Part 3: Company Loyalty

Welcome to Part 3 of the Workforce Conundrum. In these first few parts we are assembling the pieces of the puzzle, so we can provide solutions in the subsequent parts.  Today, the piece we will try to clarify concerns Company Loyalty.  At the close of Part 2, I shared some startling statistics around mergers and acquisitions.  With the rapid growth of these events and the inevitable elimination of duplicate positions, we can understand why employees might not be so loyal to the company that employs them. Let’s review some data proving whether company loyalty is an issue (does it exist? And if so should we care?).

Long gone are the days where most people join companies for life, even those individuals who might, through mergers and acquisitions, realize that they have worked for several companies without ever leaving their desk!  My brother-in-law, a rocket scientist, started off working for Boeing, then he worked for Pratt and Whitney, then he worked for Aerojet.  The only trick – he came to the same office every day for each of those companies.  It is hard to be loyal when the logo changes around you as you work.

Another factor that impacts company loyalty is generational differences (something we will explore in Part 5).  There was an interesting study done last fall by Bentley University’s Center for Women and Business[i]  that describes loyalty or longevity to a company as primarily influenced by employees’ need for security.  It then highlights a point I would like to call to our attention.

It highlights a difference between Baby Boomers and Gen X/Millennials in the kind of security they typically look for in a job.  Baby Boomers, the study submits, find job security paramount.  Gen X/Millennials in contrast prioritize career security, and because of this are valuing “opportunities that will serve them in the long-term over finding a job and staying put.”

Figure 1[ii]

Another similar study[iii] shares that from 1960 to 1980 the average number of job changes for a 32-year-old was right around 2, and today that number is moving closer to 4!  The data supports the feeling – people, due to many factors, are just changing jobs more frequently.  Many like to blame this on the tendencies of a generation “those millennials just don’t have the work ethic,” but that is again, short-sighted in its broad sweeping generalization.

The Bentley study states that Millennials are just as committed to their jobs as prior generations but are willing to move due to several factors including: multiple priorities, looking for an ideal fit, and economic pressures.

So, what’s the real deal with loyalty?  The oft referred to definition has changed based on your experience.  If you define loyalty as starting to work for a company and staying with them for life, then yes – that kind of loyalty has for all practical purposes ended.  It would appear that the behavior of companies has ceased to value such loyalty as well.  Why would I say that?  Let me offer a few pieces of evidence.

First, instead of many companies offering pension plans to motivate their employees to stay with a commitment to take care of them even past employment, it is the rare company indeed that does so today.  Next, companies’ most expensive (and most valuable) resource is their employee base.  In the current economic culture, many positions tend to increase in salary on an annual basis, so the burden increases at a rate that is tied more to inflation than to production.  This implies that if the productivity level does not increase at an equivalent level, a company will be able to train a new person faster to be competent more quickly than someone who has been with the company several years. This is not a very popular thought that is broadcast much, but it is a reality faced by most companies.

For example, Jane has been working for 15 years as a staff accountant, increasing her earnings from a starting salary of $40,000 to a current salary of $62K per year.  If her company hires a new graduate, Kim, at $48K for the same job, to be trained by Jane, Kim’s salary would cost the company nearly $15K less and Kim would likely have more up-to-date skills for the modern world (comfort level working remotely, with apps, and with more modern tools).

The final piece of evidence I will offer is that employees also seem to be able to find larger jumps in benefits, position, and/or salary by changing companies.  Once you are in a company, many employees become part of the 3% annual increase system and only get larger bumps in salary by changing to a new company and negotiating a higher wage.

In summary, there are several factors enhancing more frequent job changes: company shifts in benefits, mergers & acquisitions, mobility not being a career limiter, but a career accelerator, etc. There are many factors influencing the changes in company loyalty and not all of them are bad. And let me end with one potentially positive note. On the U.S. side of the equation, according to a Bureau of Labor Statistics news release at the end of September 2018, the “median number of years that wage and salary workers had been with their current employer was 4.2 years in January 2018, unchanged from the median in January 2016,”[iv] so maybe the concern of company loyalty is leveling out.

So, if life on the loyalty front has changed, should we care?  Is there more to do here?  The answer, for companies anyway, seems to be an emphatic – YES! According to employee loyalty studies by Silvestro[v] (showed a strong positive correlation between employee satisfaction, loyalty, productivity, and profitability); Yee, Yeung, and Cheng[vi] (demonstrated that service quality improves); and Chi and Gursoy[vii] (market share and profitability increases), we will need to solve the company loyalty issue for companies to excel.

In next weeks’ article (Part 4), we will explore another piece of the workforce puzzle: how the speed of information change is putting pressure on the workforce conundrum.


[i] https://www.bentley.edu/files/2017/11/01/Bentley%20CWB%20Generational%20Impacts%20Research%20Report%20Fall%202017.pdf

[ii] https://blog.linkedin.com/2016/04/12/will-this-year_s-college-grads-job-hop-more-than-previous-grads

[iii] https://www.thebalancecareers.com/how-often-do-people-change-jobs-2060467

[iv] https://www.bls.gov/news.release/tenure.nr0.htm

[v] Silvestro, R. (2002). Dispelling the modern myth: Employee satisfaction and loyalty drive service profitability. International Journal of Operations and Production Management, 22(1), 30–49.10.1108/01443570210412060

[vi] Yee, R. W., Yeung, A. C., & Cheng, T. E. (2008). The impact of employee satisfaction on quality and profitability in high-contact service industries. Journal of operations management, 26(5), 651–668.10.1016/j.jom.2008.01.001

[vii] Chi, C. G., & Gursoy, D. (2009). Employee satisfaction, customer satisfaction, and financial performance: An empirical examination. International Journal of Hospitality Management, 28(2), 245–253.10.1016/j.ijhm.2008.08.003

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