Loyalty: A Lost Concept in Business

“Loyalty in and of itself will not solve a company’s challenges, but strong
employee loyalty will put the company in a better position to face them.”

This is clearly a difficult business environment. Companies find themselves being forced to take any number of draconian actions in an effort to simply “save the business.” Unfortunately, many companies find the challenges even more difficult to surmount because, in the past, they failed to employ one management philosophy that would have put them in good stead to meet these difficult times. The forgotten philosophy that will, by its very nature, put a company in the best position to meet difficult times is the building of a strong bond of loyalty between the company and the employee.

Have you noticed that the concept of corporate loyalty is seldom mentioned anymore? It’s not the subject of business school courses and it’s rarely used in the vernacular of those discussing best practices in business. Often lumped in with typewriters and carbon paper, corporate managers view notions of loyalty by either the company or employee as obsolete and something to be discarded.

I could not disagree more. From my perspective, offering and engendering loyalty is the single, most important concept a leader can implant in the culture of an organization. Creating a corporate/employee alliance, in my opinion, will give a company its best opportunity to achieve and maintain success – and it’s utterly indispensable during periods of recessionary distress. 

Few business leaders openly discount the potential value of loyalty, but writers, business schools and managers alike seem to pooh-pooh loyalty as a viable concept because they argue that the nature of the relationship between employers and employees has undergone a fundamental change.

Years ago, loyalty was a deep-seated concept created by a type of “lifetime contract” between the company and the employee. In consideration for the employee dedicating decades of their working life to the company, the company would offer and promise to protect and take care of the employee. Now we’ve switched to an era where employees feel more like NFL “free agents” that companies may hire and lay off with thankless abandon. And that produces a genuine but avoidable catch-22:

• The employer views the employee as a “temporary tool” who is more likely to act out of loyalty to their own personal interests than to the organization and thus sees any attempt at building fidelity to the organization as a lost cause.

• The employee is dissuaded from offering loyalty to the organization because they have learned from experience that the management and company will do whatever it has to do to advance its own interests, without any concern for the employee.

There is no doubt that the nature of the relationship between employer and employee has changed, but the root cause of this is a failure by management to invest in the concept of loyalty. The employee rightfully has the attitude, “If my company is not going to be loyal to me, why should I be loyal to the company?” I’ll give you the answer because your business and its employees will both beef up their bottom lines if they do.

Loyalty Pays Off

The MIT Sloan School of Management, for example, has surveyed employees from Fortune 500 companies and found that there’s a proven link between employee loyalty and organizational performance (the stuff that profits are made of). Loyal employees are more productive; they take fewer sick days; they create greater customer satisfaction and loyalty, and they’re less likely to job-hop.

Conversely, the absence of loyalty is both expensive and disruptive for the employer, while disheartening to the employee. It is expensive and disruptive for the organization if the best employees depart for better opportunities and have to be replaced. Did you know, for example, that the average large corporation replaces its entire workforce every four years? That’s a costly waste of money that, when reduced, can improve corporate bottom lines. At the same time, employees who are given no reason to offer loyalty to the company feel that they must endure the upheaval to life and families by shifting employers every few years in order to protect themselves and advance their career.

Building a bond of reciprocal loyalty between companies and employees may not be a guarantee of success for an organization, but it does provide the best opportunity to achieve it, because loyalty encourages everyone to work toward the same goal. It has always been my philosophy that my primary duty as a manager or leader was to be loyal to those who worked with me. Only by being loyal could I expect loyalty in return. I was rarely disappointed.

Does it Cost Scarce Dollars to Improve Loyalty?

Company executives argue that it is too time-consuming and expensive to build loyalty and besides, they believe employees won’t be loyal anyway. I disagree. While employers shouldn’t become corporate baby-sitters who guarantee their employees “jobs for life,” there is a middle ground. Building a mutual bond of loyalty to and from employees is the least expensive investment a company can make and offers the very highest of returns. Building loyalty is not a process or procedure; it is achieved as the result of a cultural philosophy – a way of life. The actions needed to build organizational loyalty are easy and simple, but they must be consistent.

Here are a few simple examples of what an executive or company can do to encourage and begin to build loyalty with employees.

Build Parallel Interests

If employee interests are aligned in parallel with the interests of the organization then loyalty is encouraged, because the employee is being loyal to his/her own personal interests. As Scott Brooks of Gantz-Wiley Research has written, “The best kind (of loyalty) is when both parties are benefiting.”

