Managing a Social Dilemma

Consider the plight of Sam, who has been in a long and fruitful relationship with a life partner, whom we shall call Jan. Sam is chief of operations at Happy Place (HP) and controls hiring for its many chocolate factory employees. Jan has asked Sam to hire a favorite cousin—Danny—to fill a shop supervisor role.

Sam is already in a social dilemma, even before we consider Danny's competence for the job or any policies that HP may have against family hiring. This dilemma in itself helps to explain the enormity of the prevalence of SCP. Sam has obligations to both familial and work groups. If Sam decides not to consider Danny, there is a risk that the longtime, very important bond with Jan will be jeopardized. On the other hand, deciding to consider Danny for the job costs very little, assuming that there is no obligation to hire. In the long run, and given the likely power of family social groups over organizational social groups, it should not be surprising that family often wins in decisions like this one.

Additional social dilemmas occur when Sam decides to consider Danny for the job. Evaluations of both Danny's competence and his willingness to accept the opportunity of a job at HP lead to dilemmas. The first of these (the competence dilemma) is the classic problem of nepotism. If Danny is less competent than other available workers are, Sam needs to decide between Jan's wishes and HP's interests: This again pits Jan against HP in Sam's decision making. Of course, if HP proscribes family hiring, Sam may risk losing his employment, depending on the legal status of the Sam–Jan relationship.

However, when combined with Danny's willingness, this situation also pits Sam's relationship with Danny (a member of the family) against Sam's relationship with the organization. Suppose that Danny is highly competent and is by all criteria (performance, retention, citizenship) the best available applicant for the position. However, if Danny feels compelled to accept the offer, against his own wishes, this constitutes coercion (Van Hooft & Stout, Reference Van Hooft, Stout and Jones2012). Even though Danny would provide advantages to the organization, Sam is faced with weighing the interests of HP against those of Danny. In the end, Danny may have problems with both Sam and HP, and either way, Sam has problems: by not agreeing to Jan's wishes, by choosing to undermine HP's interests, or by coercing Danny.

To avoid these problems and more (Muchinsky, Reference Muchinsky and Jones2012), organizations use sweeping antinepotism policies (Jones et al., Reference Jones, Stout, Harder, Levine, Levine and Sanchez2008) that prohibit the hiring of close kin. Such policies are, by definition, policing—that is, the use of coercion (through penalties such as the loss of one's job) in an attempt to reduce or eliminate targeted behaviors. Such policing is also, by definition, discriminatory on the basis of our most basic social category—our family membership. That is, an antinepotism policy discriminates between applicants who are and applicants who are not family members, and thus is a selection device. This, in itself, does not constitute unfair discrimination. It just singles out family relationships (as opposed to other SCPs or group memberships) as a basis for excluding people from the organization.

However, it should be noted that Gutman (Reference Gutman and Jones2012) described some adjudicated cases in which such policies have created de facto discrimination. One case is particularly illustrative of this problem. The vast majority of applicants excluded from employment by one antinepotism policy were women (Gutman, Reference Gutman and Jones2012). Thus, this policy was struck down by the court on the basis of unfair gender discrimination.

Naps and Nepotism

From the organizational perspective, the social dilemmas of SCPs have an analogy in the fundamental need for sleep. Like the preference for kin (Spranger, Colarelli, Dimotakis, Jacob, & Arvey, Reference Spranger, Colarelli, Dimotakis, Jacob and Arvey2012), sleep is a powerful motivator. Numerous studies have shown that variables associated with sleep can have effects on work performance (Driskell & Mullen, Reference Driskell and Mullen2005; Wyatt & Bootzin, Reference Wyatt and Bootzin1994). In particular, recent research has consistently shown that napping at work can enhance productivity (Davy & Göbel, Reference Davy and Göbel2013; Driskell & Mullen, Reference Driskell and Mullen2005; Hayashi, Chikazawa, & Hori, Reference Hayashi, Chikazawa and Hori2004; Wyatt & Bootzin, Reference Wyatt and Bootzin1994). However, in some cultures, there appears to be a stigma of incompetence that accrues to those who are “caught napping” (Mead, Reference Mead2007). This may explain why, despite the demonstrated advantages of napping, research on company policies that allow napping is fairly recent (e.g., Bonnefond et al., Reference Bonnefond, Muzet, Winter-Dill, Bailloeuil, Bitouze and Bonneau2001). Thus, the natural inclination for sleep (like the natural tendency toward kin preference) is policed in organizations.

