Nepotism, favoritism and cronyism: A study of their effects on job stressand job satisfaction in the banking industry of north Cyprus
Main Article Content
Nepotism, cronyism and favoritism are unprofessional practices giving preferential treatment to relatives and friends in employment. For this study a survey was carried out with 576 respondents working in the banking industry in northern Cyprus. An analysis was then conducted to assess the impact of these practices on job stress, job satisfaction, and intention to quit behavior of employees, as well as word of mouth comments in their workplaces. Results of this study show that nepotism, favoritism and cronyism create job stress in the workplace and this increases dissatisfaction of the staff about their organizations. Nepotism has the greatest negative effect on job stress.
The service industry is one of the most important income-generating sectors in small states. In the last few decades, some small states have been important service centers in banking, finance and trade services. Among these, Singapore and Hong Kong are examples. In the Mediterranean Sea, two examples are Cyprus and Malta. Bermuda, Bahrain and Jersey are other states that have been studied by Bowe, Briguglio, and Dean (1998).
The complex nature of services (Angur, Nataraajan, & Jahera, 1999;Arasli, 2002) results from their common characteristics, which are intangibility, perishability, high customer involvement, simultaneous production and consumption and homogeneity. These characteristics, coupled with the growing prominence of the services sector, have also increased the need for fair and professional management as companies look for ways to improve financial performance and attract customers in today’s competitive environment. Especially in the service industry, customer satisfaction is predominantly dependent on employee behavior and attitudes.
Establishing professionalism and institutionalization are quite difficult in these workplaces in small states since employees tend either to be related or to know each other personally. Thus, services provided in this labor-intensive environment are more open to corruption than are those in larger states. For example, nepotism is likely to occur more frequently in such microgeographies where several external factors like sociocultural, economic, educational, and political structures force people to support their close relatives or friends. This could make more complex a phenomenon that is one of the biggest obstacles associated with hiring, placement, rewarding, development and retention of staff in these institutions.
In this study an examination was carried out of the impact of nepotism, cronyism and favoritism on the banking industry in northern Cyprus. All three practices are major concerns in both the services industry and the banking industry in that area of Cyprus. An examination was made of a number of factors including job stress, word of mouth, job satisfaction, and intention to quit behavior of employees in their workplace. The impact of nepotism has usually been considered at the macro level (Abdalla, Maghrabi, & Raggad, 1998; Boadi, 2000; Mutlu, 2000). However, there are very few studies that underline the importance and the effects of nepotism, favoritism and cronyism on those outcomes mentioned above at the organizational level. The present study also provided some suggestions and managerial implications for owners, politicians, managers, and employees in northern Cyprus where the banking industry constitutes an essential part of the economy. This study was, therefore, useful and innovative in the approach taken.
Nepotism, Favoritism and Cronyism
The term nepotism is derived from the Latin word for grandson or nephew. It is related to the English word nephew, which comes from Latin via Old French, (http://www.dictionary.com). Webster’s Third New International Dictionary (Merriam-Webster, 2000) defines nepotism as favoritism shown to nephews and other relatives, by giving them positions because of their relationship rather than their competencies. Most of the literature suggests that large firms are more likely to hire relatives as employees than are smaller firms. However, some researchers believe that nepotism is dominant in smaller firms in less developed countries (Hayajenh, Maghraki, & Al-Dabbagh, 1994; Williams & Laker, 2005).
Cronyism is defined as giving preference to politicians’ particularly to cronies (close friends of long standing), especially as evidenced in the appointment of hangers-on to office without regard to their qualifications. Favoritism means the provision of special privilege to friends, colleagues and acquaintances, in the areas of employment, career and personnel decisions. Cronyism and favoritism are hard to control, especially in cultures that place a high value on interpersonal relations (http//www.citadel.edu/citadel) particularly to cronies (close friend of long standing), especially as evidenced in the appointment of political hangers-on to office without regard to their qualifications (Ashour, 2004).
