19 Sep 2005  Research & Ideas

Rethinking Company Loyalty

These days, your best workers are likely to show more loyalty to their careers than the company. What's needed, says this Harvard Management Update article, is a new view of loyalty and its meaning to employers and employees.

 

Few business leaders would deny the importance of organizational loyalty; perhaps fewer still believe they can achieve it the way they once did. After all, the lifetime contract expired long ago, and your people—especially your best people—are more likely to display loyalty to their careers than to you, their employer.

The very nature of the relationship between employers and employees has undergone a fundamental shift: Today, workers not only don't expect to work for decades on end for the same company, but they don't want to. They are largely disillusioned with the very idea of loyalty to organizations. But, at the same time, they don't really want to shift employers every two to three years for their entire careers. Similarly, companies would grind to a halt if they had to replace large portions of the workforce on a similar schedule.

So where does this leave us? Is there a way for both employers and employees to strike a brand-new balance when it comes to loyalty—one that gives organizations the focus and expertise they need to compete and employees the career development opportunities they demand?

According to the experts interviewed by Update, the answer is yes, but only if companies are willing to rethink how they define loyalty and how they manage their people.

Reevaluating loyalty

Loyalty should not be viewed as an either/or proposition. It's true, the experts say, that to produce their best work, employees must be loyal to the company and what it stands for. But "employees can give their employers 100 percent and provide great performance while furthering their own careers," says Joyce Gioia of The Herman Group, a consultancy based in Greensboro, North Carolina "The two aren't mutually exclusive," especially when the skills that a person masters to further her own career are also what the company needs.

And when firms help workers acquire new skills that 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.

But even when you can't retain talent, it doesn't mean departing employees weren't loyal. Indeed, another mistaken assumption is that loyalty has to mean "forever." "One of my students expressed it well," says Harvard Business School professor Linda Hill. "He said, 'It's like dating: You can be faithful to the person you're seeing now while you're involved with him or her, but that doesn't mean you won't move on to dating someone else later.'" Nor should companies strive to keep all employees forever. "You don't want blind loyalty," says Scott Brooks, an executive consultant at Minneapolis-based Gantz Wiley Research. "The best kind is when both parties are benefiting." Leigh Grantham, VP of marketing and administration at DeFuniak Springs, Florida-based electricity provider CHELCO, agrees: "I'd rather have a star performer for three years than a dud for life."

Balancing career and company loyalty

If an employee's loyalties to his career and to an employer aren't mutually exclusive, how can leaders ensure that the employee-employer relationship pays off for both parties? The most effective executives and managers are applying these strategies:

1. Align career growth with company goals. When a company helps its employees develop expertise that furthers their professional development and enables the company to address its thorniest challenges, both types of loyalty align powerfully. How to achieve this alignment? "Encourage managers to discuss their direct reports' career goals with them as often as possible," advises business coach Gayle Lantz. "Managers need to help their people identify links between their own professional goals and the company's goals. When people understand the larger business context in which the company is operating, they can more easily define ways to advance their own careers."

Of course, frank and frequent dialogue about careers can sometimes lead employees to part ways with their employer when they discover that they won't be able to achieve their career goals. But if the process is handled skillfully, all parties profit in the long run.

The best kind of loyalty is when both parties are benefiting.
— Scott Brooks, Gantz Wiley Research

Grantham says that her company uses assessment tools and career coaches to identify employees' strengths and decide how to best leverage those talents for the company's good. The company also encourages employees to initiate conversations about how their strengths and talents might be best used in the organization. "When our employees are using their strengths," she says, "they find their work more satisfying and feel that they're supporting their own career paths. Everyone benefits; it's the best way to do business." At CHELCO, employees are encouraged to initiate meetings with their supervisors, their bosses' boss, and career coaches to discuss career-path possibilities at the company. "These meetings are separate from performance reviews," says Grantham.

According to Grantham, one staff accountant at CHELCO recently benefited from this process. When the accountant expressed interest in a management position, her coach reminded her that her assessment indicated strengths in areas other than management. The accountant then acknowledged that her interest in management stemmed primarily from managerial positions' earning potential. "She saw no other way to earn more," says Grantham. Based on her interest and commitment to furthering her career, as well as on her educational background and strengths—including attention to detail, adherence to rules, and persistence—the company offered her the position of revenue analyst. In this role, she provided more value to the organization and took on new challenges. She also increased her earning potential because the new position rated several grades higher than her former position in CHELCO's job-factoring system.

