Nepotism in Family Businesses

Topics: Firm, Corporation, Pope Alexander VI Pages: 3 (1098 words) Published: September 15, 2013
Distinct Questions of the Family Business
Nepotism in Family Businesses

Nepotism is defined as the granting of favors to relatives without regard to merit. While most non-family owned firms exercise strict policies stressing the prohibition of nepotism, the vast majority of family owned businesses are found to have made it common practice to appoint family offspring as successors. In the course of the essay this phenomenon will be discussed critically in terms of firm performance and it will be analyzed when and how a policy of nepotism is favorable or unfavorable.

Motivation is one the most important key success factors of every business, including family businesses. However, nepotism is one of the most severe motivational challenges that are observed in family owned firms. In plenty of cases family logic overrules business reason. This results in the welcoming of family members to the business life regardless to their abilities to contribute to the business (Kets de Vries, 1993). Non-family members who are also employed in this very business suddenly find themselves in highly unattractive positions. If they perceive that there is a sense of preference and that promotions are only given to family members it will affect their motivation and thus their work performance. Non-family member employees will not continue to go above and beyond the business in order to achieve the best possible outcomes for the company. Once a picture of no advancement opportunities and unjust treatment in terms of merit is established, there are three possible consequences. Firstly, high potential employees who are striving for achievements and who are very ambitious will be likely to leave the company in order to look for more career promising options. Secondly, employees who are more averse to changes and have a more laid-back work attitude will stay. Thirdly, future potential employees who could be very important and...

References: Kets de Vries, M.F.R. 1993. The Dynamics of Family Controlled Firms : The Good and the Bad News. Organizational Dynamics: 312-323. New York.
Lee, L., Lim, G., & Lim, W. 2003. Family Business Succession: Appropriation Risk and Choice of Successor. Academy of Management Review, 28 (4): 657-666.
Rivers, W. (2009). Nepotism: Negative or Nice?. Retrieved 2. April 2012, from
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