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How Nepotism in the Workplace Hurts Your Business

Hiring friends and family may seem like a good idea at the time, but it can lead to friction and distrust among employees.

Posted by Ann Snook on October 6th, 2020

Maybe you want to help a young family member start their career. Or, you want to keep your money “in the family.” You might even simply like the idea of working with someone you already know. Whatever the reason, the decision to employ a friend or family member should be considered carefully, with a full understanding of possible consequences.

While it isn’t always unethical to hire friends and family members, employing or promoting them over other, more qualified candidates is favoritism and can damage your organization. You could lose the trust of your employees, undermine your company’s reputation and even encourage misconduct.



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Morale Will Tank


An employee, let’s call her Daisy, works diligently to prove she’s worthy of a promotion. She works late and on weekends, volunteers for assignments, takes professional development courses, mentors a junior employee and communicates well.

But when her employer hires one of their less-than-qualified family members for the job, she feels defeated.

Daisy’s engagement suddenly drops. She takes hours to respond to emails, her efficiency plummets and she seems unhappy at the office. Why bother trying, she wonders, when giving her best wasn’t good enough to succeed at this company?

“Workers want to believe they can get ahead, and that hard work will be rewarded,” says Allan Borch, founder of DotcomDollar. “If they see beneficiaries of nepotism being promoted or gaining other benefits without putting in hard work, while they themselves see nothing, they won’t bother giving their best effort or worse, they’ll just decide to leave.”


RELATED: 6 Core Values Exercises for Defining Your Company’s Ethics Culture


Turnover Will Increase


“Turnover will rise . . . because your team will see that hard work and going the extra mile won’t get them anywhere potentially” says David Bakke, executive at National Air Warehouse.

Daisy had been working toward a promotion for years and when she sees that you value family connections over qualifications, she’ll take her talents elsewhere. Other employees might flee too, even if they weren’t directly affected by nepotism. They might view your company as unethical or a dead end and move to an organization where they feel more valued.

Losing great employees isn’t the only cost of turnover. The time and money you have to spend on recruiting, interviewing and training new employees is tremendous, says Bakke. Productivity will be down for months. Plus, you might gain a reputation for nepotism in the workplace, which could drive away potential new hires.

nepotism in the workplace

The Hired Person Will Suffer


Daisy isn’t the only one who could suffer from nepotism. The family member who benefited could have a rough road ahead, too.

Let’s say Sam, the CEO’s nephew, got the promotion Daisy was hoping for. Maybe he was just as qualified as Daisy, but maybe he wasn’t. Either way, employees around the office might not think Sam deserved the position and could create a toxic work environment for him.

Sam might be ignored in meetings. His employees might not do what he says, or go over his head when they have a problem. He could even become the target of harassment or bullying.

“When employees are hired because of nepotism, others may question whether they have the necessary knowledge, skills, and attitudes,” says Owen Drury, Digital Editor at ODDigital. “If they have this kind of distrust, they may show [the family member] less respect, ignore their ideas and instructions, or comment on them negatively.”


RELATED: How to Handle an Employee Conflict of Interest


You’ll Deal with Family Drama


While working with family might seem convenient and fun, it can also lead to uncomfortable situations.

For instance, what if the CEO hired Sam to repay a favor to Sam’s dad (the CEO’s brother), but Sam is really terrible at his job? Or Sam and the CEO are on different sides of a family inheritance battle after Grandma dies?

“Instead of hiring someone who’s actually qualified for the job, you’re hiring someone just because they’re your relative. Except, they don’t have the training and skills a different candidate would have, and they won’t do as good a job,” says Sean Nguyen, Director of Internet Advisor. “Plus, managing family is awkward, and think about what happens if they do incredibly poorly. Either you let the company suffer, or you have to fire them – how awkward would that be?”


You Might Get In Legal Trouble


“Is nepotism a crime in and if itself? Absolutely not. But depending upon the nature of it, you might open yourself up to discrimination lawsuits,” Bakke says.

For example, say Daisy is Black and the CEO’s family (including Sam) are white. Or, Daisy is Jewish and the family is Catholic. Family members often share ethnic backgrounds and religions, so hiring or promoting only family members can be viewed as indirect discrimination.

You need to be able to prove that you hired a family member on their merits and that you didn’t discriminate against an employee or candidate based on a protected class as defined by the U.S. Equal Employment Opportunity Commission.


3 Nepotism Insights from an HR Professional


We chatted with Sarah Cole, Human Resources Coordinator at i-Sight about nepotism red flags and how to hire family and friends fairly. Listen in on our conversation in the video below.


Any benefits you might see in nepotism ultimately aren’t worth the emotional and financial stress it could cause. “Bottom line: If you’re the owner or head honcho at your own company, stamp out the first signs of nepotism among managers,” Borch says. “And of course, be a good example yourself.”

Ann Snook
Ann Snook

Marketing Writer

Ann is a marketing writer at i-Sight Software. She writes about issues related to investigations of fraud, employee misconduct, corporate security, Title IX, ethics & compliance and more.

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