Workplace favouritism,psychological contract violation and turnover intention: Moderating roles of authentic leadership and job insecurity climate

Abstract

The multilevel investigation examines the impacts of favouritism on non-beneficiaries’ turnover intention by focusing on the mediating role of psychological contract violation and the moderating roles of job insecurity climate and authentic leadership in family firms. Congruent with the theories of relative deprivation, belongingness, and social identity, this paper is among the first to propose and empirically examine how and when favouritism leads to higher or lower turnover intention in family firms. Having utilized time-lagged data from 576 non-beneficiaries who came from 101 work groups in 48 family firms in Turkey, our findings support the following: the significance of favouritism by demonstrating that non-beneficiaries’ turnover intentions are higher in family firms when they perceive favouritism to be high; favouritism in family firms positively influences psychological contract violation; psychological contract violation acts as a mediator of the association between favouritism and non-beneficiaries’ turnover intention; and both job insecurity climate and AL act as moderators of the relationship between favouritism and turnover intention. The theoretical and practical contributions of these findings are discussed.

Keywords

favouritism psychological contract violation turnover intention authentic leadership job insecurity climate human resource management family firms

Introduction

Family firms represent the most common form of business globally as more than two-thirds of all businesses are owned and/or run by families (Barnett and Kellermanns, 2006; Pyromalis and Vozikis, 2009). However, these businesses are often linked with characteristics such as nepotism and favouritism (Padgett and Morris, 2005; Sieger et al., 2011). Favouritism can be defined as special privileges or treatment provided by management to the ‘beneficiaries’, including family members, close friends, townsmen, neighbours and acquaintances (Arasli and Tumer, 2008; Loewe et al., 2008). Therefore, as the opposite of this definition, ‘non-beneficiaries’ can be described as non-family members, non-close friends, non-townsmen, non-neighbours and non-acquaintances who are not provided with any special privileges or treatment by the management. Favouritism extends beyond nepotism by including friends, neighbours and acquaintances in addition to family members. Many studies have suggested that most employees working in these firms are not beneficiary employees (Mitchell et al., 2003), and thus organizational success and development relies mainly on retaining these non-beneficiaries (Barnett and Kellermanns, 2006; Bernhard and O’Driscoll, 2011; Stewart and Hitt, 2012).

Although favouritism remains a crucial phenomenon in family firms, empirical literature on the effects of favouritism in these organizations is scarce. Scholars now know that favouritism sends negative signals, affecting employees’ evaluation of processes such as promotion, appraisal and compensation, as well as their commitment, morale and satisfaction (Abubakar et al., 2017; Arasli and Tumer, 2008; Laker and Williams, 2003). However, academic understanding of the processes and conditions through which favouritism promotes or hinders non-beneficiaries’ turnover intention, which is ‘considered a conscious and deliberate desire to leave the firm within the near future’ (Kalemci Tuzun and Kalemci, 2012: 518), is far from complete and some fundamental pieces are missing. For example, employees’ direct intention to quit in a favouritistic family-run work setting is not a logical and compelling claim without any mediator effect. As suggested by Whetten (1989), scholars need to clarify causal associations in a phenomenon through designating intervening variables between predictor and outcome variables.

Hence, recent research has begun to question the favouritism–turnover intention model and to consider how (through which mediator) and when (in the presence of which moderators) favouritism might result in higher or lower turnover intention in family firms (Abubakar et al., 2017; Arasli and Tumer, 2008). Initially, we aim to unlock the ‘black box’ by examining non-beneficiaries’ perceptions of favouritism, explicitly focusing on the mechanism that results in turnover intention. Drawing on belongingness theory, we introduce the concept of psychological contract violation (PCV), which ‘refers to the sense of anger and betrayal that an employee feels when he/she believes that the organization has failed to keep its promises’ (Suazo, 2009: 142). PCV is anticipated to be a key factor that connects non-beneficiaries’ favouritism perceptions and their intention to leave the family firm. Subsequently, drawing on the theory of social identity, which claims that employees of an organization have a tendency to abide by workplace norms when they classify their identity based on their organizational membership, this study suggests the moderation impact of authentic leadership (AL); such leaders could create higher perception of moralities and retain employees through moderating unfair displays of favouritism (Riggio and Saggi, 2015). This represents the important research question to be empirically investigated. Further, drawing upon relative deprivation (RD) theory, which suggests that an insecure work climate may lead non-beneficiaries to lose hope regarding their future career and worry about losing their job in the near future, we attempt to advance understanding of the factors triggering the effects of favouritism on non-beneficiaries’ turnover intention by considering the potential moderating role of insecure work climate at the group level. Job insecurity is defined as an employee’s ‘perceived powerlessness to maintain desired continuity in a threatened job situation’ (Greenhalgh and Rosenblatt, 1984: 438). Positing job insecurity as an individual work stressor ignores the possibility of it being a contextual stressor, acknowledged as collective and shared perceptions (Sora et al., 2009), and thus we consider this approach at the group level.

This multilevel study makes at least four contributions to the literature. First, it contributes to the family firm literature by examining the favouritism–turnover intention model from the perspective of non-beneficiaries in family firms. Such an exploration is crucial because family firms are often considered as extremely favouritistic work settings that are unfavourably viewed by non-beneficiaries. However, no known empirical research has investigated the consequences of favouritism for non-beneficiaries in family firms. Second, this study contributes to research on belongingness theory by hypothesizing and empirically analysing how the detrimental effects of favouritism (frustrated belongingness leads to negative outcomes) influence non-beneficiaries’ turnover intention. By applying this theory, we can answer a critical question regarding the mechanisms by which favouritism is associated with turnover intention. Third, by focusing on leaders’ behaviours towards a work unit as a whole (Arici, 2018), this multilevel study extends earlier investigation of AL by analysing it as a group-level variable regarding the relation of favouritism and turnover intention. Finally, there is a lack of previous studies investigating job insecurity at the group level, so this multilevel research adds to the body of knowledge with respect to the construct.

