Bob MacDonald on Business

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Where Has All the Loyalty Gone, Long Time Passing?

August 5th, 2013 · 4 Comments · Building Better Business Managers, Business Ethics, Business Management

Gone to downsizing, outsourcing and cutbacks – Oh when will they ever learn?

There are a lot of things missing in the business world today, but nothing is missed more dearly than the reciprocal loyalty between a company and its employees. In fact, loyalty is rarely even mentioned in today’s management discussions because there is little perceived need for anything that resembles allegiance or corporate fidelity.

After all, companies are reporting historically high levels of profit and most are awash with cash. Managers have now come to believe that employees have few other options and even if they do leave, there will be a long line of people jockeying to take their place. This has allowed managers to reprise the attitude that, “Employees should be happy just to have a job.”

Conversely, employees have no incentive to be loyal because they have endured the pain of too much downsizing, cutbacks, Outsourcingevaporating benefits and outsourcing. It is difficult to be loyal when you’re treated as an expendable commodity, an interchangeable “cog,” rather than a valued partner in creating the success of the company. But any manager or company that discounts the value of employee loyalty is making a serious error in judgment. While loyalty in and of itself may not ensure a manager’s career or solve a company’s challenges, it will put both manager and company in a better position to be successful and able to survive difficult times.

Why has this Crucial Corporate Spirit gone AWOL?

One of the reasons there is a lack of respect for loyalty is that loyalty is a long-term strategy, whereas managers and companies have become more and more short-term focused. Cost cutting, downsizing, trimming benefits and outsourcing may, in the short term, increase the profits of a company, but failure to engender or actual destruction of employee loyalty will have a long-term deleterious impact on the company’s ability to survive future challenges. It has been shown that most companies that downsize or outsource jobs fail to achieve any long-term cost savings or improved efficiencies and are in a much weaker position when the economy turns around. In simple terms, a company can only cut so much before the impact turns negative.


Corporate management mentality tends to view the “economic value” of loyal employees who work to be productive and enhance customer relations as “soft numbers,” unlike the “hard numbers” of operations such as cost of goods, manufacturing and labor costs. It is this mentality that causes managers to focus on restructuring, downsizing and outsourcing, during any economic downturn; which is a natural business cycle. What many managers and companies fail to understand is that an investment in employee loyalty has been proven to bring returns on that investment that exceeds capital investments in research, new equipment and plants, and it is much longer lasting. And it does not cost that much to invest in loyalty.

Building a mutual bond of loyalty to and from employees is the least expensive investment a company can make and offers the highest returns; while the absence of loyalty is both expensive and disruptive for the employer and disheartening to the employee. It is expensive for the organization if the best employees depart for better opportunities and have to be replaced. The average large corporation replaces its entire workforce every four years. That is a costly waste of time and money that if reduced can significantly improve bottom line results – and those are hard numbers.

The reality is that the single, most important concept a leader can implant in the culture of an organization is reciprocal loyalty. Creating an organizational/employee alliance will facilitate the most fertile opportunity to achieve and maintain success for the long term – and it’s utterly indispensable during time of recessionary distress.

There is no doubt that loyalty must be a two-way street, but the lead must come from the top management. If either the  manager or the company views the employee as a “temporary resource” who is more likely to act in their own personal interests, then management also believes that any attempt to build fidelity to the organization will be a wasted effort. These ill-informed managers will also have a tough time believing that it is human nature – and in the best interests of the employee – to reciprocate with a level of loyalty equal to what is offered or withheld by the company.

An employee will be dissuaded from offering their loyalty if 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. A failure on the part of management to invest in the concept of loyalty will rightfully engender an attitude from the employing suggesting, “If my company is not going to be loyal to me, why should I be loyal to the company?”

Creating Parallel Interests

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 reciprocal organizational loyalty are easy and simple, but they must be constant and consistent.

If the employee interests are aligned in parallel with the interests of the manager or the organization, then loyalty is naturally employee-loyaltyencouraged, because the employee is – in effect – being loyal to their own personal interests. For example, if the employee is viewed as the driver of corporate value and is allowed to share in the value created they will be incented to do their best to add that value.

If the manager adopts the philosophy of working for the employee – not the reverse – the employee will be encouraged to be loyal to the manager because they know their loyalty will be rewarded. If the manager provides employees with the support, tools and protection to do their job, then doing the job is easier and they will respond with a better effort. It’s human nature. When the manager shows sincere respect for the talent and effort of the employee and when the employee knows they will receive credit when credit is due and not be unfairly blamed – or outsourced – when things go wrong, they will be encouraged to be loyal to the manager.

Promoting Loyalty and Improving the Bottom Line

One of the best ways for a leader to build loyalty from an employee is to demonstrate a true interest in the career development and advancement of the employee. If the employee understands they do not have to leave in order to develop their skills or advance their career, there is little incentive to leave. After researching the subject of company loyalty, business writer Lauren Keller Johnson discovered, “When firms help workers acquire new skills and supports 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.”

There is always a lot of talk about the value of “employee empowerment.” An empowered employee tends to be a loyal employee. However, most of the talk about empowerment is just that – talk. Most organizations are by nature bureaucratic and the nature of bureaucracy is to centralize, not decentralize power. Limiting the power of the employee to make a difference is the antithesis of building loyalty. If an employee is given the task of doing a job, but the manager does not demonstrate enough trust in the employee to give them the real power to do the job, the employee has no incentive to demonstrate loyalty to the manager. In short, loyalty is built on trust and without it there can be no loyalty. The surest sign of trust is to give the employee the power to make decisions to do the right thing. If that type of trust is offered, it is amazing to see how closely loyalty will follow.

And the Moral of the Story …

Reciprocal loyalty between the company and the employee has become a casualty to the modern mentality of short-term results as opposed to long-term value. Discounting the value of loyalty may offer some short-term results for companies, but the failure to invest in the long-term value of loyalty will create long-term problems for these companies. Loyalty in and of itself will not make a company immune to difficult challenges, but strong employee loyalty will position the company to better face and resolve these challenges. And when you treat employees like partners, they act like partners.

There are many ways loyalty can be created between a company and its employees, but the most important point to note is that these actions are not operating costs, but investments in the future success of the company. These investments in company loyalty will actually reduce costs by reducing turnover, improving employee commitment, productivity and efforts to help the company be successful. Developing an environment that cultivates and builds a bond of loyalty between the manager, company and employee is the best investment a company can make in its future, especially when times are difficult.

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