Nepotism describes a variety of practices related to favoritism; it can mean simply hiring one's own family members, or it can mean hiring and advancing unqualified or under-qualified family members based simply on the familial relationship. The word nepotism stems from the Latin word for “nephew,” especially the nephews of the prelates in medieval times. While attitudes toward nepotism vary according to cultural background, nepotism is a sensitive issue in American business. Many companies and individuals consider the practice to be unethical, largely due to its conflict with traditional American values of self-reliance and fairness.
However, nepotism may have played a role in the success stories of such self-made men as Andrew Carnegie. The business historian Pamela Laird has shown how various personal networks can contribute to career success. Laird has shown that kin networks can be an early and crucial aid in business success.
In Western societies nepotism raises legal concerns. Although U.S. laws do not specifically prohibit hiring one's relatives, studies show that between 10 and 40 percent of U.S. companies maintain formal policies prohibiting such a practice. Many of these anti-nepotism rules were instituted in the 1950s with the aim of preventing the hiring of incompetent male relatives of male employees. In the 1960s and 1970s the same rules applied but failed to reflect the change in the workforce as more women entered the job market; females were often the victims of these rules, however, and many were forced to quit.
Nepotism is also tied to discrimination issues and pragmatic concerns. There is substantial debate over whether employers with any form of biased preferences for hiring, including nepotism, can even survive in the business market, ethical issues notwithstanding. On the other hand, a 2006 report noted that approximately one-third of all Fortune 500 firms are family owned, and that family-owned businesses accounted for about half of the country's gross domestic product. In addition, these firms accounted for about three-fifths of all employment, and an even higher proportion of new job creation. The success of these businesses can be viewed as an implicit endorsement of nepotism.
Larry Singell and James Thornton identify four levels of anti-nepotism rules. They note that companies may institute policies that prohibit the employment of a current employee's relatives in any of the following situations:
- Anywhere in the organization
- At the same facility
- In the same department or work group
- In positions where one may immediately influence the compensation, promotion, or work situation of the other
Even if a company has a clearly stated policy, complications may follow in its enforcement. For example, the increase in dual-career marriages increased legal challenges to nepotism issues. Employees occasionally meet at work, socialize, fall in love, and eventually marry. In some cases, couples have had to decide which spouse has to quit, as company policy would not allow them to work for the same organization. Do practices such as hiring (or even not firing) family actually constitute discrimination?
Further, even if there is no complication between the two individuals as a result of marriage, there is sometimes pressure from in-laws and even close friends of in-laws for favoritism in hiring. There appear to be differences in nepotism practices between family-owned businesses and publicly owned businesses. Most family-owned businesses simply expect family to be involved in the future, as do the in-laws who join the family. However, there are usually more formal rules for publicly held companies; these companies must therefore be cautious, since they are open to outside scrutiny over their hiring and promotion practices.
If practiced fairly (itself a contentious term in this regard), nepotism can be a true asset, Sharon Nelton suggests, citing the example of Thomas Publishing Company. In 1998 there were seven third- and fourth-generation family members working for the company. The third-generation president, Tom Knudson, encouraged nepotism among their independent sales contractors because he believed it resulted in high performance, stability, and long-term commitment.
Chad Kaydo also writes that nepotism may be viable. For example, a top salesperson's relative may have many of the same qualities that make the representative successful. Recruiting family members can therefore boost both performance as well as retention. For instance, one senior contractor began working for Thomas in 1940. By 1998
his wife and three of his adult children (two daughters and a son) all worked for the company. The son encountered a challenge when calling on a client at odds with the senior contractor. He easily and politely diffused the situation using the diplomacy techniques he had gleaned from his father, the very senior contractor the client disliked, and gained a larger-than-usual sale.
Wrigley is another successful company that has been run by a family for many years. One Business Week story noted that family-run businesses can have lower employee turnover rates as specific managerial values are passed down from generation to generation.
In the 2000s the tide in business seemed to be turning toward policies that encouraged hiring qualified relatives and spouses, with idea that good people tend to associate with good people. Jacquelyn Lynn noted that such policies can promote employee satisfaction by aiding individual efforts to balance professional and personal lives. Hiring family members can also provide benefits to companies, for example by reducing their health insurance costs. Nepotism can also extend to older family members. Bill Gates's father serves as the Gates Foundation's chairman.