Literature review

Theoretical views of favouritism focus on the inclination of individuals to favour members of their own social group over others (McNamara et al., 2016). The existence of favouritism in the work setting sends a negative signal to non-beneficiaries that the business does not contribute to their human capital (Abdalla et al., 1998; Arasli et al., 2006). Favouritism for these employees is a source of stress and workplace conflict (Kwon, 2006), which results in poor decisions, demotivation and loss of productivity (Özler and Buyukarslan, 2011). Although relatively few in number, some studies have investigated unfair treatment due to favouritism in human resource (HR) practices with relatively consistent findings (Abubakar et al., 2017; Arasli and Tumer, 2008; Arasli et al., 2006; Rustemli et al., 2000). For example, Estiri et al. (2018) found that a high perception of favouritism negatively influenced employees’ sense of belonging, which may lead to violation of the psychological contract between employee and employer. A psychological contract is a supposed set of mutual obligations between parties in an association (Robinson and Morrison, 2000; Robinson and Rousseau, 1994). Incongruence and lack of communication in this relationship may result in PCV (Hill et al., 2009). Extant literature shows that a perceived violation of the psychological contract influences such important outcomes as job satisfaction and intention to quit (Robinson and Rousseau, 1994; Suazo, 2009).

The effects of favouritism on HR practices in family firms might be triggered by an insecure climate dominating the work setting. However, with the exception of Sora et al. (2009, 2013), many studies have to date focused on employees’ perception of job insecurity at the individual level and found a significant correlation with crucial outcomes (Ito and Brotheridge, 2007; Murphy et al., 2013; Silla et al., 2010), but there is still a lack of studies examining insecure climate at the group level in family firms.

The authenticity approach originates from Shakespeare’s Polonius, who states in Hamlet, Act 1, Scene 3: ‘to thine own self be true’ (Shakespeare, 1901). AL has been a fundamental element of ethical leadership studies over recent decades and it has achieved incremental validity over other leadership approaches (Arici, 2018; Avolio et al., 2004; Ilies et al., 2005; Liu et al., 2018). AL is defined as

a pattern of leader behavior that draws upon and promotes both positive psychological capacities and a positive ethical climate to foster greater self-awareness, an internalized moral perspective, balanced processing of information, and relational transparency on the part of leaders working with followers, fostering positive self-development. (Walumbwa et al., 2008: 94)

Drawing on the literature, we first claim that the relationship between favouritism and non-beneficiaries’ turnover intention in family firms is mediated by PCV and moderated by insecure climate and AL (Figure 1).

Figure 1.

Study model.

Hypotheses

It is difficult to determine whether discrimination within a firm manifests itself in the form of favouring one’s own group (Brewer, 1996). According to RD theory (Crosby, 1976; Folger, 1986), this discrimination can result in such responses as low commitment, high intention to quit (Mollica, 1999), and reluctance to collaborate (Melkonian et al., 2011). RD theory argues that if employees perceive that changes regarding compensation or reward practices will affect them negatively, their perceptions of deprivation increase because of a perceived inequality and power imbalance (David and Singh, 1993). In family firms, non-beneficiaries, ‘often treated as second-class citizens’ (Dyer, 2003, 2006), feel at a disadvantage compared to beneficiaries in areas like promotion and compensation (Hauswald et al., 2016). The unfair practices deriving from favouritism, like pay cuts and undesirable job changes (Buunk and Janssen, 1992; Larsson et al., 2001), can be potential sources of RD. That is, in the presence of favouritism, non-beneficiaries are more likely to display intention to quit since it is very hard for them to be promoted when faced with competition from beneficiaries in a family firm, compromising standards of professional practice (Neckebrouck et al., 2018). In addition, Barrick and Zimmerman (2005) suggested that having close friends, acquaintances or family members within the firm might increase employees’ organizational commitment and decrease their intention to leave. Several research studies have provided empirical evidence for this assumption. Breaugh and Dossett (1989) revealed that employees who have privileged ties with close friends, acquaintances or family members working in the same business are less likely to leave their organization. In a similar vein, Lee (2006) found that family cohesion was negatively associated with family employees’ intention to quit. Khanin et al. (2012) also revealed that family members’ satisfaction with the job in the family firm was negatively related to their turnover intention. However, there is a lack of previous research examining the concept of turnover intention from the non-beneficiaries’ perspective, so this current research adds to the body of understanding in the family firm literature by focusing upon the association of favouritism and non-beneficiaries’ turnover intention. Hence, the hypothesis (H) below is proposed:

H1: Non-beneficiaries’ turnover intentions are higher when they perceive favouritism to be high in family firms.

According to belongingness theory, organizations’ failure to discharge their responsibilities can be a fundamental source of frustration in terms of employees’ belongingness (Bashir and Nasir, 2013). Rousseau (2001: 512) described the psychological contract as ‘an employee’s belief concerning the situations and circumstances of a reciprocal exchange association between the focal person and another party’. Managing employees justly and equitably makes them feel that the organization has fulfilled its part of the psychological contract (Flood et al., 2001), whereas a violation takes place when one party in the relationship feels that the other has failed to discharge the promised responsibilities (Cohen, 2013; Robinson and Rousseau, 1994). The psychological contract includes an implicit agreement that anticipates the two parties acting fairly with one another (Payne et al., 1998). The violation of a contract cannot happen when beneficiaries and non-beneficiaries share similar thoughts and beliefs regarding responsibilities owed to each party (mutuality) and how those responsibilities will be correspondingly discharged by each party (reciprocity) (Ward et al., 2007). However, in a favouritistic workplace, HR practices cannot be carried out justly and transparently (Arasli et al., 2006; Chrisman et al., 2013) because beneficiaries may be supported and promoted unfairly, being rewarded not because of high performance but because they are favoured by the employer (Caroline, 2015). The preferential treatment of favouritism towards beneficiaries may hinder the creation of common beliefs among beneficiaries and non-beneficiaries in family firms because of perceived inequality and discrimination in supervision (David and Singh, 1993; Neckebrouck et al., 2018). Thus, understanding how PCV evolves and the potential influences on family businesses’ development and sustainability is vital because previous psychological contract studies have revealed violation to be associated with increased employee turnover intention and reduced trust, organizational commitment and organizational citizenship behaviours (Cohen, 2013; Robinson, 1996; Robinson and Morrison, 2000; Suazo, 2009). Accordingly, we first propose the following hypothesis:

H2: Perceived violations of psychological contract are higher when non-beneficiaries perceive favouritism to be high in family firms.

