Growth of the global marketplace is another factor in workplace mobility. “There is a tremendous amount of competition, both domestically and internationally, which has forced firms to be more nimble with respect to hiring and firing,” says Guay. “It is now a two-way street: Employees recognize that firms are not going to be able to offer lifetime employment, and companies recognize that employees will feel free to move around.” Social and business networking plus the explosion of available information on companies and career paths have helped that process along. “In the last 10 or 20 years, it has become so much easier to find jobs in other industries or regions than it was 10 or 20 years ago when we didn’t have the Internet,” he notes.
Bidwell suggests another dynamic behind the changing employer-employee relationship. Many of the things employers did to increase employee loyalty — at least up until the 1980s — were done not to encourage higher productivity and job satisfaction, but to keep the unions out, he says. “Companies were very worried about unions and the possibility of strikes. They treated their employees well so they wouldn’t join a union. But that is no longer the case. Unions are on the decline. It’s easy to quash them if they try to organize. So some managers might not care as much about employee loyalty as they used to.”
The Challenge of Measuring Employee Loyalty
Is it possible to measure employee loyalty, and if so, does any increase or decrease in loyalty affect company performance? While loyalty is clearly not on the same level as revenues or profits, for example, which directly affect the bottom line, “there is some evidence that an organization’s more satisfied employees perform better,” says Bidwell, “but the link is not that compelling.”
Using employee loyalty as a performance metric has merit, adds Cappelli. “The issue has been to put a dollar value on this: How much is it worth if employees consistently place the company’s interests ahead of other factors in those situations where they have discretion? Probably a lot, but it’s hard to put into dollar terms.”
Cobb also acknowledges the difficulty in coming up with a definitive loyalty measure. “Often the survey questions related to this are something like: ‘Do you intend to look for another job in 12 months?’ I could be looking for a job for a variety of reasons that have nothing to do with displeasure with the company,” he says. “I could be considering going to graduate school or perhaps I want to live closer to my elderly parents. So these kinds of measurements are fuzzy. They are not actually measuring loyalty. They are measuring what you hope is related to loyalty.”
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Do organizations need to be concerned about fostering loyalty when some employers simply want their employees to do what is asked of them? Cappelli would answer “yes.” The big challenge for employers, he says, is that “employees have discretion, more so now with jobs that have more autonomy. Bosses aren’t, and can’t be, looking over them to tell them what to do all the time.”
In addition, notes Cobb, some workers have brought with them, or acquired, skills that are very difficult to replace. “You don’t want that knowledge and expertise to walk out the door.” Also, disloyal employees can be a risk for an employer if they spread the word that their company is an undesirable place to work. “It affects the perceptions your customers have of you,” he adds.
Perhaps the most compelling argument for trying to retain good workers is that replacing managerial and professional employees can cost approximately 150% of their annual salary, according to various estimates. Harter suggests that for frontline, lower end workers, it costs about half of their salaries, while for high-level IT professionals, the figure could be as high as 200%. “The real impact,” he says, “can be on co-workers’ productivity.”
For Cobb, the debate over employee loyalty comes down to the actions of the more dominant side of this equation — the firm. “The employee/employer relationship has changed because of the firms. You hear people say that ’employees just don’t care about having long-term employment relationships.’ Maybe I’m naive, but I don’t think humanity changes that much.” The rhetoric of the 1980s, he says, was all about “‘taking control of your career, and your life.’ I have a hard time thinking my father is that different from me [in this regard]. It doesn’t make sense to say that individuals who were born in the 1970s experience a [huge] epiphany that they need to be in control of their lives, and that people born in the 1940s don’t think that way. People have always wanted to be more in control of their lives.” What’s different now, he notes, is how firms treat employees. “It seems strange to me to be loyal to a firm that I know has no loyalty to me.”
Republished with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.