Now, suppose that a company polices against napping—against our natural inclination for sleep. Because napping enhances productivity, the company policy is a counterproductive attempt to reduce the perception of incompetence rather than an attempt to reduce the reality of incompetence. Workplace prohibitions on social relationships, implemented in the interest of reducing perceptions of unfair preference, may be similarly counterproductive. There is a need for industrial and organizational (I-O) psychology to do the sort of research on the effects of SCP that Human Factor Engineering has done on naps.

The Advantages of Social Connection for Organizations

Research on this question is particularly important in light of research related to social connection. Though family and friend relationships are constituted outside the organization (except in family firms), the later inclusion of family and friends in the organization may actually enhance organizational effectiveness. In fact, research on social capital has demonstrated in a fairly convincing fashion that social connectedness in the workplace provides advantages to both individuals (Noe & Tews, Reference Noe and Tews2012; Walton, Cohen, Cwir, & Spencer, Reference Walton, Cohen, Cwir and Spencer2012) and organizations (Andrews, Reference Andrews2010). It is in fact possible that SCP is a large part of the reason for the positive effects of social connections in organizations.

Research on career development supports this notion at the individual level. Van Hooft and Stout (Reference Van Hooft, Stout and Jones2012) provided a number of possibilities from the nepotee perspective, based on job search and career choice literatures. First, genetic offspring are likely to have specific dispositions and abilities in common with their predecessors. This would tend to enhance the offspring's fit with occupations similar to those of their predecessors (Dickson, Nieminen, & Biermeier-Hanson, Reference Dickson, Nieminen, Biermeier-Hanson and Jones2012). Second, motives and preferences that are influenced by families and friends may affect career and job decisions. In particular, social cognitive theory (Lent, Brown, & Hackett, Reference Lent, Brown and Hackett1994) is based on self-efficacy beliefs that are developed through family experiences. If offspring experience positive feedback for developing career preferences and skills similar to those of their parents, then nepotic careers are more likely. This same mechanism may proceed from the feedback received from friends.

A third possible reason for the advantages of SCP is human capital transfer. In career theories, human capital transfer explains familial occupational choice as the result of enhanced exposure. By exposing children to the knowledge and skills required for an occupation, parents increase the chances that the child will choose the occupation. Like genetic and cognitive explanations, the assumption here is that parents have a fundamental effect on their offspring's development and choices (Guay, Senécal, Gauthier, & Fernet, Reference Guay, Senécal, Gauthier and Fernet2003). In this case, the effect occurs through the sharing of occupation-specific knowledge and skill (Laband & Lentz, Reference Laband and Lentz1992; Whiston & Keller, Reference Whiston and Keller2004).

Human capital transfers may occur with friends, as well. For example, friends from school have often learned job-relevant content from each other and have learned to trust one another's judgment and choices. Evidence is clear that people learn effectively through social transfer (Konstantinou & Fincham, Reference Konstantinou and Fincham2011). The development of trust in nepotic relationships may also grant an important advantage in SCP (Dickson et al., Reference Dickson, Nieminen, Biermeier-Hanson and Jones2012). If people have relied on each other for learning through their professional training, they might continue to do so after leaving educational institutions.

It seems likely that individual success in an organization relies to some extent on such previously successful relationships (Reiche, Reference Reiche2012). It makes sense that people would prefer to perpetuate successful friend and family relationships formed outside the organization by establishing them inside the organization. If these relationships were effective in other endeavors, why would they be assumed to create problems in the organization?

In fact, this human capital transfer into organizations through SCP mechanisms may explain the evidence about recruitment source effectiveness. Specifically, this research has shown that an individual referral is the best source for new employees (Zottoli & Wanous, Reference Zottoli and Wanous2000). To date, there is no research that shows what percentages of such referrals are familial, but it is almost certain that friends are a major part of any referral group. The effectiveness of such SCP referrals has never been compared with the effectiveness of referrals of people other than friends in the available workforce. This may seem a bit far fetched, but organizations already use this sort of analysis to evaluate the fairness of hiring decisions with respect to other group memberships (i.e., ethnicity and gender). If the quantity of research is an indication, the fairness of referrals appears to be less important than their effectiveness. Still, referral seems to be related to the successful integration of social connections across boundaries.