Mediating effect

The negative job-related changes affecting non-beneficiaries which arise from the unfair effects of favouritism may be among the main factors of perceived PCV within the organization. Favouritism in a family business also induces the feeling of unfairness, particularly among the unfavoured followers (Barnett and Kellermanns, 2006). Studies have shown that perceptions of unfairness are related to PCV, which leads to negative workplace attitudes and behaviours, such as employee withdrawal and counterproductive behaviours (Colquitt et al., 2001; Cropanzano et al., 2001). Scholars have also found that PCV causes work satisfaction and commitment to work to decrease (Anderson and Schalk, 1998; Guzzo and Noonan, 1994; Robinson and Morrison, 2000).

Furthermore, several scholars have suggested that individuals who are socially alienated and thus have frustrated needs to belong are more likely to display negative behaviours (Twenge et al., 2007) than those who are socially accepted. Therefore, when their belongingness needs are frustrated, individuals respond negatively and impolitely as the fulfilment of a fundamental need has been rejected. It has been claimed that thwarted belongingness needs can hinder long-term goal achievement by disrupting the self-regulation of socially acceptable intentions and behaviours (Blackhart et al., 2006). In their seminal study concerning belongingness theory, Baumeister and Leary (1995: 506) also contended that ‘actual, possible, or expected alterations in the state of belonging could trigger reactions, including positive ones that increase the feeling of belonging and negative ones that reduce it’. In sum, in a favouritistic work environment, if employers fail to retain a balance by not fulfilling their obligations, PCV occurs, which can result in negative employee outcomes. Several studies have empirically tested and proved that PCV functions as a mechanism by which a predictor variable might be transformed into various negative employee job outcomes, behaviours and attitudes (Cohen, 2013; Hill et al., 2009; Suazo, 2009). In accordance with this set of arguments, we expect that PCV mediates the relationship between favouritism and non-beneficiaries’ turnover intention:

H3: The relationship between favouritism perceived by non-beneficiaries and their turnover intention is mediated by PCV in family firms.

Moderating effects

RD theory suggests that the impacts of dismissal are not restricted to the fired workers; they also influence ‘survivors’ remaining with the organization (Cho et al., 2014). If organizational members are laid off, the surviving non-beneficiaries (out-group members) lose important links (Murphy et al., 2013). Essentially, the expected negative job changes for non-beneficiaries in a family firm are related to a general insecurity index and the anticipations are positively associated with anxiety over losing one’s job (Ashford et al., 1989; Brockner et al., 1992). Several researchers suggested that employees who have family or friendship ties with the family business enjoy high job stability (Gomez-Mejia et al., 2001; Neckebrouck et al., 2018; Schulze et al., 2001), whereas non-beneficiaries may suffer from particularly complex and uncertain situations (Mitchell et al., 2003). Thus, the non-beneficiaries’ feeling of job insecurity, like any stressor, may result in negative withdrawal reactions (Cheng and Chan, 2008; Chirumbolo and Hellgren, 2003; Sverke et al., 2002), such as higher levels of turnover intention, which characterizes the workplace environment in family firms among non-beneficiaries (Neckebrouck et al., 2018).

An important body of study has concentrated on investigating the relationships between job insecurity and employees’ job attitudes and behaviours (Baillien and DeWitte, 2009; Ouyang et al., 2015; Zoghbi-Manrique-de-Lara et al., 2017). However, the overwhelming majority of the investigations has concentrated on understanding job insecurity and its effects on work outcomes at the individual level (Sora et al., 2013). Nevertheless, although the link between job insecurity and its consequences reveals noteworthy information about individual distinctions, we must keep in mind that individuals are inseparable parts of departments and organizations. Sora et al. (2009) first proposed that employees in the organization can share their feelings of insecurity, leading to a shared sense, or climate of insecurity appearing in the business. Hence, the job-insecurity construct, according to Greenhalgh and Rosenblatt (1984), can be perceived as a set of shared perceptions of powerlessness to safeguard threatened jobs in an organization. Therefore, multilevel analysis of job insecurity climate is vitally important (Sora et al., 2009). Previous research has also suggested that future study should include other outcomes, like intention to leave, to expand the understanding of the outcomes of job insecurity climate, and should examine whether job insecurity climate plays a moderator role at the group level (Sora et al., 2009, 2013). Nevertheless, job insecurity climate as a group-level construct has not been investigated, despite these recommendations. Applied to our study, favouritism may be more strongly associated with non-beneficiaries’ turnover intention in more insecure climates compared to the less insecure climate of family firms. Therefore, the following hypothesis is formulated:

H4: Job insecurity climate in family firms moderates the relationship between favouritism perceived by non-beneficiaries and their turnover intention in which this relationship could be more positive and stronger under more insecure climates than less insecure climates.

