Bringing friends and family into your business can be tricky. Whether or not you hired them for the right reasons, it can be difficult for existing employees to adapt. Below, we detail some effects of nepotism in the workplace, and how to manage hiring friends and family.

What is nepotism in the workplace?

The term ‘nepotism’ is derived from the Italian word ‘nipote’, which means nephew. Nepotism refers to a form of unfair workplace procedure, when family members or friends of the boss or manager are hired not purely for their skills, experience or knowledge. Nepotism is more common in family-run companies, nonprofits, and smaller firms. Often, the employed relative is unable to successfully perform in the role. Furthermore, creating a job outline specifically tailored to a relative is also a form of nepotism, as is setting an interview exam to which the relative has already been told all the answers.

It’s important to note that not every managerial hire of a friend or relative is nepotism. In the case that the friend or relative hired is highly experienced, competent and hard-working, this is not nepotism – simply a logical hire. Nepotism specifically refers to scenarios in which the related employee simply isn’t fit for the position, or unfairly advantaged in the workplace.

Nepotism isn’t illegal as such in the private sector (there are stricter regulations for the public sector). However, in Australia, management is required to disclose any potential conflicts of interest. Thus, if a new employee or board member is a relative, they should be upfront about it.

What are the effects for the business?

Gill Corkindale of the Harvard Business Review tells the story of returning from holiday to assist and “show the ropes” to a new employee. However just weeks later, the new employee she had just assisted – who turned out to be her manger’s nephew – had become her boss. A clear example of nepotism at work, she explains her outrage at having a new employee tell her what to do, despite not being qualified to do so. Corkindale’s outrage is an example of the effects of nepotism in the workplace. She lost confidence in her employer’s ability to manage, and her morale was sufficiently lowered.

In the case that a manager employs a relative for the wrong reasons and hence practices nepotism, the effects experienced within the workplace aren’t beneficial.  Unfairly hiring a relative is likely to create a hostile environment. Employees are likely to view the employer in a negative light – they can view them as someone who needs constant reassurance of their decisions, and a weak leader. This will likely decrease employee confidence in managerial authority and power. The manager is less likely to be seen as objective and supportive of long term employees. The workplace morale in general will be lowered – favouritism will be seen as the way to move up the ladder, as opposed to skill. This is discouraging, and can make employees question if giving their maximum effort to the company is even worth it. As a result, employees who are exceptional at their role may quit to seek more fulfilling employment.

What are the effects for the new employee?

If the related employee is hired for the wrong reasons, it is unlikely that other staff will warm up to them. This means that the new employee is less likely to create meaningful workplace relationships, and can hinder the quality and efficiency of group projects. If they do, it is more likely that a shallow relationship will develop in order to protect the employment of the other staff.  In the case that the related employee is hired for their abilities, they will most likely still face judgement from other staff. It is good to warn the new employee of this. With time, if the new employee is putting in the work, they will no doubt fit in just fine.

How can you manage it?

At this point, it should be clear that hiring friends or relatives just because you know them isn’t beneficial to your workplace. However, if you have a friend or family member that you know can truly benefit your business, you must be smart about how you introduce them to the business.

1. Be upfront about the relation: let your existing employees know that your new employee is related to you. It’s more awkward if they accidentally find out later on, as it will look like you were hiding something.
2. Be sure to treat all employees equally: Don’t offer the related employee any undeserved ‘special privileges’. All employees should be treated equally.
3. Encourage the new employee to create relationships, and prove their abilities: Nothing speaks as loudly as results. If your new employee puts in the hard work, and proves that they really were the right person for the job, they’ll no doubt be accepted into the team.