Nepotism, cronyism, and favoritism easily penetrate and corrupt decisions and practices. In small states, improving performance and credibility requires a comprehensive but well-orchestrated institutional reform that combats corruption and frees up the latent potential of these organizations, redirecting their practices to serve developmental ends. Serving these ends requires competent, professional and ethically strong company staff. As also mentioned by several researchers like Ford and McLaughlin (1986), nepotism has both positive and negative effects on employee and customer satisfaction levels.
Nepotism has negative effects on human resource management recruitment and selection practices because candidates are chosen for their friendships and blood relationships. Since those workers may not have adequate relevant knowledge and job skills, they may not perform as well as suitably qualified candidates. This destroys organizational fairness, motivation and harmony while bringing inefficiency along with insufficient training and development activities. Conflict may arise between the worker who is already in the job and the new member of staff who has been hired because of his/her family relationship. Things like pay structure, incentives and benefits can negatively affect employee relations, performance and motivation. These factors may, in turn, cause an employee to decide to quit and may lead to negative comment to customers, colleagues, friends and others, which may cause severe harm to the operation and image of the organization. Based on the literature review, the following hypotheses were formulated for this study:
H1: Nepotism has a significant positive effect on job stress.
H2: Nepotism has a significant negative effect on job satisfaction.
H3: Favoritism has a significant positive effect on job stress.
H4: Favoritism has a significant negative effect on job satisfaction.
H5: Cronyism has a significant positive effect on job stress.
H6: Cronyism has a significant negative effect on job satisfaction.
Job Stress
Most recently, stress has been defined as the physiological and psychological reaction that occurs when individuals meet threats or challenges to pressure. A widely used working definition is an adaptive response, mediated by individual differences or psychological processes that are consequences of any external action, situation or events that place excessive psychological or physical demands on a person. Work pressure and stressed customers lead to a stressful work environment. Preventing stress can be achieved by creating a healthy environment, through staff and organizational development. Stress is also one of the important factors of negative job satisfaction (Williams & Laker, 2005).
Job stress can occur because of irregular work hours, loud noises, boring jobs, inability to socialize, role ambiguity, and responsibility for the results without sufficient authority or lack of autonomy. It is suggested here that nepotism, favoritism and cronyism may lead to these job stressors within the workplace. Job stress can also have various effects on the individual as well as on the organization. Stress might lead to losing adaptability to the work, to negative comments, and to an intention to quit. Therefore, human resources staff should take care in recruiting the right people for jobs, training them adequately and empowering them to make their own decisions.
Employees deciding to leave their job can be caused by several negative factors in the workplace. The most important factors are job dissatisfaction and job stress. Hussain, Khan, and Bavik, (2003) suggest that lower satisfaction is the result of higher stress, which leads to a decision to quit. Thus, a reduction in the frequency of employees deciding to leave their job can be achieved by improving work conditions (Babakus, Cravens, Johnston, & Moncrief, 1996).
The following hypotheses about job stress were formulated for this study:
H7: Job stress has a significant positive effect on what an employee says about his/her job and employer.
H8: Job stress has a significant negative effect on job satisfaction.
H9: Job stress has a significant positive effect on intention to quit.
Job Satisfaction
Job satisfaction refers to the way in which employees view their work either favorably or unfavorably. Whether the satisfaction is increased depends on the match of rewards to the expectations, needs and desires of the employees. Better performance leads to higher rewards and if those rewards are seen as fair and equitable, the result is improved satisfaction.
The ultimate goal of ensuring job satisfaction for employees is ensuring customer satisfaction. According to Goode and Moutinho (1995), there is a positive relation between job and customer satisfaction. Common problems faced by managers may include low levels of morale, high absenteeism, high turnover of staff, human relations difficulties and legal action by employees. Increased customer satisfaction, on the other hand, leads to behavioral outcomes such as commitment, intent to stay (customer retention), creation of a mutually rewarding relationship (bond) between the service provider and the customer, increased customer tolerance for service failures and positive word-of-mouth advertising about the organization (Berry & Parasuraman, 1991; Goode & Moutinho, 1995; Heskett, Sasser, & Schlesinger, 1997; Reichheld, 1996).