In contrast to the above-mentioned claim proposing the triggering effect of job insecurity climate on the favouritism–turnover intention relationship, whether this relationship may be weakened by a fair and just leadership style is another question this study aims to answer. We seek an empirical response to the question following SIT, which suggests that employees finding their self-identification with a family firm makes them more likely to stay within the firm and strive in the name of the organization (Dutton et al., 1994). Congruent with this, Avolio et al. (2004: 807) asserted that authentic leaders ‘raise followers’ identification through producing a higher level of moral values, honesty and integrity for handling the workers. In a similar vein, Ilies et al. (2005: 383) asserted that ‘authentic leaders’ high self-awareness and their authentic behavioral and relational orientation could help the employee find their identity with the leader and the firm’. AL represents such a continuum: the leader is profoundly conscious of how he or she conceives of and treats employees, of the work environment he or she manages, and the way he or she would be sensed by followers because he or she recognizes the values, moralities, understanding, and strengths of himself/herself and others (Avolio et al., 2004).

According to Mhatre et al. (2012), since career progress depends on the favour of familiars even in the 21st century, nepotism or favouritism is obviously linked with leadership. They asserted that unfair treatment through favouritism can be considered as a shape of ‘unethical’ or, at the very least ‘inauthentic’, leadership practices. From the theoretical perspective, executives who are likely to treat followers unjustly, for example by aiding or developing close relationships with beneficiaries but not with non-beneficiaries, will discriminate and alienate non-beneficiaries, impair harmony in the family firm, and decrease the likelihood of complete identification (Hogg et al., 2005). Supporting this theoretical view, in Riggio and Saggi’s (2015) study, it was recommended that leaders should overcome the perceptions of favouritism. Mhatre et al. (2012), in their theoretical study, contended that AL, with its relational clarity and sense of justice, could be an efficient leadership model for executives and supervisors to adopt when faced with perceptions of favouritism. Kalshoven et al. (2011) confirmed this argument by positing that leaders with high fairness are less likely to display favouritism among followers.

Therefore, logically, when managers lead according to AL rules, they would create a meritocracy and increase employees’ identification, even in a favouritism-oriented family firm, which means that the leader can keep the qualified non-beneficiaries in the family business by successfully moderating the effects of favouritism on turnover intention. Previous research has shown that AL works as a moderator in organizational studies (Arici, 2018; Tzinerr and Barsheshet-Picke, 2014). This is, of course, an empirical question which must be analysed, because this multi-level study is one of the first to suggest the moderator role of AL upon the favoruitism-turnover intention relationship. Therefore we propose the following:

H5: AL in family firms moderates the relationship between favouritism perceived by non-beneficiaries and their turnover intention in which this association could be weaker for non-beneficiaries managed by authentic leaders than non-beneficiaries not managed by such leaders.

Methodology

Procedure

Regarding the information gained from the Ankara Chamber of Commerce at the time of the present study, there were 82 family firms in the hospitality industry including one-, two- and three-star hotels, boutique hotels, hostels and one aparthotel in Ankara, Turkey. The managements of 48 family businesses agreed to participate in our study. One researcher was appointed to distribute the survey kits to the employees. Each participant was given a cover letter consisting of, first, a question concerning whether he or she had a family member or a familiar person (i.e. close friend, inhabitant of the same town, neighbour or acquaintance) in the management team of the family firm so as to differentiate the study sample, followed by a short passage explaining the purpose of this research and a guarantee of anonymity, as well as the questionnaire. We used a judgemental sampling method to differentiate the non-beneficiaries from the population based on the aforementioned question. Responses were directly received by the researcher.

Based on the recommendations of Podsakoff et al. (2003), a one-month time lag was utilized between data-gathering periods of the study variables in order to mitigate the common method bias. In total, 810 surveys were given to the participants at Time I, and 656 (81%) responded. Subsequently, 656 Time II survey instruments were delivered to the same respondents, with 581 questionnaires returned. Five uncompleted questionnaires were excluded. We finally obtained 576 valid samples, which came from 101 work groups. The response rate was 87.8% for the latter sample, and 71.1% for the former sample. The results of independent-sample t-tests (P < 0.05) demonstrated that there were no distinctions among participant employees responding to Time I and Time II surveys and those filling out only Time I surveys. The work groups comprised family firms’ front-line employees, such as front-office and housekeeping attendants, waiters and other departments’ employees, such as those from the HR department.

Measures

A total of 12 items for favouritism were drawn from Arasli et al.’s (2006) and Arasli and Tumer’s (2008) studies. A four-item scale adapted from Robinson and Morrison (2000) measured PCV. Four items from DeWitte’s (2000) study were adapted to measure job insecurity and three items adapted from Singh et al. (1996) measured employee turnover intention. To measure AL, 16 items were taken from Walumbwa et al.’s (2008) study. A five-point Likert scale was applied to measure all items, rated from ‘strongly disagree’ (1) to ‘strongly agree’ (5).

In line with past research (Cho et al., 2014; Lee et al., 2000; Sieger et al., 2011), we used four different control variables in our study. First, we controlled for employees’ gender, because female workers are less likely to leave their organization than male workers (Karatepe, 2014). Second, we controlled employee age to examine its utility as a control variable in the relationships demonstrated in the model. Third, we controlled for employees’ education level, because employees’ intentions in a family firm may differ according to their education levels. Finally, we controlled for employees’ organizational tenure, as the tenure may influence employees’ trust in their leader and their interpretations of the family firm’s fulfilment of the psychological contract (Lee et al., 2000).

The questions of the two surveys were initially written in English and later translated into Turkish using the method of back-translation (McGorry, 2000). Afterwards, two professional scholars, fluent in English and Turkish, checked that all the questions had the same meanings in both languages. The survey underwent a preliminary pilot test with 25 participants, which proved the phrasing, measuring, and the order of the items were accurate.

