The effects are lasting on a company’s hiring efforts and bottom-line.

By Edward Fleischman
August 4, 2015

In any organization, it is important to reward high-performing employees in order to motivate and retain your talent. However, companies need to be careful when allocating monetary and other rewards to avoid playing favorites with select employees. An organization’s reward structure must adhere to a transparent framework that managers practice and employees understand. Without this structure, favoritism can begin to take root in the workplace, which negatively impacts a company’s culture and its bottom line.

So what does favoritism look like? In its most blatant forms, favoritism can manifest in the unfair bestowing of promotions or bonuses. However, it is equally important to watch out for more subtle indications of favoritism that can be just as frustrating to employees and detrimental to company culture. For example, these can include a manager looking the other way when someone doesn’t follow the dress code or leaves an hour earlier than the rest of the team. Managers who have fallen into the trap of favoritism may also overlook or excuse lesser quality of work or spend personal time with select employees, while excluding others. Although these may seem like small issues from the perspective of the manager, they are not viewed that way by employees.

Additionally, some industries have a reputation for an overall culture of favoritism, whether by gender, ethnicity, or educational background. Multiple organizations across industries have come under fire for this problem, and companies that allow this type of favoritism to impact both hiring and the promotion of individuals are setting themselves up for negative consequences.

 

Blatant favoritism of one star employee can lower the morale of all other employees, as other good employees will likely be aware that their peer is enjoying extra perks while their own hard work goes unnoticed and unrewarded. As a result, these performers might feel neglected and unmotivated. At extremes, favoritism can lead to lawsuits, which in addition to having severe financial consequences, may have a lasting effect on a company’s hiring efforts and reputation in both the specific industry and the public eye.

All companies have an array of staff members who can be categorized as A, B, and C employees. While A employees are the ones that stand out as top performers, B employees produce strong work and C employees are building the skills they need to move into higher positions. For some managers, it may seem obvious to reward A employees, but it’s important to not overlook the others, as a company needs the support of all As, Bs, and Cs to be successful.

In the end, you want your B and C employees to aspire to be As, so when they see that their A counterparts are being fairly rewarded for their outstanding work, this can serve as a positive incentive. However, if employees sense a culture of favoritism, this may discourage professional development. Displays of favoritism can dissuade B and C performers from wanting to build their own skills and reach their potential, as they may not be convinced that their efforts will pay off equally. It is important for an employer to think critically about which of their employees are As, Bs, and Cs, and from there, the employer must acknowledge the strengths of the A employees and help the B and C employees develop their skills. If all employees feel that the company is helping them to grow, regardless of their tenure or position with the company, they are more likely to feel appropriately challenged and loyal.

While all companies are susceptible to developing a culture of favoritism, certain situational factors can make companies more prone to this misstep. During rougher economic conditions, for example, companies feel the need to maintain top talent more than ever and can leverage favoritism in the hopes that it will help them keep star employees. However, it is imperative that companies avoid this trap. The size of the company also plays a role in how severe the effects of favoritism can be. For instance, smaller companies have the same risk of falling into a culture of favoritism as larger companies, but with magnified consequences. A major impact of favoritism is high turnover rates, and smaller companies often struggle more with the loss of employees. While, a large company may have an easier time covering three exits, a company of fifteen people may be severely burdened by losing the same number.

To avoid playing favorites, it is essential to ensure that rewards for employees are tied to performance. One way to avoid this is to establish a set base salary for all employees of a certain position. Anything more should be given out of merit on a case-by-case basis and the same standards should be set for all. Year-end and spot bonuses, when given fairly, can be good incentives to reward strong employees while avoiding favoritism. While promotions, raises and bonuses can seem like the most obvious ways to favor an employee, these practices are good for a company if they are deserved and if there is a guarantee of transparency and even standards.

Overall, being aware of the pitfalls of favoritism and developing a strategy to fairly reward strong employees can ensure the retention of these employees, while keeping motivation and office morale high.

 

Edward Fleischman is chairman and CEO of The Execu|Search Group, a recruitment, temporary staffing, and workforce management solutions firm.

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