Why You Need a Nepotism Policy and a Sample Nepotism Policy

A Nepotism Policy Will Allay Employee Concerns

Is there any indication that it is not smart to hire within the family like this, or does it not have a large impact when compared to companies who don't practice nepotism?

If you've ever worked for a family-owned business where the boss's family member advanced up the ladder without the right credentials, you probably see the worth of a nepotism policy.

What Is a Nepotism Policy?

It's a policy that dictates if and how family members can work together within a business. You can limit the policy to covering employees, or include regulations for clients, vendors, or other people who interact with the company.

Why Do You Need a Nepotism Policy?

Most businesses don't violate laws when they hire family members. A majority of state regulations prohibit only local officials from hiring family members, and these laws vary from state to state—some states, in fact, have no prohibition in their statutes. 

But just because hiring family members is legal in most business situations doesn't mean that it's wise. 

One study of hospitality workers found that nepotism only provided a benefit to the family members and friends, and didn't help the business. It paralyzed the ability of human resources to operate effectively, and the other employees had a lower level of satisfaction, a higher rate of quitting, and a negative word of mouth.

This makes sense. If the owner's child reports to you, can you indeed train, develop, and discipline the family member as needed? Do you feel comfortable offering a course correction? What if you thought that this person was detrimental to the business, and you wanted to fire him or her?

Even though this frustration seems logical, there are few studies that look at the effect of nepotism on employee engagement. One such effort in Nigeria found only a slightly negative relationship between nepotism and employee engagement, but further research in this area is needed. 

However, other reasons exist that demonstrate the importance of a nepotism policy.

Conflicts of Interest Demonstrate the Need for a Nepotism Policy

Did you promote John because he's the best person to lead the marketing department? Possibly, but if he's also your son, people are not likely to believe you promoted John based on his skills alone.

When you have multiple relationships with other people at your company, that can also lead to conflicts. Whether these relationships are with family or friends, or even romantic, they can sometimes be interpreted by other employees as nepotistic. 

Why did a particular firm get the cleaning contract? Because it was run by the facility manager's cousin? Did Katie get a more substantial raise than Jan because she earned it, or because she is the CEO's daughter? When nepotism exists you will find you have difficulty justifying decisions involving people with multiple relationships.

If you aim to remove the close relationships within your company, people will gain confidence that the decisions you make are based on merit. It is, of course, impossible to remove all such relationships. 

Managers like some employees more than others. Friendships and romantic relationships naturally develop. You can’t strictly prohibit these relationships, but you can monitor them. Creating a nepotism policy can give employees and managers clear guidelines on what they can do. Here is a sample.

Nepotism Policy (Sample)

Purpose of the Nepotism Policy

The employment of family members can cause conflicts of interest, hurt feelings, and limit the diversity of our workforce. [Your company name] believes in hiring and promoting people based on their knowledge, skills, abilities, and potential. As such, we wish to reduce the potential conflicts of interest that can occur when family members work together.

Definition of Family Members

For the purpose of this policy, a family member is defined as spouse, partner, parents, step-parents, siblings, step-siblings, aunts and uncles, nieces and nephews, grandparents, grandchildren, or cousins. In-laws (or partner's family) are also considered family. Other non-family relationships can be considered on a case-by-case basis.

Nepotism Policy

No family members shall:

  • Work in the same department or share a manager.
  • Have any reporting relationship between them.
  • Oversee processes that will affect a family member. For instance, HR employees may not be a business partner, employee relations manager, or compensation supervisor over any department that the family member is in.
  • Participate in any disciplinary or reward decision that directly affects an individual family member.

This policy shall be enforced when hiring, promoting, or transferring employees.

When dealing with outside firms, either as vendors, clients, or service providers, these same guidelines shall apply.

When Relationships Change

Your company understands that family relationships can change throughout employment. People may date and marry over the course of employment.

If a new relationship violates the nepotism policy (for example, a new romantic relationship, a family marriage that creates an aunt/uncle/niece/nephew relationship), report the change or potential change to your Human Resources representative as soon as possible. Human Resources will work with you, your family member, and your manager(s) to find a solution that doesn't violate the nepotism policy.

If you have any concerns about relationships within the business, please notify the Human Resources Department as soon as possible.

Hopefully, this sample policy will help you get your nepotism guidelines in place. By doing so, you can avoid adversely affecting employee relationships and make your workplace a successful one.