The participants consisted of 381 males (66.1%) and 195 females (33.9%). As for the age of respondents, one-third of the participants were aged between 26 and 33, 19% between 18 and 25, and 27% between 34 and 41, with the remainder older than 41. In terms of education, 69.8% of the respondents had a high school diploma or below, 18.2% had a junior college diploma, and 12% had a bachelor’s or higher degree. Over 50% (54.2%) of the respondents had worked at the same organization for three or less years. About the department, 31.8% served as F&B clerks, 29.7% worked in the housekeeping department, and 25.5% worked as front-desk clerks. The remainder worked in other departments, such as HR and accounting.

Data analysis

We utilized four analytical approaches to examine the data. First, as suggested by Anderson and Gerbing (1988), we performed confirmatory factor analysis (CFA) in order to test the constructs’ convergent validity and discriminant validity utilizing Analysis of Moment Structures (AMOS) 24.0. The reliabilities of the variables were measured using the commonly accepted threshold of 0.70. Second, we conducted a Pearson correlation test in order to gauge the relationships between the variables. Third, to analyse the multilevel data, hierarchical linear modelling (HLM) 7 was performed. The guidelines produced by Preacher and Hayes (2004) were utilized to examine the mediation analysis.

Results

Validation of the measurement model

First, Cronbach’s alpha was utilized to check the reliability of the constructs. All coefficient alphas were greater than the commonly accepted cut-off level of 0.70. Since the data on the study variables were gathered from a single source, CFA was conducted to test whether these factors were distinct (see Appendix 1). CFA demonstrated that factor loadings were significant, which were between 0.66 and 0.93 (p < 0.05). In addition, all the items demonstrated accurate composite construct reliabilities (CCR), which ranged from 0.81 to 0.95. Average variance extracted (AVE) scores of the items ranged from 0.57 to 0.71, showing adequate convergent validity. In addition, the AVE scores of each construct were higher than the shared variance, proving discriminant validity.

Aggregation statistics

We examined the practicability of job insecurity and AL at the group level by aggregating the scores of respondents from each work unit. Following James et al.’s (1993) r_wg, interrater agreement was analysed. We obtained a mean of 0.72 and a median value of 0.74 for job insecurity, and a mean (0.79) and median (0.80) values for AL exceeded the threshold level of 0.70 (James et al., 1993).

The one-way ANOVA results indicated that the among-groups variance for job insecurity (p < 0.001) and AL (p < 0.001) were significant. We obtained an intra-class correlations (ICC)(1) value of 0.37 and a reliability of group mean ICC(2) value of 0.77 for job insecurity, and an ICC(1) value of 0.19 and an ICC(2) value of 0.57 for AL. According to Biemann et al. (2012) and Schneider et al. (1998), these ICC results are acceptable. Therefore, aggregation of the constructs of job insecurity and AL at the group level has been validated.

Descriptive statistics

Table 1 shows that the relations between the variables were congruent with our expectations. To illustrate, favouritism had a positive relationship with PCV (r = 0.143, p < 0.01) and turnover intention at the individual level (r = 0.133, p < 0.01). At the group level, there was a reverse relationship between AL and job insecurity climate (r = −0.332, p < 0.01).

Table 1.

Means, SDs and correlations.

Constructs	Means	SD	1	2	3	4	5	6
Employee level (level 1)
1. Gender	1.34	0.47	–
2. Age	2.49	1.07	0.002	–
3. Education	2.21	0.93	0.168**	−0.179**	–
4. Organizational tenure	2.64	1.4	−0.076	0.445**	−0.195**	–
5. Favouritism	2.55	0.81	0.095*	0.049	0.03	−0.022
6. PCV	2.12	0.97	−0.029	0.140**	−0.117**	0.161**	0.143**
7. Turnover intention	2.3	1.1	−0.066	−0.042	−0.028	0.057	0.133**	0.204**
Group level (level 2)
1. Job insecurity climate	2.21	1.12	–
2. Authentic leadership	3.02	0.74	−0.332**	–

Notes: For employee level measures, n = 576; for group level measures, n = 101. Gender is coded 0 = male; 1 = female. Age is coded 1 = 18–25; 2 = 26–33; 3 = 34–41; 4 = 42–49; 5 = above 49. Education levels are coded 1 = secondary or below; 2 = senior high school; 3 = junior college; 4 = Bachelor’s degree; 5 = Master’s or higher degree. Tenure is coded 1 = below 1 year; 2 = 1–3 years; 3 = 4–6 years; 4 = 7–9 years; 5=over 9 years.

p < 0.05; ^** p < 0.01.

PCV: psychological contract violation; SD: standard deviation.

Hypothesis testing

In order to warrant that multicollinearity was not a problem in our dataset, we used the variance inflation factors (VIF) analysis. The results demonstrated that VIF numbers were below the commonly accepted cut-off level of 10 (Gujarati, 2003), showing that the empirical findings are not biased by multicollinearity.

In the test of HLM, the employee variables (favouritism, PCV and turnover intention) were classified at level 1 and the group variables (job insecurity climate and AL) were classified at level 2. Table 2 demonstrates that HLM analyses indicate a significant and positive relationship between favouritism and employees’ turnover intention (Model 4, γ = 0.13, p < 0.05), and between favouritism and PCV (Model 2, γ = 0.17, p < 0.01), supporting H1 and H2 respectively.

Table 2.

Results of hierarchical linear modelling.

