Nepotism, Job Satisfaction, and Employee Commitment
Mary L. Williams and Dennis Laker, Widener University
OBJECTIVES
Whether or not to hire a new employee that is related by blood or marriage to an existing employee or the owner of the business is a difficult question that most firms must address at one time or another. The objectives of this research are to 1) summarize the literature involving the different approaches to analyzing this issue; 2) highlight the pros and cons of hiring related employees; and 3) empirically test the relationship between working with relatives and the level of job satisfaction.
BACKGROUND
Larger firms face the issue of hiring related employees more often than their smaller counterparts, and firms in island or small economies face this question more than others. Research into the plus and minuses of this related hiring is very limited and therefore the effects of this type of hiring are poorly understood. Two issues cause roadblocks for researchers in this area. First, there are definitional problems. In the US literature, “nepotism” is generally used to describe this type of hiring. Unfortunately, nepotism can refer to either: a) the hiring of a relative of the owner of the business – we call this “family nepotism”, b) the hiring of a spouse of an existing employee – referred to in the literature as “Paired Employees” or “PE’s”, c) in a political sense, putting one’s relatives in a political position of favor – which we call “political nepotism” or d) the hiring of an individual related to an existing employee other than the owner of the firm, which we call “organizational nepotism”. Organizational nepotism is the focus of this research.
The second issue, as pointed out by Vinton (1998), is that the existing literature on nepotism comes from different directions. The word nepotism used in an unfavorable light is most often applied to the hiring of a relative of the owner of the business. Research in this area is mainly anecdotal and appears in family business practitioner journals. On the negative side, headlines such as “Hiring in-Laws: The Kiss of Death” (Berglas, 1998); “Introducing Junior” (Merriden, 1997); and “Nepotism on Trial” (Persinos, 1984) convey the potential pitfalls. The problems associated with family nepotism include: the inability to attract qualified non-family managers because of their fear of being surpassed by family members in the promotion process, low morale resulting from unjust promotions, a lack of empowerment for the nepots, exposure of the business to family quarrels, and disciplinary problems for managers if they have to deal with a relative of the owners. Many suggestions to avoid these problems have been offered (Broadwell, 1988; Porter, 1989; LeVan, 1990; Fischetti, 1992; Arnoff and Ward, 1993). On the positive side, a family firm atmosphere has been associated with lower employee turnover, higher performance, and lower employee risk (Molofsky, 1999; Nelton, 1998).
The effect of nepotism on morale and employee satisfaction is the focus of this research. Reed (1988) reported that coworkers might sense inequities when they work with employees related to someone in the organization. They may feel that one person has obtained employment or special favors as a result of their relative’s influence (Ford and McLaughlin, 1985). Nepotism places pressure on Human Resource Managers regarding enforcement, promotions, and morale. On the positive side, one family business – Thomas Publishing Co., the New York city company famous for the Thomas Register of American manufacturers and other business publications – has been recognized as a family firm that formally practices nepotism. Molofsky (1999) in an article about the firm cites a shorter learning curve, lower employee risk, better performance, the ability to fill employee spots at peak times, and lower turnover as the benefits of this nepotistic behavior. In an article about the same firm, Nelton (1998) cited the benefits there of high performance, stability of the contractors’ companies, and long-term commitment to Thomas as benefits.
Although organizational nepotism can have a serious impact on the firm, its impact has never been empirically measured. According to Vinton (1998) nepotism is one of the least studied and most poorly understood human resource practice. In this research, we directly investigate the relationship between the level of nepotism and employee satisfaction. We believe nepotism can affect productivity through its impact on employees’ perception of fairness, employee satisfaction, and eventually customer service.
DATA
The data for the analysis was gathered from a large family controlled bank in Latin America. In a recent survey, the bank had determined that 25 percent of their employees were related to another employee of the bank. They were astounded by this high level of organizational nepotism and were concerned that it might lead to unsound business practices. They obtained information concerning the number of relatives each employee had at the bank, the degree of relatedness (spouse, nephew, etc.), the position the relative held in the bank, and the location where each of their relatives worked. The bank had 2000 employees, and 75 branches. An employee survey was created by one of the authors in conjunction with representatives of the Family Controlled Corporation Program at the Wharton School, University of Pennsylvania. In that survey, various measure of employee satisfaction were created using existing questions from the literature. Ordinary multiple regression techniques were utilized to explain the variation in employee satisfaction with a model that included levels of nepotism and various covariates.
EXPECTED RESULTS/DISCUSSION
Nepotism policies range from no policy at all to a sweeping rule that prohibits the employment of a related employee anywhere in the organization. Rigid nepotism policies place managers in the uncomfortable position of telling an employee that they will loose their job if they get married. The negative impact on morale in such organizations is often dramatic. With the results of this research, we hope to prove that the benefits of hiring related family members outweigh the expected costs.
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