For example: If all employees are allowed to share in the value they add to an organization, they will be encouraged to continue to add that value.

Support Those Who Work For You And They Will Support You

If the manager adopts the philosophy that he/she works for the employee and not the other way around, the employee is encouraged to be loyal to the manager because that loyalty will be rewarded.

For example: If the manager provides the employee with the support, tools and protection to do their job, then doing the job is easier and the employee will respond with a better effort. When the employee knows they will receive credit when credit is due and not be unfairly blamed when things go wrong, they will be encouraged to be loyal to the manager.

Allow the Employee to Grow Out Of His/Her Job

One of the best ways for a manager to build loyalty is to build an environment that creates reasons to stay with the company, not leave it. One of the ways to do this is to demonstrate a serious interest on the part of the manager in the career development and advancement of the employee. If the employee understands that they do not have to leave in order to expand their skills and advance their career, there is little incentive to leave.

To do so requires not putting an employee in a “box” that limits their options within the organization. An employee who is valued in the accounting department, but who has an interest in marketing will see no reason to leave if given the opportunity to explore that interest within the company. Allowing an employee to explore potential interests and career development is easy, but it is amazing how many managers do not recognize this and then are surprised when the employee leaves.

After researching the subject of company loyalty, business writer Lauren Keller Johnson discovered, “And when firms help workers acquire new skills and support their professional advancement, they often win those workers’ commitment – and attract loyal new employees. This gives rise to another important point: Employers can promote company loyalty by helping people grow out of their jobs – ideally, into new ones within the company.”

Empower People

Almost everyone talks about the benefits of employee “empowerment,” but it has become a meaningless cliché because so few managers actually do it. Most organizations are by nature bureaucratic and the nature of a bureaucracy is to centralize not de-centralize power. Limiting the power of the employee to “make a difference,” is the antithesis of building loyalty. If an employee is given the task and responsibility to do a job, but the company does not demonstrate the trust in an employee enough to give them the real power to do the job, the employee has no incentive to build loyalty to the company.

Loyalty is built upon trust and without it there can me no loyalty. The surest sign of trust is to give the employee to power to make decisions to do the right thing. If that trust is granted, it is amazing how closely loyalty follows.

And the Moral of the Story …

There are many other ways loyalty can be established between a company and its employees, but the most important point to note is that none of these suggested actions increase the operating costs of a company. Rather, such actions actually reduce costs by reducing turnover (especially of talented employees), improving employee commitment, productivity and efforts to help the company be successful.

Developing an environment that cultivates and builds a bond of loyalty between company and employee is the best investment a company can make it its future, especially when times are difficult.

One response to “Loyalty: A Lost Concept in Business

  1. Traditional employee loyalty doesn’t work in the 21st mellinnum. Public and private organizations are into a phase of creative disassembly where constant reinvention and adjustments are constant. Hundreds of thousands of jobs are being shed by Chevron, Sam’s Club, Wells Fargo Bank, HP, Starbucks etc. and the state, counties and cities. Even solid world class institutions like the University of California Berkeley under the leadership of Chancellor Birgeneau & Provost Breslauer are firing staff, faculty and part-time lecturers. Estimates are that the State of California may jettison 47,000 positions.
    Yet many employees, professionals and faculty cling to old assumptions about one of the most critical relationship of all: the implied, unwritten contract between employer and employee.
    Until recently, loyalty was the cornerstone of that relationship. Employers promised job security and a steady progress up the hierarchy in return for employees fitting in, performing in prescribed ways and sticking around. Longevity was a sign of employeer-employee relations; turnover was a sign of dysfunction. None of these assumptions apply today. Organizations can no longer guarantee employment and lifetime careers, even if they want to.
    Organizations that paralyzed themselves with an attachment to “success brings success’ rather than “success brings failure’ are now forced to break the implied contract with employees – a contract nurtured by management that the future can be controlled.
    Jettisoned employees are finding that the hard won knowledge, skills and capabilities earned while being loyal are no longer valuable in the employment market place.
    What kind of a contract can employers and employees make with each other? The central idea is both simple and powerful: the job or position is a shared situation. Employers and employees face market and financial conditions together, and the longevity of the partnership depends on how well the for-profit or not-for-profit continues to meet the needs of customers and constituencies. Neither employer nor employee has a future obligation to the other. Organizations train people. Employees develop the kind of security they really need – skills, knowledge and capabilities that enhance future employability.
    The partnership can be dissolved without either party considering the other a traitor. Classical employee loyalty to management is dead – Rx for employee loyalty reform.

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