WealthSpike: Thou shalt never admit nepotism – but why not?

Nepotism isn’t good. Society doesn’t like it and it’s unethical, if not downright corrupt. And family businesses are among the greatest perpetrators of it. But, here’s a controversial view, nepotism can have its benefits for business and shouldn’t always be viewed as wrong. The challenge for many business owners is to own up to it.

Talk to all family owners about bringing the next generation into the business in a senior role and they will say they hired their son, daughter, or relative because of merit. Typical responses are he or she was appointed to the top position through an external process that had nothing to do with their family links.

They back that up by pointing to the family member’s qualifications, outside experience and an understanding of the business from the lowest level up to the top. They will never want to be accused of being nepotistic. Family owners, of course, may be right. But, maybe they should also admit that being a family member also helped them achieve the top position – even to go as far as saying nepotism did play a role. That’s because it probably did in most cases.

If there are two candidates for the job with exactly the same qualifications and experience, then the family member will always get the job. As the saying goes “blood is thicker than water”.

The other important point to make about nepotism is that it might not be such a bad thing in the context of family businesses. The main reason families bring other family members into the business is because they can trust them, or at least they feel they can trust them more than they can trust outsiders. Of course, that trust isn’t always guaranteed but it is probably more guaranteed than with an outsider. All the other stuff like education and outside experience is merely window dressing.

Trust brings loyalty and security. These help to create what many family businesses are very good at talking about – long-termism. And with all the benefits that brings to the business in terms of employment growth, job stability and community cohesion.

An element of nepotism will always be with family businesses. Family owners just need to say so and stop saying that it was all down to merit that little Johnny got the job.

Transparency is always the best policy.