The following two hypotheses about job satisfaction were formulated:
H10: Job satisfaction has a significant positive effect on word of mouth information.
H11: Job satisfaction has a significant negative effect on the employee’s intention to quit.
Adverse Word of Mouth Information
The basic idea of word-of-mouth information exerts significant influence over customers’ decision making − especially if employees are not satisfied with the quality of aspects of their job such as colleagues, management style, salaries, benefits and so forth. Ennew, Banerjee, and Li (2000) underline the fact that satisfied personnel do not act as though they want to quit their job. Moreover, happy employees who have no intention of leaving speak positively about their organizations. Conversely, Mattila and Patterson (2004) note that employees who intend to leave are likely to say negative things about their work environment. Based on this, the following hypothesis was formulated:
H12: Negative word-of-mouth information will exert a significant negative influence on intention to quit.
Figure 1. The Conceptual Model.
Method
When this study was carried out, there were 22 banks operating in northern Cyprus – not including offshore banks. The banks can be classified into two types – State and Private – and there are a total of 92 automatic teller machines and 135 branches (Central Bank, 2006). Only two banks are government owned. There are 17 commercial banks, of which six are branches of banks based in Turkey. Besides this, there are 18 offshore banks active in northern Cyprus. Approximately 2,000 full-time staff members are employed in the commercial banks in the three regions. Offshore banks were not considered in this study since they are used mainly for limited transactions, have very few employees and attract only a few customers. Prior to the distribution of the main questionnaire, a preliminary quantitative survey was conducted with several employees in order to prepare a valid instrument for the main study. Next, a quantitative questionnaire was personally distributed to the bank employees and they were given assurance of confidentiality. Forty-seven self-administered questionnaires in Turkish were distributed to respondents of which 20 were on nepotism-favoritism (NEPO), 7 on cronyism (CRO), 9 on stress (JSTR), 5 on job satisfaction (JSAT), 3 on intention to quit (IQ) and 3 on word of mouth (WOM).
While preparing the questionnaire, a number of sources were used from the relevant literature (Abdalla, Magharabi, & Raggad, 1998; Babin & Boles, 1998). A 5-point Likert scale ranging from 1 = strongly disagree to 5 = strongly agree was used to measure the answers. Each question was originally prepared in English and then translated into Turkish using the back-translation method (McGorry, 2000). The cross-linguistic comparability of the questionnaire was further tested with the faculty members of a Turkish university who were fluent in both languages.
Data were collected by a research team after four visits, during November and December 2006. The commercial banks were visited and respondents were surveyed on a face-to-face basis in part, and some were given the questionnaires to fill out at home which were collected the following day. The nonprobability convenience sampling method was used in collecting data from 576 respondents who were currently working in various commercial banks in northern Cyprus. The use of convenience sampling was especially relevant due to the intensive working conditions of the frontline employees at the banks.
Data Analysis
SPSS 12.0 and LISREL 8.30 Statistical Software Programs were used to analyze the data. As for statistical techniques, first reliability (Cronbach’s alpha) value and validity tests were conducted. Next, mean score descriptive analysis was employed to observe average responses of the respondents who participated in this survey, and then, correlation analysis was carried out in order to see the strength and the direction of association between the items of the questionnaire at the first step. And at the final stage, some structural equation models were carried out to see the possible impact of some independent items on the dependent ones. These models were carried out to establish the validity of the research hypotheses of this study.
Findings
The majority of the respondents (52.8%) were female, 41.8% of the respondents were in the age range of 28-37 and 47.0% were high school graduates. The great majority (78.6% of respondents) worked as bank officers and 15.3% as bank chiefs or supervisors. Almost 40% of respondents had work experience of more than 10 years, and 78% worked in private banks in northern Cyprus.