Adam Bellow has coined the term “new nepotism” in his book, In Praise of Nepotism. Bellow and others have commented that nepotism can be a savvy business strategy, especially when a family is closely associated with a particular company or brand. In these cases, nepotism can work to bolster confidence in a firm.
There are, to be sure, nepotism disasters. Lines Brothers in Britain, once a highly successful maker of Triang toys, was rendered worthless in just a few years by its second generation of leadership. Yale Express, a U.S. delivery company, was bankrupt within five years of the second generation assuming the presidency. The Great Atlantic and Pacific Tea Company (A&P) was once the largest supermarket chain in the United States, but went bankrupt under its heir.
Linda Wong and Brian Kleiner suggest that trouble arises most often when family and business needs conflict. A family's purpose is to care for and nurture family members; a business must produce quality goods and/or services as efficiently and as profitably as possible. If a company hires or promotes an incompetent family member, other employees may see this is a gross injustice and many complications may result. More directly, the unqualified heir may simply instill policies that drive the company into the ground.
Nepotism can also publicize family disagreements and prejudices to those within the company. It may even cause a company to lose valued executives and make it very difficult to attract and retain high-quality newcomers. Family squabbles can also serve as bad publicity. For example, the CEO of Carlson Cos. fired her son, prompting a series of lawsuits between the two. Likewise, Viacom's Sumner Redstone has been embroiled in public disputes with his children who also worked in the business. On the other hand, some see the DuPont family's competition among members as having contributed to that company's success.
Adelphia Communications represents what is perhaps one of the most disastrous instances of corporate nepotism. In 2004, John Rigas and his two sons were disgraced in a highly publicized case of corporate fraud. This can be seen as a case where nepotism ruined a company not by placing incompetents in powerful positions, but rather by generating a corrupt culture at the company's top.
Abdalla Hayajenh, Ahmen Maghrabi, and Taher Al-Dabbagh note that nepotism has maintained a particularly strong footing in the Arab world. They indicate that there are several major factors behind nepotism in Arab business:
- Socio-cultural structure (tribal and kinship relations)
- Economic structure (a tight labor market making it difficult to find a job in other ways)
- Educational structure (poor preparation of workers for economic development)
- Political structure (governments' assignation of educated tribal chiefs and their sons to key positions in return for loyalty)
In Asia the majority of entrepreneurs look to the family, rather than the broader populace, for the succession of the business. Studying Asian nepotism practices, Leon Richardson holds that nepotism works as well as any other management choice as long as one never tolerates incompetence. He notes that the Japanese successfully use nepotism, with senior men and women enjoying power and not hesitating to fire an incompetent “nephew.”
In addition, many Latin American countries accept nepotism as the norm and are baffled by the often-negative U.S. attitude toward the practice. As one South American executive commented, “If I cannot hire and trust my own family, just who can I trust?”
However, attitudes towards nepotism in foreign countries can also change over time. In 2008, Italy's supreme court decided that nepotism was illegal. Still, one London newspaper reported that the vast majority of businesses in that country were family owned.
Craig Aronoff and John Ward argue that the key to the successful use of nepotism is clear communication of the
rules before they are needed and fair application of the rules as needed. They believe in holding relatives to at least three standards in hiring:
- Appropriate education for the job
- Three to five years of outside work experience
- Entry into an already existing and vital position with determined pay and performance expectations
Many experts believe that outside experience is vital to the potential family-member hire. They feel the family member should establish his or her own competence and professional sense of worth before assuming work responsibilities within the family's firm. Testing and honing his or her skill set and abilities allows one to bring expertise to the enterprise.
In the first sixteen years of business, CAM Specialty Products practiced a strict policy of not hiring family members. However, in 1997 an opportunity to invest in Deckare appeared and co-owner Gordon Hammett hired his son as work crew chief to handle on-site fieldwork. Hammett interviewed his son like all other candidates and honestly felt his son was a perfect fit for the job; he was familiar with his son's work ethic and knew his son enjoyed the type of work. As a result, the decision met with great success. The key was to have clear criteria for the job and to apply it consistently for all candidates, neither favoring nor discriminating against family members.
Nepotism is not a new phenomenon in business, but it is of particular interest as the world of business shrinks due to rapid travel and convenient and fast technological communication. As business becomes increasingly globalized, it is crucial to understand how cultural attitudes toward nepotism vary between the different countries in which a business operates. Furthermore, as more families rely on multiple incomes for their standard of living, the ethical and pragmatic considerations regarding nepotism must be carefully negotiated to ensure the most effective overall business strategy. While certain guidelines have been known to effect a smooth incorporation of nepotism into a successful business, there are no definitive strategies. Clearly, however, nepotism can lead to success if applied appropriately, or to disaster if applied without careful consideration of all the variables involved.
