Staff Loyalty Cannot Be Bought

The Role of Compensation in Loyalty

If one had to pick a point in time when compensation stepped to the forefront as the leading component in employee loyalty, many might focus on the mid-1970’s to the mid-1980’s. Prior to that period, employee loyalty, from new graduate through senior management, was thought to be earned through company stability, fairness, and a perception (often, a reality) that employers cared about their staffs.

This does not mean that all companies fostered employee loyalty, as there were many that cared little for staff job satisfaction or protection. However, those companies that put a premium on loyalty tended to create an environment that was employee-friendly and a sense of team or family for their workers. Fair, if not generous compensation was certainly a component of the loyalty factor, but seldom was it the driving force.

The rock ‘n’ roll business climate of the mid-1970’s and 1980’s seemed to change some of these formerly successful corporate environments that generated loyalty. Whether a cause or effect of the economic recession of the 1970’s – do you remember double digit prime rates and long lines at gas pumps? – the compensation dollar took on even more importance. Many companies began using compensation, instead of environment and corporate culture, to create employee loyalty. Or so they believed.

In the 21^st century, it appears that many firms have begun to realize that attempts to purchase employee loyalty, while not providing the other, formerly successful components, doesn’t work. Excess compensation may purchase better short-term performance, but does not create employee loyalty. Actually, it may create just the opposite result.

Much like many professional sports stars, using compensation as the primary focus of attraction appears to create a lower sense of loyalty, except to dollars, instead of a stronger loyalty factor. Buying players or employees tends to diminish their loyalty factor so that the next team or company that offers more dollars quickly becomes their destination of choice.

Yet, these are just facts. The real question: Why doesn’t compensation buy employee loyalty? What are the components that should exist to create a sense of team, family, belonging, and result in a desire to be loyal to a company? Is it even possible to create a feeling of loyalty to a company in the 21^st century? As Baby Boomers are replaced by Generation X’ers and others, is the idea of loyalty to a business entity an archaic concept?

Why Buying Loyalty Will Not Work

Consider an analogy to help understand why buying loyalty will not work. Compare buying loyalty to military mercenaries throughout recorded history. Mercenaries have been used by many rulers through the world to augment or even replace their regular armies in all manner of disputes and/or territory grabs.

To state that mercenaries have been used with “mixed” results is being kind in your analysis. As rulers have found, the loyalty of mercenaries only extends to the next pay period, which if missed often resulted in them simply walking away from the battle site. Even more dire consequences often result if their opponents offer higher compensation. Mercenaries sometimes simply “switch sides” and begin to fight for their new employer. This shows that their loyalty is confined to themselves personally, not a king or kingdom, ruler, cause, or country.

In a corporate setting, using compensation as your loyalty tool most often has the same effect. Treating employees like gunslingers hired to “clean up Dodge City” may result in a positive spike in short-term company operating results. However, senior management needs to keep looking over their collective shoulders at this staff since the next company that offers your key performers more money will probably cause an immediate shift of loyalty by your employees. Management should understand that most employees really want their employer to create a sense of:

• Meaning
• Purpose
• Team
• Belonging

Surveys show that employees want to have a positive impact on and make a “difference” in the world—not just the world of business, but the world in general. These studies indicate that workers want to be creative and committed, but paying employees excellent compensation alone will not generate these feelings. Most employees look for a workplace that allows them to believe they have a “purpose” beyond just an anonymous contribution to a firm’s bottom line.

If a company can create a corporate culture and a working environment that provides this perception and, hopefully, reality, employee loyalty can still be created. Employees who are made to feel valued, cared for, and important to their company will typically also consider loyalty in their conscious minds while working and when considering a job or career change. While compensation is always important, most employees realize that the report card of their success and happiness involves more than just money, as currency has no personality, generates no caring, increased self-respect, or sense of family, and certainly generates no feelings of making the world a better place to be.

A company trying to buy loyalty by dispensing cash will usually learn what others have discovered. Studies, surveys, and documented operating results show that there is no amount of compensation, profit sharing, performance incentives, and/or promises of monetary rewards that will create employee loyalty to company. Apparently, the level of money incentive is immaterial.

Should a business entity want to establish some corporate loyalty, management should consider the factors that influence a feeling of purpose, value, and family, and try to implement these components into the workplace. If short-term performance increases are the immediate goal, use money as the catalyst. But be aware that short-term improvement is the appropriate expectation. Long-term performance and employee loyalty will probably not be part of this equation.