Corporate Loyalty Isn't Dead


Fear of flying is a common condition. But what's a boss to do when an employee is so terrified of the skies as to avoid travel that's essential to her job? That's the question Audrey Smith, a vice-president at Pittsburgh-based Development Decisions International, faced several years ago. Many executives in this not exactly kinder, gentler economy might have put the consultant on a dead-end career track or eased her out the door. Smith, whose company does leadership training, chose another path. She used corporate coffers to pay for counseling for the employee by a social worker who specialized in helping people overcome flight anxiety.

Smith says she wouldn't have extended such a helping hand to just anybody. But the employee was an outstanding performer, and if she had left, the big loser would have been her employer. "People aren't interchangeable parts," says Smith. "We work hard to bring in folks with the right skill mix. You don't just start over when it doesn't work" perfectly.

Call it selective loyalty. Over the past two decades, plenty of folks have talked about the rise of the "free-agent" employee and the demise of "corporate loyalty" -- the commitment employers feel toward workers. Look below the surface, however, and the true story is much more complex. It turns out that some companies bend over backward to retain highly regarded employees, in hopes that they'll return the favor and call the company home.

"BUILDING ENDURANCE." These companies benefit greatly by identifying talented workers and turning them into a well-treated core workforce that will stick with the company, says Fredrick Reichheld, a director at consultants Bain & Co. and author of Loyalty Rules! How Today's Leaders Build Lasting Relationships, which is scheduled to be published by Harvard Business School Press in September. "You don't accomplish great things when it's every man/every woman for himself or herself," says Reichheld. "It's building endurance" that matters.

True, the majority of companies still establish an arms-length relationship with employees from Day One, says Jeffrey Pfeffer, professor of organizational behavior at Stanford University's Graduate School of Business. Often, job candidates are greeted with applications or contracts that Pfeffer calls the corporate equivalent of a prenuptial agreement: They plainly spell out that new hires are "employees at will" who can be fired for any reason that doesn't violate employment discrimination or other laws. "That's a lovely way to enter the organization," says Pfeffer dryly.

Such a standoffish approach does stem from serious corporate concerns. The notion of lifelong tenure has been battered over the past 15 years or so, as companies have found it necessary -- or convenient -- to shed thousands of employees in an increasingly competitive global economy.

AVOIDING GUARANTEES. Moreover, beginning in the 1980s a series of court cases made it clear that employers who promise, in writing or verbally, something along the lines of "a long and happy career with our company" make themselves vulnerable to breach-of-contract lawsuits brought by fired employees, says Alan Levins. He's a senior partner at San Francisco-based law firm Littler Mendelson, which represents management, and co-author of The Boss' Survival Guide, soon to be published by The McGraw-Hill Companies (parent of BusinessWeek Online).

Today, even the staunchest advocates of corporate loyalty would be unlikely to make many guarantees to employees. Nonetheless, they aren't shy about sending signals to truly valued employees that they have a future with the company if they want one.

Consider Nancy Eberhardt, a senior vice-president at Carl M. Freeman Associates, a real estate company in Potomac, Md. Recently, one of her prized employees gave birth to twins. The employee's work plans are unclear, but Eberhardt is determined to do everything possible to make it easy for her to return. Eberhardt has given the new mom a lengthy sabbatical -- well beyond federal family-leave requirements -- and offered to set up a home office and a make-your-own-hours schedule. "If she decides to come back, she's in," says Eberhardt, adding that "this is something we would do for people who bring real value to the company."

COSTLY REPLACEMENTS. Does this mean businesses are unconcerned about how they treat employees outside the circle of high performers? Usually not, at least if a company is well-run, says Christopher Horn, director of talent assessment and development at Spherion, a large staffing company in Fort Lauderdale. The reason is simple dollars and cents, he says. Horn adds that the costs of finding replacement employees and training them, especially in an economy where the unemployment rate remains low, are too high for managers to be cavalier about the workforce's happiness.

Still, "core" employees -- an engineer with a national reputation, a corporate treasurer whose investments have blossomed -- are more likely than their peers to get a serious hearing from the boss about everything from stock options to time off to attend to a personal crisis, he says. Horn views this less as a matter of corporate loyalty than corporate desire to retain, for a significant chunk of time, those with technical gifts or exemplary leadership skills.

"Because of their critical role, they tend to be treated very well," he says. Moreover, such employees can help a company weather unwanted turnover with less damage to productivity -- both because they're extremely accomplished and because they can quickly indoctrinate new hires.

"CLEAN UP HER ACT." Sometimes, even those who falter get the royal treatment. Richard A. Hagberg, CEO of Hagberg Consulting Group, a Foster City (Calif.) leadership-development company, recalls the biotech company scientist whose work was brilliant but whose mannerisms made colleagues uncomfortable because they seemed to be sexually charged.

Instead of dropping the employee for fear of a harassment suit, the employer hired Hagberg's company, which charges $12,000 to $25,000 for its services, to work with her and change her suggestive ways. "The thinking of the company is: This is a person who is producing. We want to keep her. But her behavior is inappropriate, and we need to give her some feedback so she can clean up her act," Hagberg says.

Of course, such attentiveness can create problems when it's ladled out in discriminatory or obvious fashion. In some cases, the boss's loyalty to the troops translates into cronyism and protection for the undeserving, says Spherion's Horn. "I've seen a lot of that," he adds. "The person has failed repeatedly and gets cover." Another problem is that selective loyalty can breed resentment among those who don't get the warm company embrace. "Loyalty is about being unfair," says Reichheld, because the company doesn't distribute its rewards to all.

FAMILIAR FACES. Still, some executives see smart business reasons for breeding a stay-put mentality in the workforce. Take MTW Corp., a software company based in Kansas City. CEO Ed Ossie says his clients like to do business with employees who not only are very good at what they do but who are also familiar. "Dramatic change," he says, "is highly overrated when it comes to customer relationships."

Free agency, the loyalty advocates would add, may be highly overrated, too. Just ask Audrey Smith. Today, she reports, her formerly airline-allergic employee is not only a fearless flier but still on staff and going strong. By Pamela Mendels in New York


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