How have businesses been affected by nepotism?

November 01, 2019

Nepotism means favoritism and being unprofessional. According to (Araslı, Bavik, & Ekiz, 2006) nepotism and favoritism is very common behavior in business organizations. Usually nepotism is flourishing in the family-managed businesses. These businesses nepotism is adopted to prevent loss of power belonging to the family in the business. This is the main obstacle to the professional behavior, democracy and institutionalization. In the year 1994 an article by Hagen and Amin argues that nepotism is also a dominant issue in less-developed countries.
Nepotism is a corruption practice followed mostly in the recruitment process. When the managers or higher authority with decision power is intended to favor connected people in order to obtain their personal benefits, even though these people have low ability or qualification than other better applicants.  
In the analysis done by (Büte, 2011) these favoritism bring inequality among the employees and they feel that working under incompetent person is distressing situation. Due to these circumstances lack of confidences causes negative effect on employee job satisfaction, organizational commitment and individual performance. According to this research article the effects of nepotism and favoritism in the Turkish state banks.

Effects of nepotism on organization
- Reduced productivity will be a negative effect, as employees will not give their best which will lead to lower in performance, unsatisfactory results and a lowered output.

- For an organization a dissatisfied employee and unethical leader is the worst combination because these will affect the overall outcome result of the organization.

- When family and close friends work in the same company their personal conflicts and differences can easily turn into problems in the work place.

- The employees will take the favored staff incompetent and the relationship between employees will be ruined.

 Data Collection Methodology and Data Analysis
In the research by (Büte, 2011) the data was analyzed using a statistical software package known as LISREL 8.54. Cross-sectional data were obtained via a previously developed research model and scale, and were analyzed by quantitative methods. For the reputation of the state bank the names of the executives were confidential and was not to be disclosed. The researcher found it very costly and time consuming to contact all the state bank branches in Ankara. Therefore a sample of 300 respondents from relevant state banks was developed taking into account the location, accessibility and financial factors and the questionnaire forms prepared were sent to the employees. Among these 250 questionnaires were returned and 7 questionnaires from that were not completely filled out. So a total of 243 questionnaires were used to collect data.

Table 1: Demographic Characteristics

The demographic characteristics were analyzed based on the respondent’s gender, their marital status, their age, educational level, the banks they used and their level of experience. According to the table 1 above majority of the respondents were female (61.73%). The breakdown of the banks they used are close to one another.  And a 65.02% of them were married and the same percent of them were with a bachelor’s degree. Nearly all the respondents were with a sector of experience.

Table 2: The Results of Confirmatory Factor Analysis

Standard Loadings

T Values
Factor 1: Preferential Treatment (Nepotism-Favoritism)
Employees of this bank always feel that they need someone they know or a friend in a high-level position.
Supervisors are afraid of subordinates who are related to high-level executives.
I am always careful when speaking to family or relatives of bank executives.
Executives are more interested in keeping friends and acquaintances in good positions than they are in those employees' performance or the organization's profitability.
The expectations of executive relatives and acquaintances are given priority.
Banks permitting employment of executives' relatives have a hard time attracting and retaining quality people who are not relatives.
Banks permitting employment of executives' relatives have a difficult time firing or demoting them if they prove inadequate.
High-level executives of this bank have a hard time demoting or firing friends and acquaintances.
Factor 2: Human Resources Practices

During the employment process the bank explains both the positive and the negative aspects of the job.
My bank uses standardized interview methods during employment.
Personnel for this bank will go under educational programs at least once a year.
My bank does systematic analysis to identify what is missing in the educational programs for the employees.
My bank takes service behavior, and its development as basis for the educational programs.
My bank uses the results from the education programs to reach educational targets.
My bank takes job-related criteria for promotions and appointments.
The employees learn the performance evaluation results with an official notification.
Factor 3: Job Satisfaction

I consider my job rather unpleasant.
I am often bored with my job.
I feel fairly well satisfied with my present job.
I feel very tired at the end of the work day.
I am disappointed that I ever took this job.
Factor 4: Organizational Commitment

I would be happy to spend my remaining career in this bank.
I really feel as if this organization's problems are my own.
In this bank, I feel “part of the family”.
I have an emotional bond with this organization.
I feel a strong belonging to this organization.
I am proud to tell others that I am part of this organization
Factor 5: Turnover Intention

I often think of resigning from my job.
If I leave my job, I won't lose much.
Most probably, I will be looking for a new job soon.
Compliance Index Results:
Chi-square /df = 2.79
GFI (Good of Fit Index) = 0.87
AGFI (Adjusted Good of Fit Index) = 0.81
CFI (Comparative Fit Index) = 0.92
RMR (Root Mean Square Residual) = 0.057

Notes: Each item is measured on a five-point Likert scale. All correlations are significant at 0.001 level.

In the research total 37 questions were generated in order to o identify the relationships between nepotism and favoritism and human resources practices, affective commitment, job satisfaction and turnover intention. Among them 10 questions were based on “nepotism and favoritism”, there Cronbach’s Alpha coefficient was found to be 0.89. 12 questions related to “Human resources practices” and there Cronbach’s Alpha coefficient was 0.93. Another 6 questions was for measuring “affective commitment”, its Cronbach’s Alpha coefficient was found to be 0.88. Again 6 questions on “job satisfaction” was taken and its Cronbach’s Alpha coefficient was found as 0.91. The last 3 questions were related to “intentions to quit” its Cronbach’s Alpha coefficient was found to as 0.81. In the factor analysis, 7 items were loaded below the expected variables, i.e. below the 0.60 load value, the acceptable load value in the literature.

Table 3: Means, Standard Deviations and Correlations Related to All Variables Used in the Model

In the questionnaire, 5-point Likert scale from 1=strongly disagree, 2=disagree, 3=neutral, 4=agree to 5=strongly agree was employed. More than half of the survey was conducted via face-to face interviews. The remaining were given to respondents to be filled out at home and were collected the next day.
According to the table from the research article, the highest correlation was found between human resource practices and job satisfaction (0.69). Thus the lowest correlation was between human resources practices and turnover intention (0.31). The mean and standard deviations of these factors were calculated to support their validity and the results shows that it supports the validity of the scale.

The study examined the effects of nepotism and favoritism in the state banks on human resources practices, job satisfaction, organizational commitment and intention to quit. It also revealed the importance of independent executives in the banking sector. They should keep their managerial decisions transparent and clear to the employees without nepotism or favoritism included. This will be the main reason for employee job satisfaction and thus will improve their commitment and efficiency. `

Araslı, H., Bavik, A., & Ekiz, E. H. (2006). The Effects of Nepotism on Human Resource Management: The Case of Three, Four and Five Star Hotels In Northern Cyprus. International Journal of Sociology and Social Policy, 295-308.

Büte, M. (2011). The Effects of Nepotism and Favoritism on Employee Behaviors and Human Resources Practices: A Research on Turkish Public Banks. TODAĐE’s Review of Public Administration, 185-208.

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