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5 Reasons Why Organizations Need an Anti-Nepotism Policy

May 31, 2016
Deb Muller

With a net worth estimated at $149 billion, the Walton family, heirs of the Walmart empire, topped the list as the richest family in the United States in 2015. The Waltons are also famous for another reason–the explicit nepotism, or favoritism of family or friends–which pervades the upper echelon management.

Sam Walton, one of two brothers who founded Walmart, had 4 children, and his eldest son, “Rob,” became Chairman of the Board of Directors upon Sam’s death in 1992. Recently, Walmart was back in the headlines when Rob’s son-in-law took over as Chairman of the Board in June 2015.

Could it be argued that there is a logic to protecting a family business or family-owned enterprise by populating the upper management ranks with trusted family and friends? Perhaps. However, the consequences of nepotism in the workplace are vast and far outweigh the benefits, if any. If a company is publicly-traded, flagrant nepotism also breaches the company’s obligation to its shareholders.

The repercussions of nepotism in the workplace are sometimes obvious, sometimes subtle, but always serious.

Here are 5 reasons why organizations need an anti-nepotism policy:

1. Nepotism relegates employee performance to who you know

Chron lists a sense of fairness as one of the top 10 characteristics of a great workplace. Fairness, in the context of employee relations, is the application of rules with consistency across all levels of the organizational hierarchy. Nepotism undermines a sense of fairness, because intuitively, individuals that aspire to the management team know that ultimately, it comes down to who you know or who you are. Outstanding employee performance, typically a criterion for promotion, becomes secondary to family birthright or personal connections.

2. Favoring family and friends can lead to claims of discrimination

There is no federal statute that bars nepotism. Legally-defined protected classes–age, race, and religion, for example–which can be the basis for claims of discrimination, do not explicitly cover nepotism either. However, favoring family and friends can lead to discrimination claims nonetheless, especially if the preferential treatment consistently favors individuals that happen to fall into a certain national origin, race or ethnic background.

Nepotism may also lend itself to claims of hostile work environment, a form of harassment or constructive discharge. Hostile work environment occurs when a co-worker’s or supervisor’s behavior in the workplace is such that an employee no longer feels able to perform his/her job duties. If the employee feels compelled to quit, it may be a case of constructive discharge. If family members are appointed to positions within the workplace regardless of their suitability and impact the workplace negatively, the organization may be subject to claims of hostile work environment or constructive discharge.

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3. Nepotism impedes talent retention

In The Deloitte Millennial Survey 2016, two of three Millennials surveyed anticipated leaving their current job by the end of 2020. These figures were only slightly lower for Millennials that held senior positions within their organizations. One of the most significant drivers was the belief that organizations are not doing enough to build leadership skills. In the Survey, employees that were loyal to their organizations agreed with the statement, “Younger employees are actively encouraged to aim for leadership roles.”

Nepotism fosters a workplace environment which is diametrically opposite to one described by Millennials in the Deloitte Survey. If leadership positions are filled by family and friends, there is no incentive by the management team to encourage employees to aim for leadership roles. The knock-on effect is that favoritism impedes talent retention and no doubt interferes with recruitment as well.

“This last year at work, I have had opportunities to learn and grow.”

4. Favoritism negatively impacts employee engagement

The Gallup Q12 is a set of twelve outcomes that emerged from thousands of interviews conducted by Gallup researchers studying the drivers of employee engagement. The purpose of the research was to determine the predictors of employee engagement given its abysmal and stagnating levels within the US. In The 12 Elements of Great Managing, three of the twelve tenets that emerged involve personal development in the workplace:

#6: There is someone at work who encourages my development.

#11: In the last 6 months, someone at work has talked to me about my progress.

#12: This last year at work, I have had opportunities to learn and grow.

Nepotism stymies personal development by closing off opportunity. An employee can progress within the organization, but only so far. In preventing employees from growing into certain roles, nepotism fuels disengagement.

5. Anti-nepotism policies can help establish employee expectations

Office romances can be tricky. In general, organizations may prohibit co-workers from dating. Companies can also require that relationships between co-workers be reported to the management after a certain period of time. If employees marry, some company policies specify that one of the parties to the relationship must leave and find a different employer, especially if the two employees are in the same management line. The situation is further complicated by the rise of the “gig” economy as an increasing number of employees are working from home and the lines between a person’s personal and professional life blur.

Anti-nepotism policies are excellent constructs for companies to outline expectations and establish guidelines should employees in the same organization date or get married. The reason is because the impact of the relationship may lead to actions that are perceived as favoritism or nepotism. A thoughtful anti-nepotism policy establishes the rules and potential consequences of employee relationships in the workplace before the company confronts the inevitable.

In reality, the negatives of permitting nepotism in the workplace far outweigh any positives, and an anti-nepotism policy has become an essential component of employee relations best practice. For organizations, it underpins employee engagement, helps mitigate potentially harmful litigation and improves employee performance and retention. For employees, it promotes a workplace where development is both encouraged and achievable. It’s an employee relations win-win.

Photo credit: B137 at English Wikipedia CC BY-SA 3.0 via Wikimedia Commons

Deb Muller
Deb Muller is the CEO of HR Acuity, employee relations case management and investigations software that combines documentation, process, and human expertise so organizations can meet the challenge of managing employee relations in the modern world.

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