Nepotism Revisited

By David W. Ewing

Almost 30 years ago a landmark study produced a list of dos and don'ts for employing relatives. The list, representing the collective wisdom of 2,700 business leaders, is worth another look.

Nepotism: The word continues to stick to family businesses like the proverbial tar baby, stigmatizing them in the view of outsiders as somehow inbred, unprofessional, second-rate. Questions about nepotism often perplex the family business owner, too, who is concerned that the hiring of relatives can affect the company's reputation, its ability to attract top executives, and the morale of its employees.

Almost 30 years ago the Harvard Business Review studied corporate attitudes toward nepotism in one of the most comprehensive, in-depth explorations ever done of the topic. The results were surprising. The nationwide survey of 2,700 business leaders showed that many recognized, and appreciated, the value of having capable, loyal family members working in a business, despite some potentially strong drawbacks.

The 1965 survey covered small and large companies in a variety of industries, and included leaders of public and privately owned firms. Because the results provide a number of practical tips on the hiring and supervision of family members, and how companies can use nepotism to their advantage, Family Business excerpts here the Review's report, which was titled “Is Nepotism So Bad?”

—The Editors


Nepotism has been criticized as being unprofessional. Most writers and critics of business have frowned on the practice. They have claimed that the rise of an intellectual, analytical approach to management spells the decline and ultimate extinction of nepotism. But businessmen seem to see things just the other way around. Judging from their responses to the study, it is because executives take an increasingly professional approach to their work that they can justify nepotism; being professional, they can deal with it objectively—using it when it is of potential benefit to the company, rejecting it when it is not.

Nepotism does not have a good image in the business community. Businessmen have a general feeling that nepotism is undesirable. Executives are impressed by certain disadvantages of nepotism, especially its tendencies to discourage outsiders from seeking employment in the company and to stir up jealousy and resentment among employees.

But this attitude does not hold up when the executives get down to concrete cases and decisions. While over 60 percent of those responding to the study profess an unfavorable attitude toward nepotism in general, 85 percent justify it on specific occasions in the normal course of business. Only a minority elect the hard-boiled “out-with-the-nepot” alternative open to them. This is true in all kinds of companies. Many executives seem to feel that relatives of currently employed managers may be exceptionally well qualified. There is much open-mindedness, too, toward the possibility that a family relationship will stimulate a sense of responsibility in the nepot, encourage him to take a greater-than-average interest in the company, and produce other desirable attitudes. By dealing with nepotism objectively, analytically, and knowledgeably on a case-by-case basis, executives feel that they can draw on its potential advantages while minimizing its disadvantages. They regard as irrelevant generalizations about how “good” or “bad” nepotism is. Using such categorical rules, they believe, can be bad business.

Since so many executives would like to leverage the potential benefits of nepotism, the question arises: What are the best ways to deal with the problems created by employing relatives in management? The advice from respondents can be summarized in the form of dos and don'ts.

 

Deployment for employment

First comes the question of how to decide whether or not to employ a manager's relative. The study has produced a variety of ideas on the subject:

Do have a group of the company's executives not related to him pass on his qualifications. In companies where nepotism occurs very often, fairly often, or occasionally, there is strong agreement with the wisdom of this procedure; nearly seven of every ten respondents consistently favor it.

Do consider the possibility of staying out of the question yourself if you are a senior relative—but don't feel obliged to abstain. “The decision to hire,” say 37 percent of those who have been related to other managers, “should be made by executives who are not related to the candidate.” Many of the respondents emphasized the strength of their convictions with extra written comments.

If the senior relative does decide to participate in the hiring decision, his main problem is how to deal with his bias. Some executives warn him about being too partial. Others warn him against expecting too much of a relative and hence being too “hard” on him. Writes the head of a California corporation: “In order to decide fairly and on the merits, you must begin with a slight prejudice against hiring the relative; your tendency must be not to hire him.”

Do consider the possibility that a would-be nepot may profit from two or more years of experience in another company before joining an organization where he has family ties. Such experience would be made a requirement by 58 percent of those from companies where nepotism occurs very often. Among those who have personally been nepots or patrons [senior executives related to nepots], there is 54 percent agreement with the wisdom of such a requirement.

Do consider the advisability of the nepot's obtaining some kind of formal business training or preparation before he goes into administrative work with relatives. A degree from a business school is favored by 38 percent of those who have been nepots or patrons; on the other hand, a doctoral degree in science, engineering, psychology, or other advanced field is favored by only about 10 percent. A popular requirement is one to three years of apprenticeship in factory work, field selling, and/or clerical work; 58 percent of nepots and patrons consider this desirable.

Don't turn the hiring decision over to outsiders, however skilled they may be in executive recruiting. Approximately seven respondents in every eight show lack of enthusiasm for delegating the hiring job to consultants.

Don't employ a relative who does not have one or more highly “visible” assets—at least, if there is much possibility of resentment or misunderstanding among nonrelatives in the company. Respondents have varied opinions as to what this asset should be, but the advantage of some “strong point” is mentioned repeatedly. Some think it should be demonstrated managerial capacity. Others think it should be exceptional intellect or personality. Still others think it should be know-how. “It is important,” says one large-company manager, “that the relative have a ‘specialty' skill, such as in finance, engineering, or sales.”

