Declining Employee Loyalty: Red Flag for Business
Printer-friendly versionPDF version
a a
 
Type Size: Small
By Knowledge Wharton,
Knowledge@Wharton
May 12, 2012

If loyalty is defined as being faithful to a cause, ideal, custom, institution or product, then there seems to be a certain amount of infidelity in the workplace these days.

Consider some recent studies: MetLife's 10th annual survey of employee benefits, trends and attitudes released in March puts employee loyalty at a seven-year low. One in three employees, the survey says, plans to leave his or her job by the end of the year. According to a 2011 Careerbuilder.com report, 76 percent of full-time workers, while not actively looking for a new job, would leave their current workplace if the right opportunity came along. Other studies show that each year, the average company loses anywhere from 20 percent to 50 percent of its employee base.

Whatever the actual figures, some employees are clearly feeling disconnected from their work. Among the reasons cited for this: the recession, during which companies laid off huge swaths of their employees with little regard for loyalty or length of service; a whittling away of benefits, training and promotions for those who remain; and a generation of young millennials (ages 15 to 30) who have a different set of expectations about their careers, including the need to "be their own brand," wherever it takes them. In a nomadic world, one of the casualties is a decreasing sense of commitment to the organization.

Wharton management professor Adam Cobb sees another reason for what is clearly an evolving relationship. "When you are talking about loyalty in the workplace, you have to think about it as a reciprocal exchange," says Cobb. "My loyalty to the firm is contingent on my firm's loyalty to me. But there is one party in that exchange which has tremendously more power, and that is the firm."

Cobb suggests that at a minimum, "loyalty is not something a company can rely on. But when people say that employees have no loyalty to their firms, you get into a chicken-and-egg kind of argument. Imagine a different world where firms took care of their employees, and loyalty was reciprocal. Would employees be job hopping to the extent they are now?"

RELATED: Hate Your Job? 5 Ways to Love It or Leave It

Employee behavior, Cobb says, has been influenced by the dramatic organizational restructuring that began 30 years ago. "Firms have always laid off workers, but in the 1980s, you started to see healthy firms laying off workers, mainly for shareholder value." In their announcements of pending staff cutbacks, "firms would say, 'We are doing this in the long-term interest of our shareholders,'" Cobb notes. "You would also see cuts in employee benefits — 401(k)s instead of defined benefit pensions, and health care costs being pushed on to employees. The trend was toward having the risks be borne by workers instead of firms. If I'm an employee, that's a signal to me that I'm not going to let firms control my career."

Peter Cappelli, director of Wharton's Center for Human Resources, agrees that these days, employers' attitude toward their employees has changed. "They see them as short-term resources," he says. And because employers have ended lifetime employment, adds Cappelli, author of the forthcoming book, Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It, "job security depends now on continuing usefulness to the employer. Cuts in pay and increasing workloads happen when it is useful to the organization. As employees see their careers operating across many employers, they no longer focus their attention solely on the ones" they work for now.

Pages