At the organizational level, research supporting SCP–effectiveness relationships is more than suggestive. Walmart, O’Reilly Automotive, Ford Motors, and Walgreens are all firms with integrated family relationships in critical roles; all started as family firms, and they all carry family names. During the great recession, these were some of the top-performing stocks in their sectors; this suggests that a family connection is an advantage at the organizational level.

Quantitative research also supports this. For example, a meta-analytic study by Luo, Huang, and Wang (Reference Luo, Huang and Wang2012) demonstrated that guanxi—a Chinese notion of social connection and exchange relationships—has positive relationships with several measures of performance across a very large sample of organizations. Given how uncommon it is to find firm-level evidence of the efficacy of social-psychological variables, this makes a strong case for conserving and even enhancing SCP in organizations.

In addition to these advantages, there is little quantitative evidence showing that the inclusion of family and friends in an organization's social connections is a problem. Many people tell stories of incompetent offspring and corrupt cronies, but there is little quantitative evidence supporting the negative effects of these sorts of relationships (Mulder, Reference Mulder and Jones2012). In fact, these stories may reflect cultural stereotypes. Regardless, given the tendency to seek confirming evidence to support stereotypes under some circumstances (Allen, Sherman, Conrey, & Stroessner, Reference Allen, Sherman, Conrey and Stroessner2009; Snyder, Campbell, & Preston, Reference Snyder, Campbell and Preston1982), such vivid anecdotes should be given little weight.

How to Effectively Police Social Connection Preference

Effective policing needs to take into account the stakeholder dilemmas described earlier. First, it should be clear that an antinepotism policy is a form of unfair discrimination. Because such policies do not take all stakeholder interests into account, using an applicant's status as a family member or friend of someone in the organization as a sole basis for hiring (or not hiring) is unethical and unjust (Phillips, Reference Phillips2003). This is akin to the use of stereotypes to make decisions: “I have seen an example of a dysfunctional crony or family relationship, so I assume that all such relationships are bad.” To the contrary, the evidence on recruitment sources, social capital, and career choice suggests the opposite.

What this means is that an employer who wishes to have the advantages of a “family feel” in an organization must manage the common prejudices against SCP. Like the stigma associated with napping, there are probably prejudices against SCP. In addition, just as SCPs are not likely to go away, so the stereotype that SCP will always lead to unethical behavior dies hard. In fact, it is not likely that we will ever get rid of either preferences or prejudices. Even though these prejudices do appear to differ across cultures (Luo et al., Reference Luo, Huang and Wang2012; Wated & Sanchez, Reference Wated, Sanchez and Jones2012), they are pervasive enough to have practical significance for organizational practices (i.e., antinepotism policies). At the same time, because prejudices do appear to differ across cultures, some of the same methods that organizations use to try to enhance cross-cultural understanding may therefore hold promise as ways to manage the prejudice against SCP (Morley & Cerdin, 2010).

Assuming that the many stories of dysfunctional SCP are true, however, we need to ask another set of questions. Foremost among these is how organizations might effectively manage dysfunctional relationships. One obvious way would be to try to stop them from entering the organization in the first place: hence, the use of common antinepotism policies. These include everything from complete exclusion on the basis of family membership to simple disclosures about dual relationships (Gutman, Reference Gutman and Jones2012; Wegman, Reference Wegman2007). Disclosure requirements of course fit less comfortably under the heading of selection devices than do stricter antinepotism policies. Nevertheless, most of the same ethical questions apply: The idea is to reduce real or perceived conflicts of interest.

Such antinepotism policies have the potential problems that we have discussed so far, and there are other reasons to doubt their efficacy. First, strict antinepotism policies have been successfully challenged on the basis of gender discrimination. In one case, almost all of the job applicants excluded on the basis of an antinepotism policy were women—spouses of male workers (Gutman, Reference Gutman and Jones2012). The history of such policies also suggests problems with which I-O psychologists are well acquainted: The original selection tests were devised partly to eliminate SCP in hiring in the Chinese civil service (Wang, Reference Wang1960). These apparently did not entirely do the trick back in the first millennium—the practice of employing only eunuchs (men who were unable to have children) was also followed, but it also failed (Crawford, Reference Crawford1961; Menzies, Reference Menzies2004). Considering the relative ease of identifying family relationships, there may be greater problems with policing less obvious cronyism. These are loosely policed in laws that require the disclosure of conflicts of interest (e.g., Sarbanes-Oxley Act; Wegman, Reference Wegman2007).

