Nepotism can have far-reaching impacts, including on a company’s bottom line. How should HR respond to nepotism?

For those of you who are curious about idioms, you might be surprised when you look up the origin of the phrase “Bob’s your uncle”. Most of us understand the phrase to mean “everything will be ok” – it actually has to do with nepotism. The expression came about in the late 1800s when a British prime minister, “Bob”, appointed his nephew as chief secretary of Ireland (a plumb position).  Bob was, quite literally, his uncle.

Call it what you want (nepotism, cronyism, or favouritism), the concept is not new. While most commonly recognised as a familial connection – for example, when a world leader appoints his son-in-law as his senior adviser – it can cover things such as being the boss’ pet.

Having a favourite is, to some extent, natural. There is nothing wrong with having a “go-to person” or a “safe pair of hands”; however, you should make sure that this does not affect decision-making or come across as favouritism.  

“Where any instances of favouritism arise, HR should investigate the person in the position of power.”

Favouritism can lower employee morale, lose you valuable employees, cause resentment, lead to overlooked potential, and stunt the growth of the business through reduced productivity.

In a recent investigation into workplace culture at a health care provider, 81.5 per cent of respondents identified favouritism and nepotism as a problem within the workplace.

Reported issues included the recruitment of under-qualified family members and friends without advertising positions, and the recurrence of specific employees being favoured over others.

Examples of favouritism included:

• giving some staff more opportunities for development;
• giving some employees precedence when it came to approving flexible work arrangements and leave;
• promoting “favourite” employees, despite them not having greater skills and qualifications than others; and
• overlooking the poor performance of “favoured” employees.

No workplace is immune. In a recent case at a major bank, a bank manager was dismissed after breaching the majority of the bank’s code of conduct principles by failing to disclose a personal relationship with an employee who directly reported to him.

During their relationship, the female employee received a bonus following a performance appraisal conducted by the bank manager and a rapid advancement in her position (and salary) owing to the bank manager’s advocacy; the bank manager did not seek a promotion on behalf of the other team members. When the manager was questioned by his regional manager on whether he was involved in a workplace romance, he denied any relationship, despite having moved in with the female employee.

The Fair Work Commission held that the conflict of interest should have been disclosed and that “the manager should have known better”. The conflict could have been easily managed. According to the regional manager, he would have put measures in place to address the conflict if only the bank manager had disclosed the relationship in the first place.

A lesson in investigating favouritism

Senior management and HR should be careful to avoid these types of conflicts and to investigate and manage any complaints of nepotism or favouritism. Properly investigating such complaints will assist the business in defending any claims of unfairness in the future.

For example, in a recent unfair dismissal case, the aggrieved employee made comments against his employer alleging, among other things, nepotism. The employer investigated the complaints and explained to the employee that his complaints were unsubstantiated. The employee was advised that the grievance procedure “should not be abused” and that if he continued to make such allegations without evidence, it would be viewed as misconduct.

The employee was subsequently dismissed after he continued to make serious allegations against the employer and other employees. The employee claimed unfair dismissal. As the employer had investigated the complaints of favouritism at the time the employee raised the claims the Fair Work Commission did not focus on them during the proceedings. The employee’s unfair dismissal claim was ultimately rejected because the allegations made by him were misconceived, and the employer had made reasonable attempts to investigate, address and respond to his concerns as they were raised.

Unlawful discrimination

Favouritism may also give rise to unlawful discrimination claims. In a recent case, a state government was directed to pay compensation for discrimination against a medical practitioner. The medical practitioner was a specialist neurologist who gained his qualifications in China. He applied for an internship position at a hospital. The hospital policy guaranteed an internship for graduates from a local university (in category one) but international medical graduates were placed in category eight, with no guarantee.

The tribunal found that the policy resulted in the hospital favouring local graduates, without a consideration of the merits of other applicants.  The likelihood of an overseas trained doctor succeeding in his or her application was described as low. The tribunal said it was “far from obvious” that the practitioner, with his experience and specialisation, would be “as ‘work ready’ as a wholly inexperienced new graduate”. While this case is in the context of recruitment, it illustrates how an instance of favouritism may give rise to an unlawful discrimination claim if workplace policies have terms that can be construed as discriminating. By treating all employees or prospective employees equally and in accordance with reasonable and justified metrics, employers can avoid any claims of unlawful discrimination connected to favouritism.

So, how do you deal with favouritism?

• You should ensure every employee is being fairly managed against the expectations and duties of their position, and that employees are being rewarded according to their performance.  
• Your daily interactions with direct reports should be the same or similar – avoid treating your employees differently and even the perception of it. (For example, even a casual “hello” to one employee as opposed to “nod of the head” can be interpreted negatively!)
• You should encourage employees to speak up when they suspect someone is unfairly giving or receiving a benefit because of “favouritism”.
• You should encourage employees who suspect that they are a “favourite” to remain professional, and not to accept the benefits of favouritism. An employee that suspects they are a “favourite” could, for example, question their boss by asking, “What did I do to deserve this?”
• Where instances of favouritism arise, HR should investigate the person in the position of power (i.e. Uncle Bob) and any benefits given or received by him.  If it is appropriate, disciplinary action should be taken to remedy Bob’s behaviour.
• The reason for the favouritism should also be investigated. It may be that the person who is complaining of favouritism is performing poorly and has not been considered, for example, for a position or assignment, because of that, rather than because someone else is a “favourite”.