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Real responses to real-life questions

Kathryn Engelhardt-Cronk, MissionBox co-founder and CEO, is joined by nonprofit consultant and outcomes expert, Bob Penna, for the MissionBox DoubleTake — a column that offers opinions about the peskier aspects of working in the nonprofit sector. The opinions offered here are based on the authors' personal nonprofit experience and may not reflect the opinions of MissionBox, Inc. These opinions should not be considered legal advice or used as a substitute for professional legal consultation. MissionBox readers are invited to submit alternative responses, which may be published here as well.

Is nepotism commonly allowed in nonprofits?

I have just joined a national funding organization as an accountant. We have 80 or so employees and I like my co-workers and our mission.

I have been surprised, however, by how many management employees are related to our CEO. The Legacy Funds director, for instance, is married to our CEO and their two daughters are assistant managers in different divisions of the marketing department. Today, I just discovered that the CEO’s nephew is our IT director.

Is this business as usual? While it’s none of my business, I think it makes our organization very “mom and pop” and doesn't look professional (at least to me). I also noticed that while everyone here earns a market-based salary, including the CEO’s relatives, the combined income of these family members represents a healthy chunk of our overall personnel payroll and benefit costs.

It seems odd that the board would allow the CEO to stack management with his direct relatives. I’ve never worked at a nonprofit and am wondering if this is typical?

Kathryn says …

I’ve certainly seen nonprofits that allow employees to be related, although I admit the “management stacking” you describe seems to be a bit over the line in terms of potential conflicts.

With that said, this all really depends on your organization's employee policies and procedures documentation. Have you checked out your employee handbook (if there is one)? You also may not be aware of existing board policies regarding the CEO’s hiring practices. The board may have had good reasons for agreeing to this unusual setup, or they may not be paying attention.

I’m presuming that there are no restrictions on the CEO hiring relatives or having first-degree relatives in management positions. In any case, if this daily family reunion isn’t causing you or the organization any problems, I’d advise you to mind your own business and keep doing a great job in the accounting department.

Bob says …

Ah, nepotism, the Cheshire Cat of organizational management. Sometimes you see it right out in the open, as in the situation you describe. But other times, perhaps due to different last names, you don’t know about it at all. Nepotism usually looks bad even if there are no actual ill effects, but can just as easily appear benign even though it is seriously harming an organization. And in the end, no one really knows what to do about it.

Family businesses, for example, by definition practice nepotism. Does that mean they are all bad, that other employees are always at a disadvantage, or that the company will fail? Take, for example, the Ford Motor Company, where Edsel followed his father Henry, the founder, and was eventually succeeded in turn by his son Henry II.

President Kennedy tapped his brother to be attorney general — and in doing so brought his closest confidant and one of the sharpest minds of the era into the highest circles of government. Was that a good or bad thing? Should the sons and daughters of legislators be barred from all government positions simply because of their elected parent? Is that fair?

These questions merely hint at why the issue of nepotism is so vexing for management in all sectors of our economy.

The real question regarding your nonprofit is whether there are any discernible ill effects on the organization stemming from the arrangement you describe.

For example, you noted that everyone there earns a market-based salary, including the CEO’s relatives. So it does not seem that they are being shown any favoritism. Were other people fired or their salaries cut so that these family members could be brought aboard? If not, they also do not seem to be profiting at the expense of other employees. Are there other types of favoritism that they are shown? If so, you have not mentioned them.

Rather, your concern seems to center around an apprehension that the familial relationships within the organization degrade its appearance of professionalism. I would disagree. It is the performance of your organization, how well it serves its beneficiaries and the broader community, that will ultimately determine whether the organization is held in high esteem or not. If it does well by its mission, does it really matter that the CEO’s nephew is the IT Director? If the communications and marketing departments bring in a steady stream of financial support, and the Legacy Funds grow, does it matter if the people behind these efforts are related to the CEO?

The ultimate test of any organization, for-profit, nonprofit, or governmental, is whether it does what it is supposed to do, and does so in an efficient and ethical manner. If the answer to these questions is yes, then I would argue that the relationships you describe are immaterial and that ghostly grin you think you see in the tree really isn't there. You are perceiving a problem where none seems to exist at all.

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MissionBox editorial content is offered as guidance only, and is not meant, nor should it be construed as, a replacement for certified, professional expertise.

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