South-Western - Management  
Suddenly Loyalty is Back in Business
Topic Human Resources Management
Key Words employee turnover, retention, loyalty
InfoTrac Reference none
News Story

The average 32-year-old worker today has worked for nine companies. Companies are recognizing that loyalty among employees is desired, and are doing something about it. In Feb. 2001, a survey of 1800 workers found that just 65% intended to stay with their organizations for the next several years. Since September 11, attitudes seem to have changed. A followup poll done in October, 2001 showed that 54% would say no to an offer of a similar job with better pay.

As companies have instituted programs to increase company loyalty, turnover has been reduced. One study found that a 5% increase in employee retention can yield profit increases of 25% or more. Loyalty describes the quality of a working relationship, and isn't bought with stock options or bonuses. Successful companies use specific strategies to cultivate and maintain loyalty among executives, employees, and customers:

  1. Keep it small - teams of 10 or fewer work best.
  2. Watch the front line - keep your customers happy and they'll come back.
  3. Face up to bad news - don't promote a climate of secrecy.
  4. Offer just desserts - reward employee loyalty.
  5. Hang together in hard times - take care of your employees and customers as long as you can.
Questions
1.

Describe the relationship between employee loyalty and retention. What are some ways the companies in this article are working to increase employee loyalty?

2.

What is the difference between functional turnover and dysfunctional turnover?

Source Wendy Cole, "Suddenly Loyalty is Back in Business," Time, December 10, 2001.
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