Cronyism and nepotism — facts of life in the workplace?
Leadership pulling on its favourite strings isn’t exactly new, unheard of, or shocking. But where businesses start with families, there’s an expectation for them to be taut. And often, this expectation is completely justified.
In many cultures, behaving under these influences is even the norm. The idea of nepotism, though, is often accompanied by concepts like “corruption”, “abuse of power” and “unethical”.
In the Western world, especially in America, nepotism and cronyism flies in the face of many citizens who pride their personal value system as being meritocratic, democratic, and fair.
However — where does the line between deference and inequity cross over into a long-term conflict of interest?
Is it when cronyism in the workplace extends into a scaling a business — only with your favourites?
Or, when a leader surrounds themselves with a buffer that looks an awful lot like in-group bias, personified?
Or, is it when a business starts hiring with a ‘closed book’?
“Making favours the same as business decisions is a cultural problem, and it affects the bottom line every, single, time.”
There are tonnes of industries where contacts move and shake with those they know. Typically, they will have arrived as a package: associates and partners, copywriters and designers; construction directors and contractors, producers and screenwriters; developers and project managers. In advertising, the call out for a team of two is expected practice. So, what’s the big deal?
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Holly encountered a lot of cronyism and nepotism as a Legal Recruitment Manager.
“I don’t really have an issue, nepotism is common practice where families, parents and their partners or kids have a real vested interest in their own business, their investments,” she says confidently.
I ask Holly if this is much more normal in the bubble of law, than in the wider world.
“No. That is what a family business is. I would expect them to recommend people they know will succeed, regardless of blood or friendship.”
According to a paprer by Khatri, Naresh & Tsang, Eric. (2003), ‘Antecedents and Consequences of Cronyism in Organizations’ from the Journal of Business:
“…cronyism affects performance, morale, and inertia at the organizational level. Cronyism can be observed in all cultures; however, its manifestation is likely to vary from one culture to another.”
— — —
Jone L Pearce from the The Paul Merage School of Business, California has a different take.
In his papers, he talks about how the protectionism of family businesses and autocracies, particularly in the Middle East, will always naturally result in hiring favourites.
However, the research shows that regardless of being an expectation, it still results in the opposite of growth behaviours: inciting poor performance, poor morale and inertia for the vast majority.
“Even when such practices are culturally accepted,” Pearce writes, “they are seen as undermining organisational performance.”
Human-centred resource management and behavioural science increasingly points to obvious nepotism and cronyism as key factors that form both individual outcomes (such as a lack of loyalty, higher grievance filing and ingratiation):
They are likely to feel a sense of injustice when they perceive that ingroup members, regardless of capability, manage to be promoted much faster than they do. It is not surprising to find that outgroup members are more likely to file grievances. (Cleyman et al., 1993). — Khatri, Naresh and Tsang, Eric. (2003)
…as well as group and economic outcomes, which influence income and staff turnover — even so far as human decisions which can, either consciously or unconsciously, scupper the business ‘as punishment’.
Cronyism is much more transparent than it used to be
In addition, sites like Glassdoor and Indeed Reviews shine lights on recruitment practice, so it’s getting harder and harder to shield this kind of decision making from the masses.
So what about companies that aren’t family-run? “If a business starts scaling then it’s a fact of life that it’s your networks that give you an extra lift. In some light, this might be cronyism,” says Holly. “It’s bias over openness. You know, your contact or friend is experienced, qualified and you know they can do it. For me that’s just headhunting and networking.
“But as a recruiter, I draw the line where performers get blocked internally and externally, the ones who earned that opportunity I can help them get through hard work. And then when they’re denied legitimate promotions or jobs — no. I was a solicitor as well as a recruiter, so the closed book thing doesn’t sit well with me at all.
“At the top, I’ve seen it turn into lost investments, and lawsuits.”
Seasoned CEO Brian de Haaff from SaaS platform Aha!.io, talked about the pitfalls of cronyism for the Huffington Post — pitfalls that actually affect the crony hire, as opposed to the rest of the workforce. But this in itself is a subjective, ethical situation. As is the spotlight burning down on the Trump Administration, who continues to attract all the wrong kinds of headlines with words like ‘collusion’ and ‘corruption’, and analyisis from IMF executives that should strike fear into the heart of every American.
