Nepotism is essentially hiring or promoting someone not based on their skills or experience but based on the individual’s relationship to someone with power. There are many forms that nepotism can take. It includes business owners promoting their child to managerial positions without any justification or a CEO giving priority to promoting their relative over other more qualified employees.
It is very common in the world of politics when political leaders appoint their relatives or friends to a prominent government position, even when there are many individuals who would be better qualified for the role.
Nepotism in the workplace isn’t always clear-cut. Sometimes, it appears as preferential treatment. Hiring someone based on friendship rather than the quality of their work or experience, giving inside information about job openings, ignoring rules for a relative, or always asking the same person to do high-visibility projects. Although it may seem harmless and can even be justified by the authority figure of “trust”, it essentially creates an uneven playing field for individuals and for the organization as a whole.
Over time, nepotism doesn’t just undermine fairness. It erodes trust, stifles talent, and turns workplaces into breeding grounds for frustration and resentment. When success depends on connections rather than competence, the entire system starts to crack.
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Types of Nepotism
Reciprocal nepotism involves a family member being hired at the business not for their qualifications, but because they have a certain financial need, loyalty, or sense of cultural obligation. Sometimes, people accept jobs offered by relatives or family friends solely because they need a job and income or feel obligated to the family in some way, like joining a family business.
For example, in the case of a small restaurant owned by someone’s parents, a younger sibling might be pressured into going to work there. Even if doing it is uninteresting to them, they want to do something else with their lives.
Entitlement nepotism occurs when someone thinks they are entitled to have a position or be promoted simply because they are related to someone who holds that position or is promoted, rather than for skill. Entitlement nepotism is common in family-owned businesses, in which a son or daughter, or relative of the business owner, expects to take over as the leader and run the business, regardless of their actual experience or capability.
For example, a family-run manufacturing company might, after a succession of generations, start the unqualified heir, assuming that they automatically will move into an executive role, ignoring the more experienced employees. This kind of nepotism can create bad feelings in employees and potentially bad business decision choices.
Effects of Nepotism
Nepotism’s effects vary, but in every case, it does more harm than good.
Impact on Employees
Whenever one person is given an unfair advantage, the rest will lose out on that advantage. Employees who have competitively earned their way into promotions or leadership roles can lose those opportunities when someone with connections takes their spots.
This leads to discrimination where merit no longer matters—rather, relationships facilitate upward movement. Over time, employees become disenchanted, dissatisfied, and disengaged. Disengagement is often tied to a sense of helplessness. Over time, this damages employees’ motivation, productivity, and overall job satisfaction.
Employees will no longer be motivated to be productive, and they take it to the next level by hoping that they can be promoted to the next level. Eventually, the employee will not take it to the next level but rather begin to even question their future in the organization at even the perceived loss of merit.
The workplace culture is also impacted. Employees who feel like they’ve been overlooked become resentful. Resentment modifies the workplace culture as it creates an undesirable toxic work environment. Innovation diminishes without employees willing to share innovative ideas, knowing they will not be treated equitably for their good ideas anyway, so who will put their necks on the line?
Hopelessness can find its way into the employee’s plight. Employees start to become more engaged and less risky, yielding an increasing reluctance to stretch, even when stretching to the next level is simply walking it.
Impact on the Organization
Nepotism can ultimately hurt companies as well as the whole system. If promotions and career advancements have nothing to do with merit, the overall talent pool weakens, diminishing performance and marketplace competitiveness. When favoritism is the expectation and the practice, the workplace loses its legitimacy, becoming a deterrent for talent acquisition and talent retention.
There is potential internal damage, and then there is the risk of the legal system. Companies run the risk of a legal case against them when workers feel discriminated against and wronged. Lawsuits stem from claims of unfair hiring or promotion practices. Violating anti-nepotism laws can land a company in legal trouble, and quickly.
Legality and Factors That Enable Nepotism
Nepotism is in most cases not against the law in the U.S., specifically in the private sector, unless that nepotism may lead to discrimination or violate company policy. For public offerings, though, companies must disclose any conflicts of interest because of public policy measures like Sarbanes-Oxley.
Whereas in the private sector, there are few restrictions on nepotism when it comes to administration in agencies, the public sector has specific regulations prohibiting nepotism in a governmental capacity or hiring of relatives of public officials. Federal law, 5 U.S. Code § 3110, prohibits federal officials from hiring or appointing relatives in agencies for which that official has administrative authority.
Some states have very strict anti-nepotism laws, like Kansas, Kentucky, and Ohio, to avoid conflicts of interest for government workers. Each state’s anti-nepotism policy should recognize that favoritism should not be used to help selected individuals obtain employment or unfairly limit others’ (non-relatives’) access to the same job and should maintain a framework of merit-based hiring, particularly in public service.
Telling Signs of Nepotism
Although nepotism may not always be overt, some common indicators reflect a workplace culture that values relationships over merit. Below are some major ‘red flags’ of nepotism:
Hiring Policy
Perhaps the biggest red flag of nepotism is an unfair hiring process. If job openings never get published, and certain individuals go through the hiring process as if they are skipping rounds of interviews for any reason, this can indicate favoritism. For example, an executive has a son, and the company hires him as a department manager without publicly opening the position to applicants and without interviewing other qualified candidates. While this scenario seems more common in family-owned businesses, it can occur in larger corporations when organizational bodies prioritize relationships over qualifications in their hiring.
