Employee loyalty affects organisational performance

The degree of management commitment determines an employee’s commitment in an organisation. E J Sarma writes that the long-term impact of loyalty cannot be downplayed

A few days ago there was a news item in the sports column quoting Michael Schumacher, “Ferrari will give him a life time contract,” which emphasised on the responsibility of performance. “I have a lifetime contract,” Lou Holtz, former Notre Dame Football coach once said. “That means I can’t be fired during the third quarter if we’re ahead and moving the ball.” Both cases depict the new age loyalty syndrome.

The issue that confronts HR people in IT organisations is whether to spend time and effort to build employee loyalty and commitment at all. One often hears the comment that some turnover is inevitable and hence there should be a threshold limit and anything beyond that level is unhealthy. I would say that these are self-fulfilling prophesies. If you want to keep people keep them all. They will stay committed provided organisations increase their commitment levels and dedication to employees. The degree of management commitment will determine employee commitment.

Loyalty’s long-term impact on corporate performance is not something that can be dismissed or downplayed. We should all pay attention to studies like the Sloan School of Management’s recent survey of hundreds of employees in Fortune 500 companies. The Sloan study found that there are clear-cut links between employee loyalty and organisational performance. In other words, employee loyalty deserves a place on the balance sheet, right next to other key assets. The employment relationship is governed solely by self-interest—and nervous employees consider themselves free agents. And employers consider themselves as event managers and not institution builders.

I have tried to figure out why few organisations succeed in retaining their employees’ commitment. Researchers at the University of Delaware have found that employees who have a positive attitude about their organisation (perceiving that their on-the-job contributions are valued and that the company cares for them), are more willing and likely to work harder and score high on commitment. I have seen organisations mistrusting old employees and restricting information flow.

Research indicates that employers can make an impact on how their employees feel by taking positive steps to create a work environment that indicates, by action, that an employee is valued. Employers must address fairness, quality of supervision and support for employee life style.

Research indicates that the following can influence an employee’s positive feelings:

• Participation in goal setting: The HR department in IT companies must learn to enforce the appraisal system, more so a participative system.
• Performance feedback: Supervisors must be trained hard by HR to give objective feedback. PCMM or no PCMM, a supervisory feedback can make or break an employee’s well being.
• Supportive communications with immediate supervisors and upper management: When an employee is in difficulty, both in work situation and personal life, there has to be supportive communication and information. The feeling of being let down or helplessness destroys loyalty once and for all.
• Justice in performance appraisals: Appraisal decisions, if contested, must have avenues for review by a senior person.
• Objective measures of performance: The standard of performance must be prescribed for all levels.
• Sufficiency of pay, benefits and rewards: It is not the quantum but the fairness and treatment that counts.
• Quality of supervisory relationship: The leadership style must leave employees wanting to be with their leader.
• Favourable developmental opportunities: Where there is adequate training budget, learning opportunities exist and loyalty blooms.
• Clearly stated guidelines defining appropriate work behaviour and job demands.

Expect nothing so give nothing—is that acceptable? How much impact can employers make on employees who are pre-disposed to being weary of mistreatment by the organisation they work for. It is important to understand that high achieving employees will be high achievers if their employers take their needs into consideration, forgive an honest mistake and care about their opinion, or, in other words—can be trusted to do the right thing.

The more weary or mistrusting an employee is about the organisation, the less likely they will exceed the minimal acceptable level of job performance. Significantly, weary employees can develop a positive feeling about their employer if the management takes steps to address few issues mentioned above and can perform well above standards and better than less weary employees.

The X generation is a group that is notoriously weary and mistrusting of organisations after having watched their colleagues suffer. They learned from their peers that what is important is not the company or the organisation but the individual. High individualism is the attitude these days. But employers also need not follow the same dictum. They can be less selfish to become employee friendly. But how? A responsible employer who adheres to the loyalty contract takes a long-term view of employment. This does not mean they guarantee jobs for life or fail to remove under-performing employees or disregard profit and shareholders. It just means that employers do their best to keep employees who are performing well in their jobs.