Ultimately, does it even matter at all? Brian de Haff:
“One of the biggest problems with cronyism is the lack of objectivity and transparency that comes with it. The [chosen] manager will have a natural bias towards whatever his boss thinks; disagreeing may put his own job in jeopardy.”
The OED defines “nepotism” as ‘the practice among those with power or influence of favouring relatives or friends, especially by giving them jobs.’ “Cronyism”, however, has more far-reaching and problematic connotations.
Scott Robertson, a Marketing Professor from NYU who is prolific here on Medium, wrote a piece about the joys of knowing people who work to earn their crust. (This being in relation to his recent hit blog post about Snap and Tesla’s stock fortunes rn) — because of the gratitude knowing hard-working people affords you in an unfair world:
Something all three have given me is an appreciation for one of the pillars of our success as a nation: the rule of law. In these three countries there is a moving part called corruption that can hit you like an invisible bus after years of hard work.
HR: Making the call between nepotism and fair recruitment?
Holly again: “I was in a position of having to make the call between any Ivy League graduate, and the daughter of a shareholder who wasn’t from one of our preferred colleges. Ultimately, I went for the grad. The daughter was being assigned a role of her own anyway.”
As a recruiter, Holly’s self-interests are in her candidates which means no commission if the job role advertised is pulled, pointless, takes longer than it needs to, or is a total cover-up for a cronied job offer. A recruiter will want candidates to win the job and win more business.
“So if an employer is coming to me with an odd job role that tarnishes our reputation for the candidate pools and believe me, they talk to each other… It works out for a while but it’s soon clear someone’s cashing out. They owe a favour or there’s a personal relationship at stake.
And depending on the context, it smacks of weak leadership.”
“Then all the smart people start leaving, if they haven’t already caught on!” Holly laughs. “It’s so stupid. Companies pay the price in the end.”
After a career break and a move back to the UK from years in New York, Holly changed her career completely, moving away from the legal recruitment profession. She went back to University, and 4 years later, now spends her 9–5 as a charity worker. She says she rarely encounters cronyism. “Cronyism is where you know there’s abuse of power somewhere, for a high flung, high status role,” she says.
“I don’t see cronyism making waves in social work. I do actually see nepotism for voluntary (non-exec) opportunities on the charity side, though. And for the nice cushy jobs in charities. Real-world speaking though, it’s not competitive. No-one wants to work in this sector in the same they want, like, to be a partner for finance or tech or a law firm.”
So does nepotism and cronyism only apply to ‘attractive’, competitive industries then — and is it therefore easier to audit for?
“I dunno. People in our line of work with the skills we need are lacking. You do get rewarded for hard work and I don’t see anyone stabbing new hires in the back for their friends. It’s nicer all round — the people, the hours, the style of working. But in other industries, yeah definitely. So for example there’s a new job role and someone’s friend with no relevant skills gets it, no questions asked,” says Holly. “But later down the line, again, it’s really the company’s problem and they pay for it in the end.”
Why?
Holly: “Making favours the same as business decisions is a cultural problem and it always affects the bottom line, like every, single, time. Friendships get ruined, people get fired. Y’know? Their performance has been lagging long before that point and so we end up managing them out. It’s a nightmare.
“The job market’s changing. This kind of thing becomes super transparent, and if it’s not, it’s easy to find where the dirt is sticking with Glassdoor for example,” she says, with a bit of a wobble like this has actually already affected her practice in the past. I decide not to probe.
“The idea of only hiring your best friends may be old hat — much sooner than you think.”
Further Reading →
(1) Khatri, Naresh & Tsang, Eric. (2003). Antecedents and Consequences of Cronyism in Organizations. Journal of Business Ethics. 43. 289–303. 10.1023/A:1023081629529. (PDF) Available from: https://www.researchgate.net/publication/226026426_Antecedents_and_Consequences_of_Cronyism_in_Organizations [accessed Aug 19 2018].
(2) Vice Money, The Economics of Cronyism (2007) https://news.vice.com/en_ca/article/qvzyyx/trumps-transition-looks-an-awful-lot-like-the-start-of-crony-capitalism [accessed Aug 19 2018]
(3) Big thanks to Holly. Name partially anonymised due to the nature of her work.
