Putting non-qualified personnel in a decision-making capacity will be detrimental to all the stakeholders in the long run
The untimely death of Sushant Singh Rajput, a talented and budding actor, has left many heartbroken. He symbolised the rise of the common man and was a rare combination of talent and intellect that is often not visible in Bollywood. His succumbing to the pressures of nepotism is a grim reminder that our society has become oblivious to the talent and potential of people who are relegated to the background by cronyism and favouritism. Although partisanship has existed in Bollywood for decades, it is only now that people are openly discussing it. But it is not the only hotbed for nepotism in the country. Indian politics has tried to keep it “within the family” for generations. From Jawaharlal Nehru to Rahul Gandhi, the Congress Party is an apt example of dynasty politics. But they are not alone. Mulayam Singh-Akhilesh Yadav; Bal and Uddhav Thackeray; N Chandrababu Naidu-Nara Lokesh and Biju to Naveen Patnaik to name a few, are some more examples of nepotism in politics. So partisanship is everywhere, in entertainment, in politics and policy-making, and, of course, our workplaces. The word nepotism comes from Latin, with “nepos” meaning nephew, as in the 17th century the Catholic clergy used to give preference to their nephews for positions of authority. Nepotism in itself in not a negative term if preference is given to family qualified for a specific job. However, in most cases, it is not the case and outsiders may be better qualified for the position in the firm.
Partisanship is quite common in family-owned businesses where relatives are given preferential treatment in various aspects like hiring and promotions. With family businesses contributing at least 70 per cent to India’s GDP, most of us may have encountered nepotism at our workplaces at some point of time. Credit Suisse, which maintains a universal database of the 920-largest, family-owned businesses, makes an interesting observation about them. According to it, after achieving success in the first generation, only one-third of the companies maintain their successful track record in the second-generation. By the third generation, this number goes down to 12 per cent and a paltry four per cent make it to the fourth generation.
This innate inability of a family business to flourish across generations may have its origin in nepotism. Organisations can see a dip in performance as more qualified and talented personnel are sidelined to give a chance to family members, who may act as managers without proper training and expertise, endangering financial performance and client-supplier relations. The homogeneity created by the lack of different views from outside the family and the resultant dearth of diversity stifle innovation and creativity, not only reducing productivity but also employee morale. A lingering feeling that family members would be more preferred in promotion and perks could lead to shallow organisational commitment and lower trust in the management.
Competent employees who feel unappreciated would join the competition. The high level of stress and low job satisfaction can trigger a chain of events, ultimately leading to lower customer satisfaction and retention. This pushes organisations to spend more to attract talent through interviewing and customers through advertising. Overall, it is a downward spiral for the organisation. Moreover, conflict-management in family businesses can be very tricky. In some cases, family members are known to avoid potential disagreements arising due to monitoring, evaluating and disciplining each other, adding much fuel to negative performance. On the other hand, partisanship may also bring to the table conflicts of interest between different family members; between family members and other stakeholders; conflicts of identity and concerns regarding reputation. Many a time, an organisation is split into smaller organisations to give one to each of the family members and keep peace. Nepotism can also be considered positive, especially in smaller family businesses and start-ups, where family members volunteer their services or work for very low salaries, taking off the pressure from cash flows.
However, preference is not always bad for an organisation. Research suggests that there are a number of family businesses whose performance is above average. The difference may lie in the types of nepotism prevalent. The first type is entitlement nepotism, where the family member feels entitled to be a part of the business. Generally, business owners who are altruistic in nature feel a compulsion to look out for family members and encourage considerate and peaceful behaviour towards them. However, this altruism can be exploited by the family, who in turn, can have an increased feeling of entitlement. Such behaviour affects firm performance negatively. The second type is reciprocal nepotism, where a family member feels obligated and indebted to be a part of the business. Evidence shows that having family members with reciprocal behaviour leads to superior performance of organisations.
For a family business to survive, thrive and grow, it requires the help of expert professionals who understand the nuances of business. However, if it is culturally required by business owners to rope in their family members to perform certain functions, then the onus of training and making them qualified for a specific job is on the business owner. Putting non-qualified personnel in a decision-making capacity will be detrimental to all stakeholders in the long run. The business owner must ensure equitable treatment of both family and non-family employees. As the saying goes, “You can win the marketplace if you win the workplace.”
(The writer is Associate Professor, Amity University, Noida)
