Declining Employee Loyalty: A Casualty of the New Workplace

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James Harter, chief scientist, workplace management and well-being, for Gallup, has a different perspective based on a Gallup poll first initiated in 2000 to measure employee engagement. The poll divided workers into three parts: “engaged” employees are those who are “emotionally attached to their workplaces and motivated to be productive.” “Not engaged” employees are those who are “emotionally detached and unlikely to be self-motivated,” while “actively disengaged” employees are those who “view their workplaces negatively and are liable to spread that negativity to others.”

In 2000, the poll indicated that 26% of employees were engaged, 56% not engaged and 18% were actively disengaged. In 2008, those figures came in at 29%, 51% and 20%; in 2010, at 28%, 53% and 19%; and in 2011, 29%, 52% and 19%. In short, there is surprisingly little difference between the numbers. Indeed, as Harter sees it, “not much has changed in terms of people’s everyday experience at work.”

He cites a Gallup report titled “State of the American Workplace: 2008-2010,” which includes 12 questions designed to address such issues as productivity, quality of relationships with coworkers and managers, and employee alignment with the organization’s overall mission. One conclusion of the report: “Despite the workplace stresses accompanying the most severe recession in decades, American employees’ average level of emotional engagement with their jobs did not drop significantly.”

Finding that Silver Bullet  

Loyalty, which can be considered a component of employee engagement, is based on a number of factors, says Harter, including whether the employer “looks out for employees’ best interests, pays attention to their career path, gives them opportunities to improve their well-being and so forth.” In this equation, managers play a crucial role, he adds, referring to a survey done several years ago that analyzed all the reasons people stay with or leave an organization. “If you’re looking for a silver bullet, it is the quality of the relationship between an employee and his or her manager that determines the overall level of employee engagement. Good companies develop a growing list of great managers over time…. It’s local level teams and how they are connected together by leaders and managers” that have the most impact.

Human nature, Harter adds, “doesn’t change when the economy changes. It might take on a different dynamic” during a recession, but what remains constant is “the need to be connected — to a manager, a co-worker and/or a purpose, and also the need to be recognized.” People’s perceptions of their own standards of living “did drop as the economy dropped,” he says. But that same drop was not registered in workplaces where employees said they have “someone who encourages their development. There is something about having a mentor, or someone in your life who helps you see the future in the midst of chaos, that can make a difference.”

(MORE: 4 Perks Employees Love)

Wharton marketing professor Deborah Small cites a body of research on what is called “procedural fairness,” indicating that much of what employees feel about an organization “is not the outcomes they get, but the processes. If people feel like processes are handled fairly in the organization, even if they don’t get the best for themselves,” that would tend to encourage loyalty.

Research also shows that not all behavior is self-interested, Small adds. “Sometimes people do things at considerable cost to themselves, like sticking to a job with lower pay when they could move on and potentially earn more money. It’s because we care a lot about relationships and the welfare of others. When we have a relationship with our firm or colleagues, there is a social cost to leaving.” To the extent that an employee is well treated by a firm or a boss, “that might, on the margin, make a difference” in his or her decision to stay or leave.

Financial incentives — including stock options, restricted stock and pensions — are other ways that companies have tried to tie employees to their firms. But Wharton accounting professorWayne Guay isn’t sure that such types of deferred compensation are strongly correlated with loyalty. “There is evidence that stock options, restricted stock and other devices that require vesting do result in lower turnover,” he says. “Executives and others tend to stick around a little longer. But it doesn’t [suggest] an implicit bonding between an employer and employee. It’s more of a contractual agreement.”

Defined benefit pension plans have historically been a strong retention device used by companies to lock employees in, Guay adds, but very few firms these days offer them. More common are 401(k)s, which require employees to bear the investment risk, and which are portable — employees can take these vehicles with them when they leave the company.

At the same time, stock and stock options can, in some cases, be more than a retention device. They can motivate employees to not just stay at the company, but to work hard and go beyond the minimum requirements, says Guay, adding, however, that they are most effective with high-level executives “who can actually see how their own actions affect the firms’ stock price and overall performance. Once you get too far down in the organization, there is usually less of a direct link between your actions as an individual employee and overall performance.” Some firms, he notes, have division level or plant level versions of incentive plans that can drive better performance.

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