	PCV		Turnover intention
Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8	Model 9	Model 10
Intercept	1.95^** (0.18)	1.69^** (0.13)	2.56^** (0.21)	2.57^** (0.22)	1.48^** (0.16)	2.73^** (0.20)	2.23^** (0.19)	2.68^** (0.20)	2.17^** (0.18)	2.31^** (0.04)
Control variables
Gender	−0.02 (0.09)	−0.04 (0.08)	−0.14 (0.09)	−0.15 (0.10)	−0.15 (0.10)	−0.16 (0.09)	−0.18 (0.09)	−0.15 (0.09)	−0.16 (0.09)	−0.15 (0.08)
Age	0.07 (0.04)	0.06 (0.04)	−0.09 (0.05)	−0.09 (0.05)	−0.11* (0.05)	−0.06 (0.04)	−0.08* (0.04)	−0.05 (0.04)	−0.07 (0.04)	−0.07 (0.05)
Education	−0.08 (0.05)	−0.09* (0.04)	−0.01 (0.05)	−0.02 (0.05)	−0.01 (0.05)	−0.02 (0.05)	−0.02 (0.05)	−0.02 (0.05)	0.01 (0.05)	0.02 (0.05)
Tenure	0.07^* (0.03)	0.08^* (0.03)	0.06 (0.04)	0.07^* (0.04)	0.05 (0.03)	0.06 (0.04)	0.03 (0.03)	0.06 (0.03)	0.01 (0.03)	0.03 (0.03)
Independent variable (level 1)
Favouritism		0.17^** (0.05)		0.13^* (0.06)	0.14^* (0.06)	0.17^* (0.06)	0.14^* (0.06)	0.19^** (0.06)	0.18^** (0.07)	0.19^** (0.07)
Mediator (level 1)
PCV					0.22^** (0.05)
Moderators (level 2)
AL						−0.46^** (0.17)	–0.64^** (0.10)		−0.32^** (0.12)
JIC								0.34^** (0.09)	0.42^** (0.05)	0.33^** (0.06)
Interactions
Favouritism × AL							−0.43^* (0.18)		−0.22^* (0.18)
Favouritism × JIC									0.35^** (0.09)	0.29^** (0.11)
R ² _total	0.03	0.05	0.01	0.02	0.05	0.07	0.05	0.1	0.08 0.11

Notes: For employee level measures (level 1), n = 576; for group level measures (level 2), n = 101. Entries corresponding to the predicting variables are estimations of the fixed effects, γ, with standard errors appearing in parentheses.

p < 0.05; ^**p < 0.01.

AL: authentic leadership; JIC: job insecurity climate; PCV: psychological contract violation.

Mediation effect testing

The mediating effect analysis asserted in H3 required an analysis of conditions suggested by Preacher and Hayes (2004). The procedure consists of predicting the influence of the independent variable (favouritism) on the intervening variable (PCV) (Table 2, Model 2, γ = 0.17, p < 0.01), estimating the influence of the intervening variable on the dependent variable (turnover intention) (Model 5, γ = 0.22, p < 0.01), while controlling for the influence of the independent variable (Model 5, γ = 0.14, p < 0.05), and bootstrapping the sampling distribution of the indirect influence and creating a confidence interval with the empirically produced bootstrapped sampling distribution. The indirect effect was estimated to lie between 0.015 and 0.070 with 95% confidence and normal theory tests for indirect influence (z = 2.72, p < 0.01). Given that zero is not in the 95% confidence interval, it could be indicated that the indirect influence is significantly distinct from zero, and that PCV mediates the effect of favouritism on turnover intention in family firms, providing support for H3.

Moderation effect testing

H4 predicted that job insecurity climate is expected to moderate the link between favouritism and turnover intention. As seen in Table 2, the data reflected this proposition, which suggests a significant cross-level interaction impact between job insecurity climate and favouritism (γ = 0.35, p< 0.01, see Table 2, Model 9). Figure 2 shows the significant effect (Job insecurity climate × Favouritism) on turnover intention graphically. It was found that the interaction between the two constructs was greater with a high job insecurity climate (one standard deviation above the mean) than with a low job insecurity climate (one standard deviation below the mean). Furthermore, drawing on the procedure recommended by Preacher et al. (2006), a simple slope of the regression of favouritism on turnover intention within a high job insecurity climate was significant (simple slope = 0.53, t = 4.24, p < 0.01). Within a low job insecurity climate, the relationship between favouritism and turnover intention was non-significant (simple slope = −0.17, t = −1.58). Therefore, the effect of favouritism on turnover intention was strongly positive in family firms with a high job insecurity climate. Conversely, the association is much weaker and non-significant in a less insecure climate. Thus, H4 is supported.

Figure 2.

Moderating effect of job insecurity climate.

It was proposed in H5 that AL should moderate the relationship between favouritism and employee turnover intention. The results in Table 2 confirm that there is a significant interaction effect of favouritism and AL on the employees’ turnover intention (see Table 2, Model 7, γ = −0.43, p < 0.05). A simple slope analysis also revealed that the relationship between favouritism and turnover intention was positive and significant when the level of AL was low (simple slope = 0.56, t = 2.47, p< 0.05). When the AL was high, the relationship was found to be non-significant (simple slope = −0.30, t = −1.52). Thus, in keeping with H5, AL reduces the strength of the positive effect of favouritism on employees’ turnover intention. In other words, the relationship is strongly positive and significant when AL principles are not applied in family firms (Figure 3). These results support H5.

Figure 3.

Moderating effect of authentic leadership.

Discussion

Based on RD theory, belongingness theory and SIT, our research is among the first to propose and empirically examine how and when favouritism leads to higher or lower turnover intention in family firms. Our findings support the significance of favouritism by demonstrating that non-beneficiaries’ turnover intentions are higher in family firms when they perceive favouritism to be high (H1). The strong influence of favouritism on employee outcomes is congruent with past studies analysing the influences of favouritism on other employee behaviours and attitudes, such as cynicism (Abubakar et al., 2017), job stress and job satisfaction (Arasli and Tumer, 2008).

Our findings also support H2; favouritism in family firms positively influences PCV. From the theoretical perspective, existing literature has clarified that favouritism has a negative effect on employee belongingness, which leads to a perceived PCV (Cohen, 2013; Estiri et al., 2018; Neckebrouck et al., 2018). Our findings empirically support the supposition by revealing the positive association of favouritism and PCV in family firms.

