Promoting Fairly – Making Nepotism Work

Dan Blank -- Expert Business Source, 1/16/2007 7:13:00 AM

AllBusiness.com looks at the dangers and advantages of nepotism – or, giving preference to family members within your business:

“…promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.”

They offer two key methods of dealing with this issue:

• Require heirs to work outside the family business.
  This ensures relevant experience in an environment without built-in advantages.

• Promote family members from within.
  Ensure that family members are qualified for their jobs, and receive equal salaries, evaluation criteria, and opportunities for promotion.

Nigel Nicholson author of the report “Leadership in Family Business,” warns to be aware of limiting the growth of non-family employees:

“…family companies are often insular and impermeable. They hire outsiders, but involving them in the boardroom and giving them a stake is a different matter…"

For companies struggling to hire and keep a talented workforce, issues like this may fly under the radar, as good employees realize there is little future in moving into management or the upper echelons of the company.

Human resources professional Spencer Schmerling offers advice to avoid favoritism, and ensure high morale, across your workforce:

• Open your eyes, and allow others to shine.
  Rotate projects and assignments so everyone gets a chance. This will enable you and the other team members to see where everyone’s strengths lie.
• Develop teams, not individuals.
  Ensure all employees have an opportunity to improve themselves, gain new skills and advance in their career.
• Don’t be blind.
  You may not realize issues exist, or may not want to confront those that do. However, examining and confronting differences and perceptions on your team can help create a better work environment.

And finally, Stephen J. Dubner, co-author of the book Freakonomics points us to the study: “Inside the Family Firm: The Role of Families in Succession Decisions and Performance.” In it, lies a warning for promoting less qualified, but related employees:

“We find that family successions have a large negative causal impact on firm performance: operating profitability on assets falls by at least four percentage points around CEO transitions… Furthermore, we show that family-CEO underperformance is particularly large in fast-growing industries, industries with highly skilled labor force and relatively large firms. Overall, our empirical results demonstrate that professional, non-family CEOs provide extremely valuable services to the organizations they head.”