Nepotism in Business

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v Fundamental concerns about Nepotism

v The Structure of the business

v Policy Consistency

v Business Practical Matters

Nepotism experienced in Small Businesses

The Pros and Cons of Nepotism




Recruitment in a workplace or business involves filling in positions of the vacant post in various areas. Ideally, it should encourage individuals with appropriate qualifications and sufficient work experience to apply in any organization. It is, therefore, the company’s role to choose who they have a better qualification so as to fulfill their standards. In the real sense, recruitment can occur internally or externally. This rule of recruiting people has been broken for various reasons where none cares about the qualified to work in their business. Nepotism has therefore taken the form of equality when it comes to managing the businesses because people favor either their relatives or friends. In today’s world, small businesses have encouraged nepotism especially in companies with the belief they are either saving money, or they trust them so much. Perhaps we can say that nepotism has denied the perfect to get their dream jobs thus making most businesses fail. To a great extent, nepotism is the human flaw of favoritism that includes their behavior and how they relate to others thus demoralizing the equality spirit to businesses contemporary in the society.


In today’s business world, nepotism is the favoritism of family and friends in employment or economic terms. For example, without regarding merit, jobs and favors are granted to friends and relatives. These practices damage businesses by reducing the quality of original ideas by the management. Some larger companies have policies that prevent any relations either by blood or marriage from working in the same firm or department. In Smaller businesses or family-owned businesses, nepotism is considered as an alternative for succession whereby family members learn the job so that they can take over the business when the earlier generation retires.

The frequent disputes of nepotism are that the connection between the relatives creates an adverse effect in their decision making thus hindering their professional grown. Many businesses in the past, avoided working together with family members. This changed as women started working and rising into prominent positions in the workforce and often a company didn’t want to lose a married couple because they were valuable to it. Many businesses decided to accommodate family members instead of introducing anti-nepotism rules especially if there was no direct supervisory positions or any link with the related employees.

Fundamental Concerns and Business Structure

In business, the core concern on nepotism is that it denies the customs in employment to promote or hire qualified candidates for a job. Sometimes a close relative may be the most accomplished to be employed. But nepotism leads them to get the jobs instead of the most qualified candidates with the experiences or education (Joseph Straub, 1998). In business, the ethics of nepotism also has a lot to do with its structure, for example, in established in a family business through sole proprietorship or partnerships, it typically means that you own the controlling shares of the business by yourself or with the relatives who are partners. If there is a collaboration with non-family members or with shareholders, the company forms a conventional stand that is evident from your attachment.

Policy Consistency

Nepotism in bigger businesses is not only inherently wrong, but some people think it’s unethical. An article in a 2009 family business institute, noted that nepotism might benefit companies that consistently enforce fair laws (Gale, 2009). The employees in a small organization are mostly hired from referrals than from job postings. When some companies have open positions, they prefer referrals from friends and family members to fill them. The ethics in this type of culture involve the company’s regularity in accepting family referrals in fair access to jobs.

Practical Matters

Practical issues need to be considered alongside moral nature of nepotism. Since not all companies take advantage of nepotism and its merits, family businesses often from legacies from several generations of family participation. In some cases, underqualified and uninspired are hired and are paid more than they are worth. To make matters even worse they burden other staff baby undermining the workplace culture. The key is to balance your impulse of helping the family while managing a successful business.

Nepotism in small businesses

Nepotistic relationships within small businesses must be considered where relatives often work together. Resentment or unkindly treatment from non-family employees has been a possible fear from business owners. A recent poll has proved this attitude. The fact is, almost half of those polled (48 percent) believe that the secret of being ahead is the son’s boss, while a quarter agreed that hard work brings forth success (Phillip W, 2014).

Family owned businesses need to make clear policies to change the attitude of employees by giving rewards to those who are pursuing work excellence. It doesn’t mean hiring a family member is bad, it only means that rewards are awarded to all employees who perform better for the success of the company. The emotional bonds between relatives can positively affect personal performance and the success of the enterprise. Sometimes hiring relatives can fill employee requirements with dedicated employees. Preparing and about carrying on the business in future is an entirely legitimate plan for the firm owner. Guidelines regarding responsibilities, hiring, succession, reporting structure, and training should be established to avoid potential drawbacks.

