Loyalty isn’t dead but it does need some critical care

Work-life balance, security and co-workers more important than money.
By Asha Tomlinson
|Canadian HR Reporter|Last Updated: 11/01/2001

Loyalty doesn’t mean much in today’s business market. It’s an outdated notion that receives little to no attention by employers. A recent survey of more than 2,000 North American organizations, by consulting firm Bain and Company, shows that less than half of workers feel their company deserves their loyalty.

“They don’t believe that their leaders behave with fairness and integrity. They don’t believe their organization tells the truth and they don’t believe their organization values or rewards loyalty,” says Fred Reichheld, author of the new book

Loyalty Rules!

“General loyalty has become more confused, and for the average company loyalty is dying. Of course that means the average company is dying.”

Although, Reichheld had a hunch loyalty wasn’t as popular as it once was, he didn’t realize how widespread the problem was until reviewing the survey results.

“Most people don’t understand what loyalty means or why its relevant to business success, and the idea that half of all front-line staff felt no loyalty to their company, that’s astonishing. They’re spending half their waking hours working at this thing they don’t really believe in,” says Reichheld, also author of the best-selling book,

The Loyalty Effect


Reichheld says loyalty leads to financial success and HR professionals have to become aware of how it’s linked to profit. They are not two separate worlds but are connected to one another, he says.

In his book, he provides descriptions of top North American companies who are leading the way when it comes to loyalty including Enterprise Rent-A-Car, Harley-Davidson, Vanguard Group and Dell.

“There are dozens of companies where loyalty is alive and well...they are wonderful examples of how loyalty pays in this day and age.”

The companies profiled show 70 to 75 per cent of their employees have high loyalty and business success. The key to this success is building mutually beneficial relationships, a give and take in which employees are offered opportunities to grow, learn and make money — but only if they contribute to customer value creation and the bottom line, he says.

Employers must also consider with the increasing labour shortage, the influx of more employees from the Nexus Generation — those 18 to 34 years old. Karen Ward of D-Code, a consulting and research company specializing in the Nexus Generation, says loyalty is expressed differently in this group and employers must recognize their needs and interests. Ward says this generation has grown up watching the “employment promise” being broken.

“They had their parents and other people around them getting laid off and pink slipped in the midst of corporate downsizing in the ’80s and ’90s, and interestingly enough it’s happening again. So the whole notion of signing up for lifetime employment with a company doesn’t exist any more.”

Nexus employees want to acquire a set of skills that makes them transferable and marketable, in case they get laid off and have to look for another job, she says.

A survey completed by D-Code earlier this year,

the DNA report

, suggests that today’s generation of youth is looking for more than just a salary. Out of the 1,000 people interviewed by telephone, more than 50 per cent reported work-life balance, job security and quality of colleagues as “extremely important.” Money ranked number seven out of 10 possible retention factors, further emphasizing the fundamental shift in what motivates young employees.

“Work-life balance is a really important one. The challenge for companies is that work-life balance is a very individual thing so it’s difficult to initiate company-wide initiatives that are relevant to everyone,” Ward says. “It’s sometimes troubling to me that we’re trying to balance work with our life, when in fact we should aspire to have a life, and work is one aspect of it. Companies that support this notion do very well attracting and retaining this group.”

The biggest change, however, is in their attitude towards loyalty.

“From our perspective, loyalty is addressed in different ways...there’s loyalty to your own sense of what’s important to you, what you want to accomplish professionally and personally. In addition, being loyal not to companies but to people,” she says.

This concept makes sense to Reichheld, who says the economic downturn has made this kind of loyalty important to the Nexus Generation.

“They have the greatest need for leaders who are trustworthy and who can lead them on the high road. It’s times like these when it’s obvious to young people why loyalty is such a vital thing,” he says. “There are more layoffs, not enough jobs to go around and in a tough time you want to be sure you’re working with people you trust.”