It's difficult for some managers to see the value in supporting a prized employee's development, says Gratham. "They want to keep their stars. But if we get some resistance, we have managers talk with business coaches to better understand the long-term payoff of supporting employees' development." Grantham also notes that it's in managers' best interest to encourage development, since another manager's star employee most likely wants to transfer into their departments.

2. Design work with variety and autonomy. Jobs that provide variety and the freedom to make decisions and mistakes engender extensive loyalty, the experts note. Allowing people to take ownership of projects gives them the opportunity to develop new skills and, just as important, the chance to show what they can do.

A commitment to variety and freedom takes some organizational discipline—at the very least, firms must let employees know they can exercise choice. "When new account opportunities come along, we describe them at our Wednesday-morning staff meeting and ask, 'Who has the interest and time to tackle this?'" says Garry Curtis, executive vice president at Washington, D.C.-based public relations firm Hager Sharp. In his earlier years at the firm, Curtis seized opportunities to master new skills such as creating television ads and public-service announcements by joining teams formed to serve new accounts.

3. Focus on relationships. For many employees, loyalty is born or cemented through relationships with supervisors and colleagues.

"The number one reason people leave an organization isn't inadequate pay or benefits," says business writer John Putzier. "It's the day-to-day relationship with their immediate superior." Leaders seeking to secure employees' loyalty must work to create a positive bond.

How? "Be fair in distributing rewards and punishment," advises Donald P. Rogers, professor of international business at Rollins College in Winter Park, Florida. John Chappelear, a professional coach and trainer, says, "Clarify your expectations, and make sure people have the resources and skills they need to fulfill those expectations."

Fostering supportive relationships among employees can further enhance their loyalty to your organization. "Enable people to work through conflicts constructively," says Kenneth Sole, president of Durham, New Hampshire-based consultancy Sole & Associates. "Many managers find this concept counterintuitive. But positive conflict resolution gives people the sense that 'We're in this together; we're a team.'"

To leverage this principle, Sole advises managers to model effective conflict resolution as well as educate their teams about this powerful skill. "Read books on various conflict-resolution techniques," he suggests, "and regularly practice at least one technique that fits your style. As your comfort with conflict resolution grows, at least some of your direct reports will begin emulating you."

The lifetime employment contract was never the only way to build employee loyalty.
— Donald P. Rogers, Rollins College

4. Highlight the link between employees' values and your company's mission. "The lifetime employment contract was never the only way to build employee loyalty," says Rogers. "Emphasizing a company's purpose—why we create wealth—also engenders loyalty," especially when employees see the connection between their values and the company's mission.

At Medtronic, a medical-device developer in Minneapolis, the most important meeting every year isn't the shareholders' annual gathering. It's the holiday program, broadcast to Medtronic's 30,000 employees worldwide, featuring the stories of patients who have benefited from the company's products. "Our people end up feeling personally involved in our company's mission to restore people to full life," says Paul Erdahl, vice president of executive leadership and development. "They can see the end result of their work. Many of them are profoundly moved by the patients' stories."

By putting a human face on its mission, Medtronic has achieved employee-retention rates above the industry average, says Erdahl. And it gets a whopping 95 percent favorable response rate to the employee-survey item "I have a clear understanding of Medtronic's mission" and a 93 percent favorable response to "The work I do supports the Medtronic mission." Erdahl agrees that a company's mission is especially compelling when patients' lives are at stake. But organizations in any industry, he says, can find ways to help employees see how their daily work affects customers.

Loyalty's Bottom-Line Value

by Lauren Keller Johnson

Given what they know about the mobility of workers today, it can be difficult for companies to gauge just how much effort they should put into promoting loyalty. Consider the issue at the most practical level.

A loyal workforce saves money in the form of lower recruiting costs, fewer stranded clients, and less downtime. It also encourages knowledge acquisition and sharing. "The longer employees stay with a company," explains Harvard Business School professor Linda Hill, "the more opportunity they have to develop the tacit knowledge needed to fulfill their responsibilities and the more they exchange it with others."

And how should employees value loyalty? From a point of pragmatism as well, perhaps. "The more unique and organizationally relevant a person's expertise, the greater the likelihood that he or she will be able to wield power," Hill says.

About the author

Lauren Keller Johnson is a Massachusetts-based business writer. She can be reached at MUOpinion@hbsp.hrvard.edu.

Reprinted with permission from "The New Loyalty: Make it Work for Your Company," Harvard Management Update, Vol. 10, No. 3, March 2005.

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