As a first step in the analysis of results, reliability and validity of the scales were confirmed by calculating Cronbach’s alpha values and factor analysis for each dimension and scale. Cronbach’s alpha values for each dimension had a cut-off value of .70 and each scale coefficient value was over .50 (Nunnally, 1978).
Table 1. Mean Scores of Questionnaire
Note: (N = 576)
Then, the mean scores (see Table 1) with standard deviations of the questions in the instrument were calculated. The results show that respondents (N = 576) often did not agree with the statements provided in the instrument. For example, the average response in the first part, Nepotism – Favoritism, was 3.02, which means that respondents agreed to a certain extent with the questions on nepotism and favoritism. The average response to the second part, Cronyism, was 2.62 showing again that the respondents were undecided about organizational cronyism in their workplace. The average response on Job Satisfaction was 3.69 indicating that employees in the banks of northern Cyprus felt happy about their organizations. The highest average response in the instrument was obtained for Word of Mouth, 3.75, showing that employees usually made positive comments about their banks to others. The results for Stress show that these employees generally felt themselves to be under stress in the workplace (average response, 3.40). And lastly, the average response in the section on Intention to Quit was 2.45, slightly less than 2.5, which shows that respondents were undecided about quitting their job.
The findings demonstrate correlations between the scales of the study, namely satisfaction, word of mouth, job stress, intention to quit, nepotism, favoritism and cronyism. The highest correlation was between job satisfaction and word of mouth with a positive association (0.76). Correlations between job satisfaction and intention to quit and between word of mouth and intention to quit showed negative associations (-0.28 and -0.27, respectively). There was also a high and positive correlation between the scales of nepotism and favoritism.
The scale of job stress generally had a high and positive association with intention to quit, nepotism, favoritism and cronyism. The relationship between nepotism and cronyism was also high and positive (0.35). After calculating correlations between the scales of the study, regression models were also estimated to run path analyses. Table 2 gives the results of structural equation models for various dependent variables.
Table 2. Structural Equation Models
The dependent variable in the first model is the scale for job stress. Results reveal that nepotism, favoritism and cronyism all have positive and statistically significant effects on job stress. Furthermore, the highest impact on job stress is that of nepotism (0.32, t = 6.33). The explained variance of the third model is R2 = 0.22.
The second model includes job satisfaction as the dependent variable. The standardized coefficients reveal that job stress has a significant and direct negative impact on job satisfaction. Favoritism, nepotism and cronyism have indirect negative impacts on job satisfaction. The t-ratios show that these three scales are statistically significant. However, the explained variance of the model is quite low (0.03).
The dependent variable in the third model is word of mouth. Results reveal that both job satisfaction and job stress have an impact on word of mouth. However, stress is statistically nonsignificant while job satisfaction is statistically significant. The explained variance of the second model is 0.58.
Finally, the last model has a dependent variable of intention to quit. Results again reveal that both job satisfaction and word of mouth have a statistically significant negative impact on intention to quit, while job stress has a statistically significant positive impact on it. The explained variance of the fourth model is 0.18. A careful analysis of Table 2 shows that NEPO, FAVO and CRO have a significant positive impact on JSTR. NEPO, FAVO, CRO and JSTR also have a negative impact on JSAT. Thus, H1, H2, H3, H4, H5, H6 and H7 are accepted. Table 2 also shows that JSAT exerts a significant positive effect on WOM. Thus, H8 is accepted. However, JSTR does not demonstrate any significant relationship with WOM. Therefore, H9 cannot be supported. Additionally, results demonstrate that JSAT and WOM have a significant negative impact on IQ. Therefore, both H10 and H11 are accepted. Path analysis results indicate that JSTR has a positive effect on negative WOM. Hence, H12 is also accepted.