Finding support for H3, which introduces PCV as a mediator of the association between favouritism and non-beneficiaries’ turnover intention, demonstrates that PCV works as a mechanism by which favouritism is translated into turnover intention. Our findings reveal that favouritism perceived by non-beneficiaries positively affects perceived PCV, which in turn has a positive influence on non-beneficiaries’ turnover intention. This supports previous research in which the mediating role of PCV was revealed (Cohen, 2013; Hill et al., 2009; Suazo, 2009).

Filling an important gap in the family firm literature, our findings also reveal the moderator role of job insecurity climate, which helps to understand the factors triggering the effects of favouritism on turnover intention (H4). Recent literature has suggested that job insecurity can be considered as a group-level construct in organizational studies (Sora et al., 2009, 2013). Our findings empirically support the supposition by applying this approach at the group level.

Findings also support H5, which proposed AL as a moderator of the relationship between favouritism and turnover intention, revealing that this leadership style could be an important factor mitigating the effects of favouritism on non-beneficiaries’ turnover intention in family firms. The theoretical and managerial contributions of our results are elaborated in the following.

Theoretical contributions

This empirical research contributes to the favouritism literature in a number of ways. The first contribution concerns the findings that favouritism is related to non-beneficiaries’ intention to quit. In short, we considered turnover intention from the perspective of non-favouritism beneficiaries in the field of favouritism research in family firms at the individual level. In other words, this research has furthered understanding as the source of previous research has been full-time employees in different kinds of service sector, for example banking, education, finance, and so on.

Second, this study makes another valuable contribution since it tries to answer a critical question regarding the mechanism through which favouritism is associated with turnover intention. With respect to the non-beneficiaries’ perspective of turnover intention, our suggestion is based on previous studies regarding the relationship between favouritism and turnover intention at the individual level. In particular, we claimed that the highly favouritistic environment of family firms tends to raise turnover intention, which may make non-beneficiaries feel psychologically and mentally unsafe (helpless, isolated, frustrated or ambiguous). As the perceived favouritistic practices are diffused within the family firm context, employees may feel that promises and obligations are not kept and, as a result, the psychological contract between management and followers is broken, leading to turnover intention based on belongingness theory. Our findings also signal the possibility of other potential mediators, since PCV only mediated the aforementioned relationship.

Third, this study contributes to the literature because we aimed to examine job insecurity climate and AL as possible moderators of the relationship between favouritism and turnover intention. We tested these relationships first by using a multi-level analysis that nested employees within their departments. Such a framework allowed us to aggregate the employee evaluations. To illustrate, job insecurity climate was taken as an external stressor at the group level, following Sora et al. (2009). We associated job insecurity climate and AL with non-beneficiaries’ reporting of favouritism and turnover intention. We first found that such a relationship was moderated by the job insecurity climate. Specifically, when the work atmosphere was highly insecure in the family firm, the perception of favouritism had a stronger positive relationship with employee turnover intention. This means that intention to quit also develops from environmental stressors as a result of this cross-level interaction; that is to say job insecurity climate in a favouritistic family firm makes it difficult to keep and retain talented workers (Chrisman et al., 2013; Neckebrouck et al., 2018; Pérez-González, 2006). In contrast, AL and favouritism interaction reduced the turnover intention in family firms, which contributes to the explanation of the variance in non-beneficiaries’ reporting of intention to quit. The association between favouritism and intention to leave was weaker under the condition of high AL. This is another invaluable finding, which reveals AL’s vital role in retaining competent workers in family businesses. This finding endorses the assertion of Pittino et al. (2016) that benevolent family business HR applications increase workers’ intention to remain (Neckebrouck et al., 2018). This important finding also responds especially to the call for further research by Mhatre et al. (2012), who claimed that AL may be a highly effective approach to mitigate perceptions of favouritism.

Practical contributions

Management implications based on the findings could be used by family firms’ managers and/or owners to retain competent non-beneficiaries in the family business. The present study shows that favouritism is an unprofessional challenge, offering privileges only to family members, friends, neighbours and acquaintances instead of the family business as a whole. Thus, the unfair and discriminatory practices of favouritism negatively affect employee relationships and motivation, that raises non-beneficiaries’ intention to quit as a response. To reduce the level of employee turnover intention, family firm managers should develop fair HR practices rather than unfair displays of favouritism. Hence, managers must improve meritocracy in the family business.

Our findings also reveal that favouritism is an antecedent of PCV in family firms. Unfair and unjust practices of favouritism result in PCV, particularly between non-beneficiaries and the employer, because the promises initially given by the employer, particularly in hiring and promotion decisions, have been broken because the employer prioritizes meeting beneficiaries’ expectations instead of those of the family business as a whole (Neckebrouck et al., 2018). Therefore, family firm managers should adopt a meritocratic and professional HR system based on fairness and equity because the success of the family firm relies on the employees’ commitment, which cannot be realized by only a traditional hierarchy based on written contracts, but which disregards the psychological contracts, which are much more important agreements between the employees and the organizations in terms of obtaining more committed employees, as suggested by Flood et al. (2001).

We also found that PCV has a mediating role on the association of favouritism and turnover intention. In other words, as a result of favouritism perceptions, the non-beneficiaries’ need to belong to the family firm is thwarted, resulting in employees’ turnover intention, because employees may feel their organization is failing to discharge its promised equitable and fair obligations. Therefore, family firm owners or managers should pay more attention to keeping their promises and obligations towards employees, including non-beneficiaries.

Our findings also reveal a noteworthy implication, namely that an insecure work atmosphere stimulates non-beneficiaries’ intention to leave under favouritistic conditions. Family firms should take care of this atmosphere and aim to create a fair and favourable climate for workers. Thus, if family businesses can reduce job insecurity by utilizing clear and fair management policies, this will mitigate the negative effects on employee job outcomes in family firms.