Clear communication of the rules and their applications are needed, since family size, culture, a line of business and history in addition to other factors are in effect, like, “how liberal and strict are the rules.” As written in Nation’s Business article, Craige E. Aronoff and John L. Ward (Aronoff & Craige, 1993). All family owned businesses believe in grooming one of the younger family members to take over the business down the road. Experts believe that a widespread workforce can develop a significant morale problem if the family members are not held accountable for their actions

In an article in Family Business Succession, Ward and Aronoff recommend that the relatives meet three qualifications before they join the business on a full-time basis, three to five years’ work experience, good educational background and an open and existing position that matches their credentials. They also stress the fact that outside work experience is the most important factor for the business and the individual. They also claim that it gives future managers a wider experience that helps them to be able to deal with challenges. Also, helps them learn from their mistakes before coming under the keen eye of the family members. It also makes them appreciate the family firm by helping them realize that other options exist, which gives them an idea of their market value.

Aronoff and Ward also proposed that relatives begin to work in the family-based firms when they’re still in school or participating internships. Family-based businesses should make it clear to their family employees that there shall be consequences for unethical behavior or illegal regardless of their ties. Finally, they suggest that these companies are encouraged to maintain those external relations to make sure that their accountability and creativity is not a problem in management. Future managers should participate in civic groups or high schools so that outside consultants or directors review their performance. Such activities improve the employee’s self-confidence and preparation for a leadership role in the business future (Aronoff & Craige, 1993).

The Pros and Cons


Nepotism, as defined by a Pete Michaels, is the practice near people with influence or powers. At most, most individuals believe that this type of act is harmful. However, nepotism also has its positive side. Recruitment of family members at some point is seen to go down especially when one has a pool of relatives (William Petty, 2013). The low cost is maintained because most of these members don’t have core competencies pertaining that job. This forces the owner to conduct some training thus ending up paying them low wages. Besides the low turnover, these family members also have the urge of learning fast since they only aim to see the company’s success. Family members also tend to have a lot of morale, loyalty, and trust. By trust, by choice, family members are also seen to gain superiority in the business through inheritance. For instance, a member of the third generation may get the C.E.O position from a business that was established by the grandfather. Significantly, this person will also earmark their position to their heirs.


When it comes to entitlement especially when there are too many kids, most of them feel that they deserve to be given the businesses upon their parent’s death or retirement. As often, upon their upbringing, these children were used to be given things they have not worked for. Another problem is when the parents are dealing with their son who they were used to giving money every month, and upon the Heir receiving the business, it ends up collapsing because he did not experience the period of hardships his parents went through. Most of them end up not being committed to the business. The below photo shows how favoritism is practiced through the family members, the kid in that picture is sitting on an executive that the father has just left him the business (W. Zgheib, 2014).


In general, cronyism, favoritism, nepotism overshadow the benefit of businesses because when somebody gets employed in an individual business, they are usually opposed not because of their qualifications, but there is debilitation in the family business. As a result, the persons get negative perception due to discrimination since the preferred individual is a relative. In business ethics, nepotism is a toxic treatment that declines the morale of the company especially if the topmost member is from the family. Nepotism, therefore, does not create a conducive place for a superior work because no one tends to be patient with the business. On a clear picture, Favoritism does not benefit the business because it destroys the relationship, trust, and creativity especially if the business has plans of expanding. Therefore measures of reducing nepotism involves having documents such as business policies


Nepotism in businesses as discussed depends on the size of the firm. For large organizations, this act can kill the business with the blink of an eye. By this I mean, if the heir inherits the company and lacks experience, then the chances of the company going down is very high. The kid at most times requires experience and only runs the business with the aim of making money. The large organizations also if they get a person who does not want to maintain the standards will also cause the company to collapse. On the other side of the coin, Nepotism seems to favor small businesses. For instance, there is a lot of trust in the firm because the person who has inherited the business also has the focus of expansion. This makes them work extra hard in order not to fail the business. On the other hand, this practice in small firms also saves a lot of money because the majority of the heirs still live under their parent’s roof. This makes the parents save a lot of money since all they have to do is to feed the children.

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