Nepotism in the business world is the showing of favoritism toward one's family members or friends, in both economic and employment practices. The term "nepotism" is applied to the practice of granting favors or jobs to friends and relatives, without regard to merit. Oppositely, "antinepotism" describes the practice of not allowing relatives (by blood or marriage) to work in the same office or firm. On the political scene, 'nepotism" is being loosely applied to the phenomenon of "dynasty building"—members of the same political family running for office and trading on their famous name to gain votes.
The word "nepotism" is derived most immediately from the French népotisme and the Italian nepotismo. These in turn have their origin in the Latin word nepote, meaning nephew. The use of the word is passed down from fragmentary information that Roman emperors and generals appointed their nephews to high positions in the empire. In the 14th through 17th centuries "nepotism" was used to describe the documented practice of French nobility naming their "nephews" (many of whom were their own illegitimate offspring) as prelates and to high office, and of many popes doing the same.
The principle of nepotism migrated to the American colonies along with other political and business concepts. The mainly agrarian economy of the United States was dominated by the family farm. For members of a merchant family to follow in the family business was a given as it was in most of Europe in the 18th century. Nepotism on the political scene was not unheard of, but it was not until the election of Andrew Jackson that the practice was seen as rampant on the American political landscape. Jackson extended patronage farther down the scale than just cabinet positions and other high offices. His use of patronage was so widespread that a supporter, Senator William L. Marcy (1786-1857), said in a speech justifying such extensive patronage that there is "nothing wrong in the rule that to the victor belong the spoils of the enemy," thus coining the phrase "spoils system."
The excesses of that era and later administrations led to reforms in the civil service area. The Civil Service Act of 1883 created the basis for the merit hiring system used in the federal service today. Many states followed suit. Nepotism is still a factor on the political scene, in both positive and negative aspects.
While in the family-owned business "nepotism" is seen as "succession," many businesses in the modern world try to avoid even the appearance of nepotism, by forbidding relatives from working together, including husbands and wives as well as blood relatives. As women have entered the workforce in greater numbers and have taken on more significant jobs, rules regarding nepotism have begun to change. Both the man and the woman in a marriage often are now too valuable for a company to lose. The current general outlook is that these family members can be accommodated within a merit system, especially if there is not a direct or indirect supervisory link between the positions of related employees.
Family businesses—estimated to represent 95 percent of all businesses in the United States—are the embodiment of nepotism. In the nonfamily business, reasons given for excluding relatives from working together have historically been that the emotional ties of these relationships may negatively affect decision making and growth at the office. The family business, however, encourages participation by all members of the family and the use of emotional ties to bond the relationships more tightly. Recent studies have shown that in the successful family business these bonds are healthy emotionally and good for the business as well. In the family business where there are problems, the type of fears that regular business rightly has concerning nepotism have proven to undermine the family firm. Resources have been developed to help families sort these issues out and to promote the positive aspects of this type of nepotism—the ability to move ahead when all are linked emotionally and mentally and are going in the same direction. The January 1993 issue of Nation's Business offered a very thorough "how-to" on policies and practices that forestall the negative aspects of family business and emphasize the positive. The article concludes that family businesses need to set rules and standards for training and succession by experience, much like the outside world of merit competition, to guide family participation and avoid problems.
A company often cited as an example of a firm where nepotism "works" is Thomas Publishing Company, a New York-based publisher of industrial buying guides, such as the Thomas Register of American Manufacturers. Thomas has been a family-owned and family-run business for more than 100 years; seven third-and fourth-generation family members were working at the 500-employee company in the late 1990s. The company, however, encourages nepotism beyond the founding family. According to Sales and Marketing Management magazine, for example, members of the Gural family have been working as independent sales contractors for Thomas for more than 50 years. Thomas keeps hiring fair by making all prospective employees go through the same process, including interviews with the human resources department. New hires—even those who had benefited from the company's nepotism policy in their hiring—are encouraged to leave if they fail to perform up to expectations. As Thomas's president, Tom Knudsen, explained to Nation's Business, "Once in the door … you're expected to produce the same as anybody else."
SEE ALSO : Career and Family Issues
[ Joan Leotta ,
updated by David E. Salamie ]
Aronoff, Craig E., and John L. Ward. "Rules for Nepotism." Nation's Business, January 1993, 64-65.
Baldwin, Deborah. "It's a Small Town After All." Common Cause Magazine, Fall 1993, 10-13.
Kaydo, Chad. "Does Nepotism Work?" Sales and Marketing Management, July 1998, 16.
Mehta, Ved. A Family Affair: India under Three Prime Ministers. New York: Oxford University Press, 1992.
Nelton, Sharon. "The Bright Side of Nepotism." Nation's Business, May 1998, 72.
Thomas, Paulette. "An Ohio Design Shop Favors Family Ties." Wall Street Journal, 8 September 1998, B1, B4.