One of the main managerial contributions is the importance of AL in mitigating the effect of favouritism on employees’ turnover intention. AL may be effective in reducing unfair displays of favouritism because these procedures are incongruous with authentic leaders’ moral principles. For management in family businesses, this result can be applicable to mitigate the turnover rate among non-beneficiaries in family firms, which negatively impacts the standard of the labour (Bassanini et al., 2013; Neckebrouck et al., 2018; Verbeke and Kano, 2012). In family firms, therefore, training programs that target developing AL abilities and competencies need to be conducted for senior managers and mid-level supervisors, to provide significant understanding and experience in the short term for senior positions, and to enable them to provide favourable messages to lower-level employees in the long term, because specific forms of leadership behaviour can be learnt and adjusted (Wu et al., 2013).

Limitations and future research directions

Common method variance could restrict the study findings because of the data obtained from a single resource, although the threat of this bias driving the findings of this study is considerably diminished by the utilization of time lag and CFA.

Second, the data in our research were collected from family firms operating in the hospitality industry in Turkey. The same hypothesized relationships could be tested by gathering data from various cultures, countries, and sectors to allow a better understanding of the generalizability and restricting conditions of our proposed framework. Directions for further investigation consist of a cross-cultural examination of the hypothesized relationships depicted in the research model.

Third, the potential effect of other leadership styles, such as transformational leadership in family firms, has not been investigated in the study. Examining the potential moderation effect of other approaches in the relationship of non-beneficiary employees’ favouritism perceptions and their turnover intention could prove valuable.

Fourth, further multilevel research would be necessary in order to identify whether job insecurity atmosphere impacts a wide range of consequences, like employee work behaviours, welfare, healthiness, and attitudes. Another direction for future research may lie in extending the moderator role of job insecurity climate in the literature since the climate may be one of the most effective moderators in the family firm’s work environment, which is characterized by higher levels of turnover among non-beneficiaries (Neckebrouck et al., 2018).

Fifth, we recommend that subsequent studies concentrate on studying other predictors of PCV, such as past experiences, stressful work conditions and abusive leadership, as well as its other consequences, like employee job stress, frustration, dissatisfaction, organizational silence, burnout, and so on, in family firms.

Sixth, other avenues for future empirical study consist of an investigation of the relationship between the study variables from the beneficiary’s perspective. The possible differences of further explorations’ findings would enable a comparison of the consequences of favouritism with our results and expanding the current knowledge related to our proposed model. Examining the potential differences between various non-beneficiary groups (non-family members, non-close friends, etc.) would also pay dividends. Further, another direction for future study may include analysing the position occupied by respondents as a control variable in the hypothesized relationships since there could be a difference between study variables depending on whether the respondent is in a management position or a low-level employee.

Finally, it could also be helpful to analyse the effect of favouritism on organizational outcomes, like service quality, sustainability performance, profitability, and productivity, and other employee-level outcomes, such as work engagement, commitment and organizational citizenship behaviours in family firms. Therefore, we recommend further exploration in this area.

Footnotes

Appendix

Appendix 1.

Measurement parameter estimates.

	Standardized loading	CCR	AVE α
Authentic leadership		0.95	0.57 0.94
My direct supervisor:
says exactly what he or she means	0.82
admits mistakes when they are made	0.66
encourages everyone to speak their mind	0.78
tells you the hard truth	0.82
displays emotions exactly in line with feelings	0.85
demonstrates beliefs that are consistent with actions^*	–
makes decisions based on his or her core values	0.72
asks you to take positions that support your core values	0.71
makes difficult decisions based on high standards of ethical conduct	0.66
solicits views that challenge his or her deeply held positions	0.84
analyses relevant data before coming to a decision	0.77
listens carefully to different points of view before coming to a conclusion	0.70
seeks feedback to improve interactions with others	0.70
accurately describes how others view his or her capabilities	0.78
knows when it is time to re-evaluate his or her position on important issues	0.77
shows he or she understands how specific actions impact others	0.71
Favouritism		0.95	0.63 0.95
I am always careful when speaking to friends, acquaintances, family or relatives of hotel executives	0.66
High-level executives of this firm have a hard time demoting or firing friends and acquaintances	0.76
If friends and acquaintances of an executive get a job here, he or she can never live up to the expectations of other employees	0.81
Supervisors are afraid of subordinates who are related to high-level executives	0.81
Employees of this hotel always feel that they need friends and acquaintances in a high-level position	0.78
Employees who are promoted or rewarded only because of close friendship ties are a negative influence in this organization	0.81
Family-dominated organizations are more concerned with taking care of their close acquaintances than the business	0.82
Middle-level managers at this hotel are uncomfortable with the presence of those employees with close personal ties to high-level executives	0.81
Employees who are promoted or rewarded only because of friends or connections have a negative influence on others working at this hotel	0.78
Executives’ close friends are frustrated by never really knowing whether they were appointed because of their talent or friendship ties	0.88
Friends and acquaintances’ disagreements become business problems in organizations allowing favouritism	0.83
Executives are more interested in keeping friends and acquaintances in good positions than they are in those employees’ performance or the organization’s profitability	0.78
Job insecurity		0.89	0.68 0.86
My job sometimes makes me feel that I will lose it	0.80
I feel worried about whether my job will go on	0.93
I am afraid that I will lose my job	0.85
I feel insecure about the future of my job	0.71
Turnover intention		0.81	0.60 0.80
I often think about leaving this hotel	0.70
It would not take much to make me leave this hotel	0.86
I will probably be looking for another job soon	0.74
Psychological contract violation		0.90	0.71 0.90
I feel that my organization has violated the contract between us	0.85
I feel extremely frustrated by how I have been treated by my organization	0.91
I feel betrayed by my organization	0.86
My employer has broken many of its promises to me even though I have upheld my side of the deal	0.73

Notes: CCR: composite construct reliability; AVE: average variance extracted; α = Cronbach alpha coefficient. ^* Dropped item as a result of CFA. All loading values are significant at the 0.05 level.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Huseyin Arasli

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