Performance Reviews
A fair workplace relies on accurate and consistent performance evaluations. Evident nepotism occurs when one particular employee receives consistently favorable evaluations that do not match average or poor performance. For example, an underperforming relative of a senior manager is consistently excused from meeting KPIs while other employees abide by them.
Rewards and Recognition
Salary increases, bonuses, and special perks should be earned based on performance and contributions to the company. If employees who are friends with leadership get promoted, receive pay increases, or get important projects typically similar to what would normally be rewarding for doing the bare minimum, this is nepotism. Leaning into nepotism promotes not only resentment, but it also demotivates employees who witness good work, and be punished by watching friends reap the rewards of leadership.
Workload Distribution
It is an issue when some employees receive all of the tough work while others receive the easy, desirable work. For example, in a typical corporate office, a manager’s friend may be assigned the high-visibility, low-lift projects, while everyone else is neither. This happens over time and continues, causing anger, low morale and burnout from the hard work.
Feedback Channels
Fair workplaces communicate work-related information equitably and transparently to all employees. However, nepotism can mean that your communication is less than fair; some employees will always have information communicated to them only.
For example, a manager can communicate about important project information or information related to an upcoming promotion, but only for their buddies. Employees excluded from these communications have no chance of getting involved, and, as a result, an inequitable hierarchy is created, with relationships trumping skills, experiences, and diligence.
Disciplinary System
In a fair workplace, all employees are held accountable for their actions. However, nepotism often results in family members or close connections being shielded from disciplinary measures. For instance, if an employee with ties to senior leadership repeatedly misses deadlines, engages in misconduct, or underperforms yet faces no consequences, it’s a clear sign of favoritism. Meanwhile, others in similar roles may be penalized for much smaller infractions.
Employee Complaints
Workplace dissatisfaction is another key indicator of nepotism. If employees frequently mention unfair treatment in formal feedback surveys or informal conversations, there is likely a deeper issue. These complaints might start as whispers but can eventually lead to widespread disengagement and a toxic work culture if left unaddressed.
Turnover Rate
A toxic work environment caused by nepotism often leads to high turnover rates, particularly in departments where favoritism is rampant. When employees repeatedly leave a team due to frustration over unfair treatment, it signals deep-seated issues. For example, if a company’s marketing department experiences frequent resignations while a manager’s relative continues to receive opportunities without merit, the pattern suggests nepotistic favoritism is driving away talent. Organizations must analyze exit interviews and turnover trends to identify if nepotism is a contributing factor.
How to Deal With Nepotism in the Workplace
Let’s take steps starting today to eradicate nepotism in the workplace.
Anti-Nepotism Policy
One of the most effective ways to prevent nepotism is by creating a clear, enforceable anti-nepotism policy. This policy should be included in the employee handbook and made a part of leadership training. It doesn’t have to outright ban hiring family members, but it should require transparency and the disclosure of any conflicts of interest.
For example, a company might allow family members to work together but prohibit one from having direct authority over the other. This ensures that decisions related to hiring, promotions, and performance reviews remain fair and unbiased.
Transparency in Hiring and Promotions
A hiring and promotion process that is open and visible to all employees helps build trust and reduces suspicions of favoritism. For example, if a company has a structured interview process where all candidates are evaluated using the same criteria, it minimizes the risk of unfair selections. Organizations should make job postings available both internally and externally and clearly outline the selection criteria for each role.
If an employee is promoted, the company should explain the reasoning behind the decision, ensuring that others see it as fair rather than as a result of personal favoritism. When employees understand how decisions are made, they are more likely to trust leadership and feel valued.
Leadership Training
Managers and executives need to understand what nepotism looks like, why it’s harmful, and how to prevent it. Training sessions should include real-world examples of how favoritism has hurt organizations in the past, such as cases where family members were promoted without merit, leading to poor decision-making and employee dissatisfaction.
Moreover, managers should be encouraged to hold each other accountable and report instances where favoritism undermines workplace fairness. By embedding these principles into leadership training, companies reinforce a culture of fairness and meritocracy.
Fairness is the Endgame
Workplace nepotism may seem harmless at first, but it can have a lasting impact on both individual employees and the organization as a whole. Addressing nepotism through clear policies, transparent practices, and a commitment to merit-based growth is essential for encouraging a healthy, motivated, and productive workforce where everyone has a fair chance to succeed.
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FAQs
What is nepotism in the workplace?
Nepotism occurs when individuals are hired or promoted based on personal connections rather than qualifications or merit.
Is nepotism illegal?
Nepotism is not illegal unless it leads to discrimination or violates specific company policies or anti-discrimination laws.
How can nepotism affect employees?
Nepotism can demotivate employees, create feelings of unfairness, and decrease job satisfaction, impacting performance and productivity.
What can employers do to prevent nepotism?
Employers can implement clear anti-nepotism policies, ensure transparency in hiring and promotions, and provide training to managers to avoid favoritism.
Can nepotism be prevented in family-owned businesses?
Yes, by establishing clear roles, transparent hiring processes, and focusing on merit, family-owned businesses can prevent nepotism and ensure fairness.