Discussion
In this study an investigation was carried out of the role of nepotism, favoritism and cronyism and the consequences of job stress in the commercial banking industry of northern Cyprus through employing a quantitative questionnaire for employees. Nepotism, favoritism and cronyism were found to have economic, cultural and educational causes and effects. Furthermore, it was found that these practices create considerable stress in the workplace of bank employees, which leads to job dissatisfaction and increases the possibility of intention to quit. Of the three practices of nepotism, favoritism and cronyism, nepotism has the highest negative impact on job stress. These practices all have a direct negative effect on the banking industry each year through the cost of advertisements, interviews, orientation and training sessions for new employees as well as the cost of losing senior employees, and loyal customers, deteriorating service, difficulty of finding new competent employees and the deterioration of the bank’s service. As Arasli, Bavik, and Ekiz (2006) stated in their recent similar study in the hotel industry in Cyprus, “Human resource departments have to have sufficient power and authority in order to help ensure that employee policies will be implemented without discrimination, ethically and affirmatively”.
The present study also showed that employees working in the banking industry of northern Cyprus are generally satisfied with their job but have been severely influenced by nepotism, cronyism and favoritism practices in their workplaces.
It seems that nepotism, cronyism and favoritism are practices that are used in preference to professional human resource practices within these organizations in Cyprus. Bank employers in northern Cyprus generally prefer to hire, promote or reward their family members or friends. Most of the time, they do not seem to care much about knowledge, training, skills and abilities of applicants for jobs. Instead employers first consider political party links, blood relationships and close friendships. In the frontline, supervisory and managerial positions, there are very limited employment opportunities in the sector. Moreover, five universities are producing thousands of students in the north every year and 90% of the population is highly educated. Most of these people prefer to compete for work in the public sector banks since the salaries, work environment and job security provisions give very great advantages in comparison to private banks. For this reason, government employment in the banking sector is quite limited since the overwhelming majority of banks are private and only a few have overseas-owned and operated branches.
In order to minimize the impacts of nepotism, favoritism and cronyism on the organizations, rules and regulations that minimize or prevent these kinds of unfair recruitment, placement and promotion practices need to be put in place by the government (adopted from the U.S. or other developed countries). Where appropriate, attention should be given to adjusting fairly the physical environment, the workload, task design, pacing of work and work schedules to alleviate significant job stress/distress for employees in full consultation with the individuals concerned. Training programs can be provided for managers and supervisors on effective management practices and styles covering the nature of stress and promoting responsible prevention and rehabilitation attitudes towards it. Furthermore, seminars on job stress can be arranged for staff to enable them to identify indicators of stress in themselves and others and to manage it effectively.
Limitations of the Study
There are several crucial limitations to the current study. First, the effects of nepotism, favoritism and cronyism on job stress, job satisfaction, intention to quit and negative word of mouth were investigated in the study. In future studies, other factors and outcomes might be examined such as role stress, organizational commitment and Organizational Citizenship Behavior. Furthermore, future research with a larger sample size and carried out in a different setting would be useful to provide support for generalization of the present findings. Another limitation was that in this study a judgmental sampling method was employed. In future studies probability sampling techniques could be used to strengthen the current findings. The selection of a single industry may also lead to questions about the validity of generalizing the study findings. However, previous research has demonstrated that the selection of a single industry eliminates problems that may emerge from industry differences (Hartline & Ferrell, 1996). Finally, the current study was an investigation of the potential effects of nepotism, favoritism and cronyism and how the employees perceived the consequences. In future studies these practices may be examined from the customer’s point of view.
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Figure 1. The Conceptual Model.
Table 1. Mean Scores of Questionnaire
Note: (N = 576)
Table 2. Structural Equation Models
Appreciation is due to anonymous reviewers.
Huseyin Arasli, PhD, Associate Professor of Management and Organizational Studies, Eastern Mediterranean University, School of Tourism & Hospitality Management, Gazimagusa, North Cyprus. Phone: +90 392 630 2019; Fax: +90 392 365 1584; Email: [email protected]