One potential answer lies more readily at hand for I-O psychologists. Although imperfect, the use of validated measures for hiring decisions is the preferred tool of I-O psychologists—not sweeping, either/or antifamily policies. This is of course a fundamental argument for the use of I-O psychologists’ services, however inadequate Chinese civil service testing might have been. In fact, it is an argument that could be significantly bolstered by further research evaluating both the predictors and the effects of dysfunctional SCPs.

However, screening for competence alone may not account for problems of coercion. In the case of Danny in our scenario, there are important questions about how to police the tendency of senior family members to coerce even competent family members into accepting jobs they do not want. Job preference measures and values inventories may help organizations screen for the sorts of dysfunctions that can occur when family or friends are being coerced into a job. Such career-relevant hiring systems may hold promise for reducing potential problems with coercive SCP in organizations as well.

In smaller organizations, I-O psychologists might even put their extensive experience with measurement to work as a way to evaluate relationship characteristics. Such information might help with both hiring processes and organizational training and development. In hiring, for example, an initial realistic preview of likely future relationship problems could lead to both self-selection and successful adjustment. In addition, an empirically based weighing of the risk of dysfunction against the development of social capital would be better informed. Such relationship information could serve as a component both of needs assessment and of the feedback provided in individual and group development. Taking such assessments to the level of standardization and validation held by some famous selection measures could prove highly profitable, if the online dating services are any indication.

Once dysfunctional relationships have entered the organization and have begun to move toward creating problems for the larger organization, things become more complicated (Becker, Reference Becker and Jones2012; Wated & Sanchez, Reference Wated, Sanchez and Jones2012). For a start, the common stereotype (and vivid, confirmatory anecdotes) may have some merit, despite what we have seen so far about the potential benefits of SCP to organizations as a whole. Evaluation researchers may in fact find that decisions based on SCP may be more likely to yield more “false positives,” leading to adverse effects on other stakeholders within the organization. There is some evidence that SCP perceptions do relate to the satisfaction of other employees (Arasli & Tumer, Reference Arasli and Tumer2008; Khatri & Tsang, Reference Khatri and Tsang2003). Although we have already seen that this might be a result of prejudice, morale has been used as a legal argument for allowing “no spouse” rules (Thorne v. City of El Segundo, 1983; Yuhas v. Libby-Owens, 1977). However, there is no evidence to date demonstrating that policing enhances commitment, satisfaction, fairness perceptions, or other morale variables.

If we follow the Danny problem a bit further, additional issues may develop for the management of SCP. For the incompetent SCP recipient, coerced employment runs the risk of stunting the development of important knowledge and skills that might have been gained in other circumstances.Footnote ¹ In broader terms, anecdotes suggest the many dysfunctional relationships that can develop as a result of SCP at work (Muchinsky, Reference Muchinsky and Jones2012). To police (or at least manage) these, I-O psychologists will need to consider the competencies usually associated with counseling and family therapy. Although many current I-O psychologists lack training in these areas, many others are intimately entwined with such problem relationships at work. Future professional committees may choose to consider the development and inclusion of this set of competencies.

Summary

Popular stereotypes about the nature and effects of social connections should not be the basis for sweeping, pervasive organizational policies. In fact, given (a) the actual evidence about the effectiveness of SCP, (b) the discriminatory effects of sweeping policies, and (c) the cultural differences in perspectives and practice, I-O psychologists have a professional responsibility to empirically evaluate both the nature of SCPs and their actual risks and benefits. Science-based practice and ethics both demand that I-O psychologists refrain from “engineering” such relationships in work organizations before carefully surveying them. Using the analogy of natural systems (e.g., rivers) and engineering solutions (e.g., dams), organizations trying to deliberately “dam” natural family and friend systems without empirical evidence about their forms and contexts are likely to experience effects that are at least ineffective and potentially catastrophic.