavior (which includes nepotism) are 30 percent more likely to leave their organization than those who didn’t witness anything (11 percent). And when employees leave, it costs you money.
According to SHRM research, it costs businesses $4,129 to replace an employee. But when you account for lost productivity, increased overtime, and recruiting fees, employee turnover can range from costing three to four times an employee’s salary. That means if you have 100 employees and experience 30 percent turnover (right at the national median), nepotism is costing your organization the equivalent of 10 employees’ salaries.
Is Nepotism Illegal?
Contrary to popular belief, nepotism is not illegal. Actually, unless you’re hiring for a government position or run a public institution, there are no laws that expressly forbid nepotism in the workplace.
Where employers can get in trouble, however, is when nepotism results in discrimination. That’s according to employment lawyers at MSD Lawyers. Nepotism becomes illegal when it leads to employers:
Denying employment to someone based on their race, national origin, sex, religion, disability, age, sexual orientation, gender identity, genetic information, and military status (as protected under Title VII of the Civil Rights Act).
Operating a public company and failing to identify related party transactions (Sarbanes-Oxley Act).
Working for the government and hiring a family member (Criminal charges)
Some states even have laws about nepotism concerning government positions, so it’s best to check with your state’s laws as well. California, for example, requires all state agencies to implement an anti-nepotism policy through the California Department of Human Resources.
How To Prevent Nepotism at Work
Want to prevent nepotism in the workplace? Follow these five steps to protect your organization and ensure you’re putting your best talent forward based on performance:
Implement a written nepotism policy.
Your policy should detail any rules your company has about nepotism and who qualifies as being part of someone’s “inner circle.” This includes family members, spouses, domestic partners, in-laws, and anyone who lives in the same home as the employee.
Make your hiring processes transparent.
Have hiring managers write down their reasonings for hiring someone. Administer structured interviews with multiple interviewers where at least one interviewer is not involved in the decision-making process.
Require employees to disclose relationships.
If an employee has any type of relationship with an applicant, they should disclose that before the employee is hired. You should also require employees to disclose relationships if it develops while working at the company. This will help you prevent any potentially bad situations from happening.
Restrict supervision.
Once you know which employees are related, make sure those employees aren’t in a chain of command that would allow one to directly or indirectly supervise the other.
Implement a confidential reporting system.
Employees should be able to report potential nepotism cases without fear of retaliation. You can do this by allowing employees to report to a third-party hotline.
Train your employees on nepotism.
Ensure all managers understand what nepotism is and how they can prevent it within your organization.
Nepotism may be common, but that doesn’t mean it can’t hurt your organization. From damaging diversity initiatives to losing talented employees who don’t have family at your organization, nepotism creates problems that can impact your bottom line. Take the proper steps to prevent nepotism from occurring at your organization and you’ll hire and retain top talent based on their performance — and not family relations.
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