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What is loyalty and how do you develop it?

By Aaron Green, 2/20/2007

Human resources professionals know that employee retention is a key factor in an organization's success. In this column I'd like to examine retention more closely and talk about the difference between longevity and loyalty because your goal is to have a workforce that is both longstanding and loyal.

Loyal employees represent a cost savings over recruiting and training new hires, and loyal employees can be incredible assets to a growing company. Furthermore, there is a direct relationship between customer loyalty and a company's growth and profitability. You can't have loyal customers without loyal employees. Employee loyalty is evident to your customers and it's nearly impossible to generate loyal customers without strong internal loyalty. There's no way around it.

Just what is loyalty?

I like the definition of loyalty provided by Fred Reichheld in his book, The Loyalty Effect. He defines loyalty as the willingness to make an investment or personal sacrifice to strengthen a relationship.

It's easy to confuse longevity with loyalty. For instance, for a few years I ate at the same restaurant every week. To some it may have seemed that I was a loyal patron; however, nothing could have been further from the way I felt. Their food was bad, I complained about it to anyone who would listen and I only returned to this restaurant because it was near my home and stayed open late. The very day another restaurant opened up nearby was the last day I ever ate there. The point is that you need to scratch below the surface to find out whether someone is loyal or not.

This concept of loyalty applies to employees as well. Just because someone has worked for your organization for twenty years does not necessarily mean he or she is loyal. Maybe he is unhappy but doesn't feel like looking for another job, or maybe she doesn't have marketable skills and can't find another employer to hire her. It is important to identify your loyal (not your longstanding) employees. Why?

Loyal employees

Your employees serve as the face of your organization on a daily basis. Whether they interact with clients by telephone or e-mail, or meet customers face-to-face every day, you need loyal employees in order to have loyal clients. If an employee is not happy at your organization, that fact will come across to customers; if he is loyal, that will come across too. Employees who are loyal and enthusiastic will encourage your customers to also feel loyal and enthusiastic toward your organization.

Loyal customers

Without loyal customers it is harder to grow your business and more costly to service the customers you have. It is harder to grow your business because the best sources of new customers are referrals and positive comments from existing customers. If this source of new business dries up, your company either does not grow or must acquire new customers in a more costly fashion (i.e., expensive advertising, larger sales force, etc.). It is more costly to service disloyal customers because they are the ones who keep your employees busy with their complaints. Additionally, unhappy customers become more price-sensitive.

So, to sum it up, loyal customers are simply more profitable than customers who are not loyal and it is easier to grow your company when you retain loyal customers. And it is easier to have loyal customers when you have loyal employees.

So how do you foster employee loyalty?

Since each employee is a unique individual, no single approach works for everyone, but here are ten ideas that I have put into practice in my own business to improve loyalty:

1. Offer more than just a job
Employees who view their current job as part of a rewarding career path with their employer are naturally more motivated and invested in their work. They may also be more likely to view necessary but tedious parts of the job in the context of the bigger picture.

2. Generate goodwill through good deeds
Being involved with a company that "does good" makes employees feel good about their jobs and their employer. In some way, each employer supports the larger community. Develop and communicate your company's outreach efforts and community support philosophies. Then offer employees the opportunity to participate in those efforts or to have their own involvement in charitable causes supported by the company.

3. Get out the checkbook
While you can't buy loyalty, you can destroy loyal ties if you're not paying someone what he or she is worth.

4. Empower employees
Providing a channel for employees to communicate ideas and influence company practices gives them a stake in the business' success and promotes team spirit.

5. Invest in training and development
If you invest in your employees, they are more likely to invest in your company. They'll also have a better understanding of your organization's business goals and practices, which can likely translate to improved performance.

6. Share your vision
Communicate your company's direction and decisions. Employees feel trusted and are more trusting when they know about company decisions.

7. Challenge employees
My experience is that setting and meeting high expectations makes employees feel more positive about their jobs.

8. Recognize and reward often
Employees appreciate positive feedback and tend to be more productive after receiving it. Additionally, giving praise to an employee is like tipping over a row of dominos: a productive employee tends to inspire and motivate co-workers by example.

9. Find common ground
Align career development with company goals. If a concession that you make for an employee is not good for both the employee and the company, it will not be good for long.

10. Get to know your employees
An employee's relationship with his/her boss and coworkers is one of the most important factors in determining how loyal that employee is. Treat employees as individuals and look for ways to foster solid relationships.

I'm excited about the subject of loyalty and how adopting a loyalty initiative can improve the employment experience for your staff and simultaneously enhance your company's growth and profitability.

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