SEE ALSO Employee Recruitment Planning; Entrepreneurship; Human Resource Management; Succession Planning
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"Nepotism." Encyclopedia of Management. . Encyclopedia.com. (May 24, 2017). http://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/nepotism
"Nepotism." Encyclopedia of Management. . Retrieved May 24, 2017 from Encyclopedia.com: http://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/nepotism
In the business world, nepotism is the practice of showing favoritism toward one's family members or friends in economic or employment terms. For example, granting favors or jobs to friends and relatives, without regard to merit, is a form of nepotism. These practices can have damaging effects on businesses—such as eroding the support of non-favored employees or reducing the quality and creativity of management. In response, some larger companies have instituted "anti-nepotism" policies, which prevent relatives (by blood or marriage) from working in the same department or firm. But in many smaller, family-owned businesses, nepotism is viewed in more positive terms. Family members are trained in various aspects of management to ensure the continuity of the company when members of the earlier generation retire or die. In fact, in many small businesses nepotism is considered a synonym for "succession."
One of the most common arguments against nepotism is that the emotional ties between people who are related may negatively affect their decision making abilities and professional growth. In the past, many businesses sought to avoid even the appearance of nepotism by forbidding relatives from working closely together. This began to change as women entered the work force in ever greater numbers and began to rise to positions of prominence. Often, both the man and the woman in a married couple were too valuable for a company to lose. Instead of instituting strict anti-nepotism rules, many businesses decided that family members could be accommodated within a merit system, especially if there was no direct supervisory link between the positions of related employees.
NEPOTISM IN SMALL BUSINESSES
Even within small businesses where family members often work together concerns about how these nepotistic relationships may be viewed by others must be considered. Business owners have often feared that non-family employees would resent or even treat unkindly family members brought into the business. Newly hired family members may even be seen as roadblocks to advancement in a company by some non-family employees. A recent Inc.com poll reveled the extend to which this attitude prevails. In fact, nearly half of those polled (48 percent) believed that being the boss's son is the secret to getting ahead, while only a quarter agreed that success comes from doing good work.
This attitude suggests that family-owned businesses need to make serious efforts to establish an environment in which it is clear that employees will be rewarded based on merit. This does not necessarily mean that hiring a relative is a bad idea. What is necessary, however, are policies and actions that show clearly that all employees are rewarded fairly and equally for company success. The emotional bonds between family members can actually have a positive effect on individual performance and company results. In addition, hiring family members can fill staffing requirements with dedicated employees. And it should not be forgotten that preparing a family member to carry on a business is a perfectly legitimate enterprise for the owner of a family business.
But in order to avoid potential pitfalls and ensure that relatives work together effectively, the company should establish formal guidelines regarding hiring, responsibilities, reporting structure, training, and succession. These guidelines will be different depending on the family's size, culture, history, and line of business, in addition to other factors. "How strict or liberal the rules … are is less important than clear communication of the rules before they are needed and fair application of the rules when timely," Craig E. Aronoff and John L. Ward wrote in Nation's Business. After all, most non-family employees recognize the legitimacy of preparing younger family members to assume the company's reins down the road. But experts agree that a widespread workforce perception that family members are not being held responsible for their performance can develop into a major morale problem.
Regarding hiring, Aronoff and Ward recommend in Family Business Succession that family members meet three qualifications before they are allowed to join the family business on a permanent basis: an appropriate educational background; three to five years' outside work experience; and an open, existing position in the firm that matches their background. Of these qualifications, Aronoff and Ward stress that outside work experience is the most important for both the business and the individual. They claim that it gives future managers a wider experience base that makes them better equipped to deal with challenges, lets them learn and make mistakes before coming under the watchful eye of the family, makes them realize what other options exist and thus appreciate the family firm, and provides them with an idea of their market value.
