In the era of ‘Great Resignation’, where companies are striving to retain their star performers and professionals are looking for the next big offer, one of the questions which has plagued us is - "What is the reward for loyalty?"
This simple question set us off on a quest to decipher the elusive concept of loyalty - for organizations, leaders, and employees - and understand what it means to different people, if it should be rewarded, and if organizations are doing enough in this regard.
Our first pit-stop in this market research journey was to look inward, at our own experiences – as employees and as employers. We traced the instances in which we have observed loyalty, and this led us to realize that as a notion, in the eyes of the beholder, loyalty is obvious when it exists, crystal clear when it doesn’t, but is also nearly impossible to pinpoint when it lands in the gray area. And unfortunately, most people land in the gray area. So, how do we then define loyalty? Is it just a figment of our imagination, is it an intangible feeling, or is it an empirically-rooted product of something?
For us personally, loyalty is a function of three facets: the leader’s vision, the overall ecosystem around us, and organizational culture. Having said that, we know loyalty is not easy to define when workforces include a multitude of generations - baby boomers, Gen Z, and Gen Y all co-existing where each one has a different perspective and parameter for loyalty. Moreover, today, the workplace itself is different; it no longer refers to just a tangible office, where upward mobility is as obvious as the C-suite on the top floor. It lives in the Cloud, it’s networked, social, mobile, global; employees may be contingency workers, consultants, or even gig workers. A generic one-size-fits-all mentality towards loyalty will not succeed in this day and age.
To better ascertain the constructs of loyalty, we reached out to nearly 40 CXOs, leading academics and other industry thought leaders, to help us develop a well-informed opinion on this subject. Featured below are summarized excerpts from this exchange.
Defining employee loyalty through mindset alignment in today’s workplace
Our respondents shared varying expositions on the subject. However, the resounding sentiment was that tenure does not equate to loyalty. Instead, strong commitment and resilience through the organization’s peaks and troughs, consistent value-creation, stewardship for the company, and ownership of work were the most recurring themes. One leader succinctly stated [response edited for clarity]:
“Loyalty is defined by the employee’s very strong commitment to giving their best, and looking out for the interest of the organization. It does not matter whether they stay for a mere 2-3 years; rather, what matters is how intensely they feel about the organization, while they are with the organization.”
These views led us to establish that employee loyalty is a mindset alignment between the self and the organization - a journey from mere compliance to commitment.
Tenure, commitment, and going the extra mile- what takes precedence while rewarding employee loyalty?
To help answer this question, our thought leaders were given the choice between four options, and were asked to rank them from 1 to 4, with 1 being the highest: (i) tenure, (ii) commitment, (iii) going the extra mile, (iv) proactive approach on improvements.
The highest rated factors were: commitment (~62% ranked this as most important), and going the extra mile (~51% ranked this as most important).
The lowest rated factors were: tenure (~30% ranked this as least important), and proactive approach on improvements (~35% ranked this as least important).
Nevertheless, it was interesting to note that tenure was rated as the second most important factor by ~35% of the respondents. Hence, we can decipher that although commitment and going the extra mile are the primary deciding factors of loyalty, tenure also plays a role in this calculation. This is unsurprising as most organizations continue to hold recognition ceremonies for their ‘long service’ or ‘long tenure’ employees, implying that in practice, this is the top most factor in denoting an employee as loyal.
Organizations spend significant amounts on employee engagement and experience creation, nonetheless somewhere along the way we have become far too generic with our approach. When we hire at an individual level, manage exits at an individual level, then why do we paint employee engagement with a mono-toned brush stroke? If commitment and going the extra mile signal loyalty toward a company, doesn’t this imply that the reverse should also take place? As an organization, we are also committing ourselves to an employee, but are we going the extra mile to keep the said employee happy? To understand what we can do, we must first understand the drivers of loyalty.
