Nepotism and Cronyism

Credits: Unsplash / Chang Duong

Her Story

I worked at a company that encouraged employees to refer family and friends for employment. For the referral, I was paid $250 for the first-hired family/friend; $300 for the next two hired referrals, for a total of $1,500 per year. Never mind that the referral bonus was taxed at 40%. Duh. But I loved the idea of an extra $1,500 income per year. I come from a large family. So I endeavored to ensure that no family member was unemployed. The family members included everyone; uncles, aunties, nieces, nephews, cousins, 1st, 2nd, and 3rd cousins, and the friends included everyone I knew, neighbors, too, who needed a full, part time, or second job. No person was left behind.

With my quest to refer family and friends to my company, I became the most-loved family member and the most-popular go-to hiring-referral person. These hired family/friends were placed in different departments which meant that I was well-connected throughout the company. None could talk ill of me without it getting back to me. If anyone did, they were sequestered to work on the field or back office, or given a poor/low performance review, and climbing up the company ladder was difficult for them. Similarly, the family/friends who “watched my back” got the company’s and my personal favors. In a way, I had turned the company referral gestures into my mini mafia project. I controlled all the family and friends who were hired as a result of my referral. Their loyalty was first to me and second to the company. I’ve been at the company for over a decade having started while in college. I am now an Executive Manager which means that I know the company and colleagues like the back of my hand.

How was she able to?

The above scenario is a true story though not mine.

Experience has shown that even under the best forms of government, those entrusted with power have, in time and by slow operations, perverted it into tyranny.

- Thomas Jefferson

Is one better than the other?

Many organizations empower their employees to refer family and friends as potential workmates. The organizations support these referrals with gifts of appreciation that range from $250 and over. The higher the position (hourly versus salaried or supervisory to mid-level management positions), the bigger the referral bonuses.

While there are no specific hiring practices for or against friends, few organizations forbid employing family members.

Nepotism is the practice of hiring and showing favoritism to family members in economic or employment terms, Cronyism is the practice of favoring one’s close friends, especially in political appointments. Both practices cut across public, private, nonprofit, small, mid-size, or large organizations.

Is’t right, fair, ethical, or legal?

There are both benefits as well as disadvantages in hiring family and friends. The above opening scenario depicts the downside of potential pitfalls.

In addition, vertical or lateral promotions based on qualifications or merit becomes difficult. It becomes obvious when family and friends are hired or promoted over stronger candidates especially when that family/friend becomes unable to perform the job. Current employees feel discriminated against in favor of the promotion of the relative thereby breeding a negative toxic workplace culture with unhappy employees. Morale becomes low as a result with the potential for the company to lose great employees. It also can become difficult to discipline or manage family/friends without straining the relationship outside of work. The general outlook is that of a conflict of interest.

Despite the disadvantages, both acts are commonly practiced. Companies do however have policies that might forbid family members from having reporting relationships to one another or from working in the same department. Aside from willful, blatant acts of discrimination, and official filing of grievance, Nepotism and Cronyism are not illegal.

When companies establish formal and informal hiring guidelines, fair work practices (dos and don’ts), have an open policy for reporting perceived or real injustices, set expectations, including limiting the number of hired family/friend referrals, hiring family/friends can be beneficial for the company. Though human beings may disagree occasionally, one might still prefer to work with a known person than an unknown.

Have you ever been a referee or worked for a company that embraced referring and hiring family/friends? What were your experiences or observations? Please share your experiences, if you please, in the comments.

Personally, I believe it’s near impossible to truly manage family and friends without lapsing in discipline and authority. However even if family and friends were not encouraged at a workplace, colleagues do develop meaningful relationships that transcend the job making HR issues somewhat uneasy. My hope is that supervisors/managers exercise their roles in a fair and ethical mannet.