So how does an employer make loyalty a part of their business agenda? Reichheld offers six principles that companies can use as a guide to build lasting, productive and loyal relationships with all of their employees:

Play to win-win — profiting at the expense of partners is a shortcut to a dead end.

“It demands a two-way street accountability for creating value and many employees today are confused, they think just staying there is being loyal...leaders have to help employees know whether they are being loyal or not.

“What makes them loyal is putting the principles and the relationship first while they’re with the team,” says Reichheld.

Be picky — membership is a privilege.

“Too many companies will hire just about anybody and will take anybody as a customer. They’re not picky enough...you can’t afford to invest in people and relationships unless you’re very clear about who you have.”

Keep it simple — complexity is the enemy of speed and responsiveness.

“Small teams are the basis of loyalty. It turns out teams of six, seven, or eight are the right size for employees to be responsive, accountable and loyal. Far more than half of the teams in North America are bigger than that.”

Reward the right results — worthy partners deserve worthy goals.

“Most companies don’t reward loyal employees, they don’t even make it clear what loyalty means. Enterprise Rent-A-Car pays a percentage of the profits to loyal employees. If loyalty builds productivity and your ability to do the job well, serve customers and grow the business, you get to share in that.”

Listen hard, talk straight — long-term relationships require honest two-way communication and learning.

“You can’t have a loyal relationship if you can’t trust your partner to be honest.”

Preach what you practice — actions often speak louder than words, but together they are unbeatable.

“Those who are going to build a company on that basis had better be very clear about what their principles are, and how their behaviour and priorities are consistent with those principles because most employees and customers are being bombarded every day with contrary messages...that loyalty is stupid, loyalty is dead, and that loyalty is for schmucks.”


The “Acid Test” of loyalty

The Acid Test allows companies to measure their employee and customer loyalty. Fred Reichheld, author of

Loyalty Rules!


The Loyalty Effect

, says the test is a relationship report card specifically designed to help leaders evaluate and strengthen key relationships.

He says this survey makes it easy for HR professionals to move forward in the loyalty department and hopes it will become an industry standard in the next few years.

“Today they (businesses) don’t know this information and I’m hoping we can change that.”

Both surveys can be downloaded off the Web site www.loyaltyrules.com.

Here is a broad sample of questions from the Acid Test that determine an employee’s relationship with an organization. Ask your employees to answer some of those questions on your next staff survey:

•This organization listens well and responds quickly to feedback.

•I trust this organization’s leaders to behave with fairness and integrity.

•When this organization has problems, I think of them as my problems too.

•I am proud to work for this organization.

•This organization values my relationship; really cares about me and invests in my success.

•I understand the values and principles that guide this organization’s leadership.

•This organization attracts and retains outstanding employees and partners.

•Customer loyalty is appropriately valued and rewarded at this organization.

•I provide enthusiastic referrals for this organization.

•This organization sets the standards for excellence in its industry.

•At this organization, we keep organizational structure simple by utilizing small teams.

•This organization communicates openly and honestly.

•I understand our strategy and the role I must play for our success.

•This organization is committed to win/win solutions and will not profit at the expense of partners or customers.

•I would like to see my relationship with this organization grow in the foreseeable future.

•This organization provides me with the information I need to make good decisions.

•I always know where I stand with this organization.

•This organization involves the right people in decisions and then takes action quickly.

•Employee loyalty is appropriately valued and rewarded at this organization.

•This organization sets the standard for excellence in its industry.

•People are fairly rewarded for their contributions to this organization’s long-term success.

•This organization has sufficient opportunities to grow its business.

•Leaders respect my time and help me manage my time effectively.

•This organization treats me like a real partner.

•This organization values people and relationships ahead of today’s profits.

•This organization makes it simple for customers to do business.

•Over the past year, my loyalty to this organization has grown stronger.

•This organization focuses all its energy and resources in areas where it can be the best.

•Customers can rely on this organization to deliver outstanding quality, service and value.

•This organization has a winning strategy (superior economics in serving our customers).

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