People and culture are the ultimate drivers of employee loyalty
With much being said about the existence of loyalty, it was also important to determine its cause. From a given set of statements, nearly 60% of our thought leaders chose ‘People and Culture’ as the overriding contributor, and 0% selected the ‘Human Resources Department’. This underlines that commitment is impacted by real exchanges and interactions, rather than prescribed engagement activities. This dictum is further established as nearly 27% respondents stated that the ‘Reporting Manager’ drives loyalty, as he/she/they are responsible for setting the tone on a day-to-day basis. As we know – “people leave managers, not companies”, and experiences are based on who one interacts with routinely, much more so than the company’s leadership team or HR personnel.
Are organizations today truly prioritizing employee loyalty?
In an age where productivity and output matters more than anything else, we asked our leaders if they believe that employee loyalty is still being celebrated by organizations today. A resounding 43% said that loyalty is still a priority, 27% said it isn’t, and 30% were unsure.
To delve further into this, we asked them to substantiate their sentiments with a quantifiable number - If the organization spends Rs. 100 on employee activities, what amount should be spent on encouraging and rewarding employee loyalty? A gamut of responses was received, as answers ranged from INR 0 to INR 1,000,000! In this wide spectrum of polarizing opinions, the most common responses were INR 20 (~16%), INR 40 (~16%), INR 10 (~13.5%), and INR 50 (~11%).
This response clearly indicates that at the end of the day, loyalty is a very personal concept and its importance varies as per the individual’s and the organization’s values. The perceived value derived from loyal employees will dictate the behavior of the organization – preferential or not – towards them.
Nevertheless, organizations must be mindful when penning down the value they attach to loyalty. Oftentimes, firms forget that employee loyalty is directly related to customer loyalty, which should make it a vital item on any CEO’s list.
“Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers.” (Putting the Service-Profit Chain to Work, Harvard Business Review, 1994)
We guess one question that springs to mind is that can loyalty be bought? Or does it have to be built through people culture? Can it be ascertained during the recruitment process? If an employee is not stable in his/her/their career, do we assume they will not be loyal? Can loyalty be seen differently from the perspective of the employer? And how can this be made unique to an organization?
Three most innovative ways through which loyalty is being rewarded:
- Antiquated incentive systems with gold watches and employee pension schemes given at the end of the employee’s career have now transformed to more meaningful incentives and amenities given throughout the employee’s journey with the firm. In our survey, many leaders came back with unique ideas for loyalty rewards! Recognition beyond the rudimentary long tenure award ceremonies was a popular theme; appreciating immediate family members of the employee, one-on-one interactions with the leadership team, nominating an ‘Employee of the Decade’ who shares his/her/their experience with the organization, social media appreciation, and more!
- Professional and personal growth opportunities were another common theme; giving the employee a new advisory role in the company, offering better career opportunities, additional responsibility and membership in future-oriented projects, avenues to upskill and upgrade, and even curating a specific career growth plan as per their aspirations.
- Another exciting reward idea was to learn the employee’s personal passions or social causes, and fund one of these ideas to make their dreams come true! This would go a long way in making the employee a loyal advocate of the company as they would have been made to feel truly feeling valued and special.
Other ideas included ESOP schemes, access to medical wellness programs, family vacations, gestures such as painting their home, and of course offering loyalty bonuses.
The bottom line is that the first agenda for any organization should be to define loyalty for their firm - once this is done, you have a yardstick in place. Just like culture, new leadership can bring change to the definition of loyalty, but unless we create a yardstick for this it will be tough to reward ‘loyal behavior’. Imagine a scenario with two employees; both have similar roles and experiences, but one has worked for three more years than the other, while the other tends to go the extra mile. Who would you reward? Or, if they both get offers from the market, who would be your first choice to retain? Whatever your answer, it goes without saying that recognizing loyalty is as important as any other monetary reward. Devoted employees know the business well, focus on the job, are seldom absent, and are less alienated and more committed. This is why loyalty will remain a core value for many organizations – it provides real business benefits.
Finally, any seemingly minor acts or grand gestures of recognition can have a huge impact on an employee’s faith and trust in the organization. It shows that we’re paying attention, and we care. And this establishes a truly human system of recognition and rewards — that engages, motives, and fosters the talent we work so hard to put in place.