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 companys 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 Reviews report, which was titled Is Nepotism So Bad?
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 donts.
Deployment for employment
First comes the question of how to decide whether or not to employ a managers relative. The study has produced a variety of ideas on the subject:
Do have a group of the companys 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 relativebut dont 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 nepots 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.
Dont 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.
Dont employ a relative who does not have one or more highly visible assetsat 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.
Dont let the nepot work under the senior relatives supervision, say 64 percent of nepots and patrons, and even more73 percentof others. But there is not such strong agreement that the nepot should be forbidden from working in the senior relatives department or division, so long as he is not under the latters direct supervision.
Dont 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?
Finally, what suggestions do our executives have for policies concerning nepotism?
Do consider the possibility of adopting specific, written statements of managements 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 dont mean rigid, written tests but instances that will indicate ones character, morality, sense of justice, business acumen, and so forth.
Dont 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.
Dont 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.
Dont 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. © President and Fellows of Harvard College. David W. Ewing was an associate editor of the Review when the study results were published.
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 executives 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 executives 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.
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.