 

Tips on training

What about the training and supervision a nepot receives in administration after being hired?

Do have him take intensive in-company training, say 67 percent of businessmen from companies where nepotism occurs very often, and 64 percent of businessmen from companies where it occurs fairly often.

Do consider the possibility of extensive but informal on-the-job coaching for the nepot from his superiors, say nearly two-fifths of the respondents from companies where nepotism occurs often. The fact that a majority do not urge such training would indicate, however, that this step is far from mandatory, in their opinion.

Don't let the nepot work under the senior relative's supervision, say 64 percent of nepots and patrons, and even more—73 percent—of others. But there is not such strong agreement that the nepot should be forbidden from working in the senior relative's department or division, so long as he is not under the latter's direct supervision.

Don't let the junior relative come into the company unprepared for the undercurrents and backlash his appointment may create. The director of manufacturing of a medium-sized Midwest company urges: “The pros and cons of nepotism should be thoroughly explained to him, and a course in human relations for him is a ‘must.' He should also be asked this question: ‘Are you prepared to understand nepotism in all of its disadvantages, and will you be sincere in trying to hold the detrimental factors in check?' ”

 

Management policy

Finally, what suggestions do our executives have for policies concerning nepotism?

Do consider the possibility of adopting specific, written statements of management's policy toward nepotism, say a great many businessmen from companies employing relatives in management. The fact that about half do not check this step as desirable, however, suggests that nepotism is too “touchy” a topic in many organizations to be committed to writing.

Do announce that management is committed to the standard of objectivity (even it if has no formulas or devices for assuring it). Urgings of this kind are repeated over and over in the questionnaires. The commitment should be communicated to all managers. It should also be communicated at the start to the junior relative. “Make it coldly plain to him,” says the chairman and chief executive of an East Coast bank, “that he gets and holds the job on the basis of his own qualifications and productive performance.” And a sales manager in a New York organization makes this suggestion for implementing the standard: “The relative should be measured against able nonrelatives. He should be put to competitive tests, where the ability of one person is bound to outshine the ability of others. I don't mean rigid, written tests but instances that will indicate one's character, morality, sense of justice, business acumen, and so forth.”

Don't go along with any proposals that the number of relatives in management be limited to an arbitrary figure or percentage of total employees, say most respondents. Less than one in five from companies where nepotism occurs with any frequency find such a limitation useful.

Don't count on a committee of executives from outside to act as a check on nepotistic policies. Only 10 percent of all respondents include such a committee in the list of steps that they consider desirable.

Don't set the salary range for relatives lower than for nonrelatives in comparable positions, say the great majority of executives from companies with or without nepotism. Only one or two in a hundred see any wisdom in this kind of salary discrimination.

 

This article is excerpted from the Harvard Business Review, Jan.-Feb. 1965. �(c) President and Fellows of Harvard College. David W. Ewing was an associate editor of the Review when the study results were published.

 

PROS AND CONS OF HIRING RELATIVESThe 2,700 people responding to the Harvard Business Review study were asked to indicate the greatest advantages and disadvantages of nepotism. They are ranked below, from greatest to least important.


ADVANTAGES

1. Compared with nonrelatives, a relative is likely to feel a stronger sense of public responsibility in his work.

2. A relative is likely to fit in better than nonrelatives.

3. A relative is likely to take more interest in the company than do nonrelatives.

4. When an executive's relative is employed in management and proves to be capable, the morale of the management team is stimulated.

5. Compared with nonrelatives, a relative of an executive is likely to be more loyal and dependable.

6. Relatives in management help to assure continuity and effective carry-on of corporate policies.

7. Because an executive's relative in a junior position does not have to “play up to the boss,” he can set his own pace and develop his potentials better.


DISADVANTAGES

1. Nepotism tends to create jealousy and resentment among the employees.

2. Nepotism tends to discourage outsiders from seeking work in the company.

3. If a relative is hired as an executive and proves to be inadequate, he cannot be fired or demoted as readily as others can.

4. It is impossible for managers to be objective about the qualifications of their own or other managers' relatives.

5. In management groups where relatives are influential, family interests tend to be put ahead of corporate interests.

6. Nepotism may cause loss of respect for the intelligent judgment, integrity, and objectivity of top management.

OBSTACLES FOR THE NEPOT

Managers responding to the Harvard Business Review study noted that a nepot, once hired, might face attitudes or self-perceptions that could add difficulty to his ability to perform his job.

One problem in particular had been observed much more than others: that the nepot finds it difficult to work productively with others and earn their respect because others tend to suspect his authority was not earned (even if in fact it was). Respondents also indicated that management might tend to think the relative of an important executive will take it easy because he feels protected.

Some respondents worried that the pressure to live up to others' expectations would inhibit the nepot's self-development. They also feared that a nepot would come to doubt his ability to succeed without the patron's help. Quite a few worried about the nepot's self-esteem, the image he presents to others, and difficulties of self-evaluation. “He'll never know,” wrote one market research manager, “if he's worth half his salary or twice the amount.”

-- D.E.

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Autumn 1993

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