Aronoff and Ward also suggest that family members begin their association with the business by working part-time during their school years or participating in internships. In addition, they stress that companies who hire family members should make it clear to the individuals that they will be fired for illegal or unethical behavior, regardless of their family ties. Finally, they recommend that family businesses encourage their employees to maintain outside associations in order to avoid problems associated with a lack of creativity or accountability in management. For example, future managers could participate in industry or civic groups, enroll in night school classes or attend seminars, take responsibility for a division or profit center, and have their job performance reviewed by outside consultants or directors. Such steps can improve the employee's self-confidence and preparation for an eventual leadership role in the business.
see also Family-Owned Business
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Bellow, Adam. In Praise of Nepotism: A History of Family Enterprise from King David to George W. Bush. Anchor Books, 2004.
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Hillstrom, Northern Lights
updated by Magee, ECDI
"Nepotism." Encyclopedia of Small Business. . Encyclopedia.com. (May 24, 2017). http://www.encyclopedia.com/entrepreneurs/encyclopedias-almanacs-transcripts-and-maps/nepotism
"Nepotism." Encyclopedia of Small Business. . Retrieved May 24, 2017 from Encyclopedia.com: http://www.encyclopedia.com/entrepreneurs/encyclopedias-almanacs-transcripts-and-maps/nepotism
NEPOTISM. The term "nepotism" (from Latin nepos, 'nephew') refers to the popes' practice of appointing a "nephew" to the curial office of cardinal-nephew. The term can also refer more generally to the appointment of a close relative or other favored person to an ecclesiastical position. Because clerical celibacy generally meant that prelates had no sons, siblings' sons or other close relations were chosen for positions requiring discretion and confidentiality. In the early modern era there were instances of a pope's natural sons filling such positions, as with Alexander VI's son Cesare Borgia (1475/1476–1507), who was made archbishop and later cardinal. (The term "nephew" might in fact be used to refer euphemistically to the natural son of a prelate.) Nepotism also refers to the practice of granting to family members, friends, or others ecclesiastical offices, benefices, preferment, and favors. Dispensing ecclesiastical offices and wealth as personal property to those one favored rather than those worthy to receive them was considered a serious abuse and was forbidden by canon law.
The genesis of the office of papal cardinal-nephew is obscure, but it can be traced back well into the Middle Ages. In the early modern papacy, the office of cardinal-nephew became crucial, as it safeguarded a papal family's control over finances, affairs of state, diplomacy, ecclesiastical appointments, theological issues, and matters pertaining to the papal family's social status. Cardinal-nephews looked out for the aggrandizement of the papal family (which was also their own) in the short duration of the pope's reign. Nephews held the ecclesiastical dignity of cardinal, but many were not ordained; they might also hold a clerical rank from cardinal-deacon to cardinal-archbishop. They often functioned as secretaries, advisers, managers, and supervisors over the affairs of the Papal States. Their responsibilities often varied greatly from one pontificate to another. Most cardinal-nephews interacted closely with other clerical officials, especially the secretary of state (who might also be a nephew). Based on the closest ties of kinship, the nephews' trustworthiness gave them privileged access to popes and to the inner circles of curial deliberations; it also provided opportunities for acquiring enormous wealth.
Though sometimes appointed very early in life, some cardinal-nephews proved to be highly competent, indispensable administrators. Among these were Carlo Borromeo (1538–1585), a nephew of Pius IV who later became archbishop of Milan, and Alessandro Farnese (1520–1589), grandson of Paul III. Others proved dissolute, and some, like Paul IV's nephew Carlo Carafa, who was executed for his shameless activities, were disastrous. The Barberini nephews of Pope Urban VIII, Francesco (1597–1679) and Antonio (1607–1671), caused a diplomatic crisis in 1634 when one became cardinal-protector of Spain, the other of France. Many cardinal-nephews were great patrons of the arts. Scipione Borghese, for instance, was patron of the young Gian Lorenzo Bernini (1598–1680). At the close of the seventeenth century, Innocent XII (reigned 1691–1700) eliminated the office of cardinal-nephew, as reformers pressed for popes who did not put family aggrandizement first. The cardinal-nephew's duties were subsumed by the secretary of state.
See also Borromeo, Carlo ; Papacy and Papal States .
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Frederick J. McGinness
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"nepotism." The Oxford Dictionary of Phrase and Fable. . Retrieved May 24, 2017 from Encyclopedia.com: http://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/nepotism
nep·o·tism / ˈnepəˌtizəm/ • n. the practice among those with power or influence of favoring relatives or friends, esp. by giving them jobs. DERIVATIVES: nep·o·tist n. nep·o·tis·tic / ˌnepəˈtistik/ adj.
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