The term cronyism refers to the practice of appointing friends to positions of authority without regard for their qualifications. While the term is normally associated with political appointments, cronyism also occurs in corporate workplaces.
Also referred to as nepotism, cronyism arises when an individual holding an influential position demonstrates preference towards friends during the hiring process. This preference is without regard for qualifications, and oftentimes results in suboptimal working conditions and a demoralized workforce.
Cronyism is sometimes hard to prove, since employers will often encourage their employees to recruit qualified acquaintances, former coworkers, and even relatives when filling open positions. These practices can blur the line between nepotism and the hiring of truly qualified friends and relatives.
Cronyism can have a demoralizing effect in the workplace because existing employees are usually quick to discover a newly hired associate does not have the experience or competency required to fulfil the responsibilities of their position.
A society that encourages close relationships between corporations and politicians is referred to as crony capitalism. In these cultures, the success of a business relies on favorable rulings by government officials. Favoritism in a crony capitalism setting includes tax breaks for influential businesses, special incentives, as well as government grants.