I’m not sure it’s always a psychological issue, but in my experience nepotism often brings a range of personal and organizational issues that are worth noting.
First, let me acknowledge that there is clearly a place for businesses and organizations in which related people work together. The classic case is a small business, but even some larger organizations can avoid problems if they are careful. But there are many organizations where family relationships result in problems, even big problems.
Hiring or managing someone who is a blood relative is not inherently disastrous. Nepotism occurs when favoritism is granted to relatives without regard to merit of performance. Hiring of an employer’s relatives, as well as relatives of existing employees, is fairly commonplace. It has its upsides and downsides. The main upside is familiarity—family members know one another, and therefore no time is needed to establish relationships, loyalty and trust.
Potential negatives are many, however. There may be baggage in a family relationship, and this baggage will inevitably be brought into the workplace. It is also very hard for employees who are relatives to perform their work duties objectively. If the employer has problems with one family member, there is a high likelihood that those problems will spill over and affect the relationship the employer has with other family members who are also employees. Nepotism causes problems with unrelated employees as well.
There was an executive director in one of my cases who was not very good at her job. She did not have a handle on finances, organization or leadership. One of her missteps was to pressure and eventually fire a key employee in order to give a position to her future daughter-in-law.
During my investigation, it appeared that this had clearly been a case of nepotism in action. While the other employees were split in their support of the executive director, they were all in agreement that the employee who was fired was highly respected as a person and as a professional. Before long, four key individuals resigned in protest, leaving the organization seriously short on staff. Due to this, the quality of service was threatened which could produce conditions that could precipitate lawsuits and bad public relations. This was serious. It also represented a breach in ethics.
Added to all of this was an additional problem at the “top.” With the hiring and promoting of the daughter-in-law to second in charge, there was a coalition that effectively limited any sort of accountability from management. Staff could not complain or voice concerns to the executive director about the future daughter-in-law, nor could they voice concerns to said daughter-in-law about the executive director.
The power of nepotism trumped accountability, which violated principles of ethics, created a clear conflict of interest and resulted in a myriad of other problems including mass resignations. Watch for it.