Loyalty may become cool again
(Here is a lesson learned from the private sector)
Elayne Robertson Demby
The idea of employees spending their entire careers at a single company was mostly derided in the 1990s as an out-of-date concept from a paternalistic corporate past. But with baby boomers nearing retirement and company knowledge more important than ever, long- term employees will become valuable once again.
Though Deborrah Himsel had been with Avon Products, Inc., for only a few years, after the terrorist attacks on September 11, she saw how loyal a work- force of long-term employees can be. Avon created and marketed a special pin whose proceeds funded a trust to help families hurt by the terrorist attacks. By the end of September, the pin was in a special catalog insert, and within 10 days more than $7 million was raised. The money was distributed to families before Thanksgiving of that year.
I was swept away
If you only have people who have been in the organization a few years, they havent developed that sense of loyalty to the corporation to be able to pull together and overcome the challenge, says Himsel, Avons vice president of organizational effectiveness in New York. I had only been in the organization four years, but when I saw the pride in the corporation, even I was swept away.
Avon has lots of employees with long tenuresmany with more than 30 yearsand emphasizes developing current employees to provide a pool of in-house talent to meet future needs. The end result of this strategy is apparent whenever there is a crisis in the world or a downturn in business. Avon employees pull together to overcome the challenge, says Himsel. She believes that it is the long-term, committed, loyal employees who lead the way.
The idea of employees spending their entire careers at a single company was mostly derided in the 1990s as an out-of- date concept from a paternalistic corporate past. An unintended consequence of this new thinking may be a market of people with a free-agent mentality moving from job to job just to increase their own paychecks while showing little interest in the future well- being of whoever their current employer happens to be, say Richard Smith, who works in New York as a vice president at Clark/Bardes Consulting, and Blair Jones, a senior vice president at Sibson Consulting in New York.
For example, during the 1990s and early 21st century, says Himsel, she and other HR professionals noticed the same thing. People were coming with multiple job offers and playing one against the other, she says. And the questions that job interviewees asked focused more on short-term financial gain for themselves, as well as vacations and perks, than on the long-term value of the position or what the work entailed, she says.
Shattering employee loyalty
Jones and Smith say that the pendulum now must swing back in the direction of offering employees something more than a paycheck. There was a time when both employees and employers had an unwritten contract of mutual and intertwined loyalties. There was a measure of reciprocity between employers and employees, says Smith. The company told the employee youll have a job for life, and in return the employee had to give 100 percent loyalty and not leave for a higher paycheck.
But the compact between employees and employers was shattered in the late 1980s as corporations withdrew promises of lifetime employment and flattened the organizational structure. The corporate message to workers was loud and clear: Employees are responsible for their careers, and they cannot expect the company to take care of them.
While the upheaval of the 1980s and 1990s was definitely needed, say Jones and Smith, it had some unintended consequences. The relationship of employee to employer evolved from mutual loyalty to one that was purely financial, says Michael OMalley, vice president at Clark/Bardes. Shattering employee loyalty made every employee a free agent looking out only for their own interest, he says.
Then in 1997, management consulting giant McKinsey & Company coined the term the war for talent. In 2001, the book The War for Talent was published by three of the companys consultantsEd Michaels, Helen Handfield-Jones, and Beth Axelrod. The message of War for Talent was that top-performing companies were obsessed with talent and recruited endlesslyfinding and hiring as many top performers as they could.
While it had many good points, says Jones, as the talent mind-set became the new U.S. corporate orthodoxy, there were some negative consequences, too. Free- agent types were viewed as being superior to those more inclined to the institutional mind-set, and the war for talent convinced companies that bringing in people from the outside was necessary for high performance, says Jones.
Measuring internal vs. external employees Companies are now questioning whether pursuing the hire-from-the-out- side strategy delivered the results they needed, says Jones. One of her clients is so concerned about the issue that it has commissioned Sibson Consulting to conduct a study to see if it has had better performance from internally grown employees or from those that were brought in from the outside. They are actually trying to look at the success profiles of internally promoted people versus people hired from the outside, says Jones.
The war for talent also escalated compensation costs, say Jones and Himsel, as employees shifted their emphasis from long-term value for the company to short-term financial gain for themselves. The employer/employee relationship became much more mercenary in the 1990s, says Jones.
And a perverse result of the flattening and thinning of corporate ranks, the shattering of employee loyalty, and the glorification of free agents is that sometimes a few employees can essentially hold their employers hostage. Its not unusual for companies to find themselves completely dependent on a particular employee for things such as sales and revenues or a body of knowledge, says Smith. I havent seen so much influence being held by so few people in 20 years, he says.
The end result of this corporate dependence is that these employees can essentially name their price and get it because the corporation has no other option.
Even employees inclined to be institutional types i.e., who wanted to be careerists at a company started to believe that they had to move around to get ahead. Employees who wanted to stay at a company began asking themselves, Whats wrong with me? says Jones. Being loyal became a negative, she says, with employees beginning to believe that the only way to get ahead was to move from company to company.
And while the war for talent actually advocated nurturing talent, in practice it led to the notion that corporations could avoid developing their own managers, relying instead on bringing in free-agent outsiders, says Rakesh Khurana, an assistant professor at Harvard Business School and author of Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs.
The companies of this generation that have had sustained long-lasting value have been those that placed a premium on developing in-house people, such as Wal-Mart, GE, and Procter & Gamble, says Khurana. Jack Welch, after all, was a GE careerist brought up through the ranks. A lot of companies are ignoring their own in-house talent, says Khurana. Many could probably get someone better for their organization for a lot less money.
Himsel, of Avon, believes that both employees and employers are looking at building more of a long-term relationship. Companies are now seeing that committed employees lead to increased productivity, she says. And after the recent corporate scandals, potential employees are looking more carefully at a companys reputation and potential career opportunities, and not just focusing on short-term financial gain. However, she points out, companies will not return to promising employees a life- time career.
People went overboard
Loyalty will not be easy to rebuild, says Jones. People are more skeptical because of what happened in the 1990s. And, says Smith, even if companies wanted to build from within, they would be hard-pressed to find a way to do it. Companies are working with skeleton crews, he says, and with the baby bust, the ranks are too thin to build replacement talent. He says that because employers broke their promises to employees in the past, any attempt to rebuild trust and loyalty would be viewed skeptically.
But some argue that employees are loyal and always have been. We have not found a decline in employee commitment since 1987, says Ilene Gochman, a practice director in organizational measurement at Watson Wyatt Worldwide in Chicago. Watson Wyatt does a survey of employees every year, she says, and the numbers reflecting employee commitment have not gone up or down. The numbers are flat, she says.
Jones points out that there is a nut of truth in every new managerial philosophy. Bringing in new people from the outside to supplement skills your organization may not have is a good thing, she says. The problem is that the pendulum moved too far in the direction of bringing in outsiders and now must swing back. The spirit of the war for talent was a good thing, says Jones. The problem is that people went over-board.
Extract from Workforce, January 2002.