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Employee Loyalty: Strategies to Foster Loyalty and Overcome Barriers

A deep-dive into what employee loyalty means in the context of the modern workplace.

Nilotpal M Saharia
Content Specialist and HR Journalist for Vantage Circle
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What do you picture when you hear Employee Loyalty? Clocking in at the same company for your entire career, getting a gold watch at retirement, and having unwavering dedication to your employer?

That era is long gone. But employee loyalty still matters today; it's just taken a different shape.

Loyalty nowadays is a two-way street built on mutual trust, psychological safety, and shared purpose between employer and employee. Companies can't take it for granted. They must continuously earn it through their actions. Let's examine what loyalty looks like today and how companies can nurture it to drive employee retention and, in turn, profitability.

In This Article

What is Employee Loyalty?

Employee loyalty refers to an employee's commitment, dedication, and allegiance to their organization and employer. It signifies an employee's willingness to work hard for their company's success and growth, even going above and beyond the call of duty.

Historically, loyalty was a transactional exchange. You work hard for the company and, in return, get job security, regular promotions, pay raises, and employee benefits. But in recent years, with disrupted careers, layoffs, declining tenures, the pandemic-fuelled “great resignation” and debates around remote work, this model is fraying.

Employees want an emotional and values-based connection, too.

It's about shared goals now. Do your people believe in the company's mission? Does it improve lives? Do they feel valued and respected? Appreciated as humans, not just workers? That's what breeds loyalty today.

The past years have been uncertain for all due to the pandemic. However, adaptable companies that showed empathy and care for employees during the pandemic earned their loyalty. Things like flexible schedules, prioritizing a supportive work environment, mental health support, and focusing on their well-being went a long way.

For instance, Salesforce gave employees $250 to set up home offices. This gesture signaled that, although the circumstances were difficult, the company wanted their employees to be comfortable. That's how you gain loyalty in turbulent times — by first focusing on company loyalty towards its workforce.

A data table showing the median tenure of U.S, employees from 2012 to 2022

Employee and Employer Loyalty — It Goes Both Ways

Imagine you're the star player on a basketball team. You put your sweat into every game, stay late after practice, and regularly make game-winning shots. But your coach fails to recognize your efforts. The team owner doesn't invest in amenities for players. And your salary stays stagnant season after season.

How long before you're ready to switch teams? If another team made an attractive offer and made you feel valued, you’d probably be keen to take them up on it. 

This scenario demonstrates the symbiotic duo of employee loyalty and employer loyalty toward employees. When one falters, so does the other.

Your people are your most valuable assets. But do they feel that way? Median employee satisfaction is on the decline. Many employees feel exploited — like their hard work isn't reciprocated. They yearn to be truly valued through:

When employees feel valued, they go above and beyond for the company. This also has some economic implications for the company.

The Financial Implications of Employee Loyalty

The state of employee-employer loyalty can be directly linked to quantifiable financial benefits. Companies cultivating strong mutual commitment through human-centric policies reap significant cost savings and profitability gains.

Loyal employees have much lower turnover rates, saving their companies substantial replacement costs, including:

  • Recruitment (advertising, headhunters, hiring incentives)
  • Selection (interviews, assessments, background checks)
  • Onboarding (training, management time)
  • Lost productivity (new hires take time to get to full speed)
  • Lost knowledge (expertise, information, and organizational know-how that departing employees take with them when they leave a company)

Replacing an employee costs, on average, 20% of their annual salary. For a mid-level American employee earning $60K, that's $12K in employee turnover costs. Cutting voluntary exit rates through promoting loyalty and job satisfaction saves companies thousands per retained employee.

Changing the Landscape of Loyalty in the Workforce

The loyalty dynamics between employees and employers have profoundly transformed in the last few decades.

Rapid technological changes, the rise of remote work and contingent workers, flatter organizational structures, and shifting generational expectations have all contributed to this evolution.

What does loyalty look like today, and how should companies adapt?

Emotional Vs. Transactional loyalty

Emotional Loyalty  Transactional Loyalty
Based on feelings of affection, belonging, and identity Based on the economic exchange of rewards for hard work and tenure
Develops through shared values, empathy from the employer, and fit Depends on fair pay, benefits, and promotions - tangible returns
Withstands temporary setbacks or offers from competitors Can change if an employee sees a better transactional offer
Drives discretionary effort above and beyond formal rewards Typically coupled with adequate but rarely exceptional performance
Fostered through inclusive leadership, employee care, and work-life balance Requires market-competitive compensation and security to be sustained

Generational Perspectives on Loyalty

The traditional model of loyalty was lifetime employment with one or two companies. But that has shifted to boundaryless careers with average tenures of 4-5 years.

Disrupted careers are the norm, not the exception.

While lifetime loyalty is on the decline, loyalty still matters. But it's become more value-based now. Employees expect suitable rewards and recognitions, and growth opportunities from employers before investing their loyalty.

The younger workforce, i.e., millennials and Gen Z workers, have different perspectives on loyalty, shaped by the connected world they've grown up in. Their loyalty depends more on alignment with causes and values.

Millennials are more likely to

  • Prioritize purpose and ethics in employers
  • Seek coaching and mentorship
  • Value openness and transparency
  • Expect fast growth and mobility

While Gen Z employees are

  • Passionate about social justice causes
  • Desire an individualized career path
  • Value organizational authenticity
  • Expect diversity and inclusion

Companies must appeal to these new sets of values that the next generation of employees demand to earn their loyalty.

A manager thanking an employee for his hard work and loyalty to the organization.

6 Strategies to Foster Employee Loyalty

1. Lead with Empathy and Care

It all begins at the top - with a company’s human resources and leadership teams. Your employees aren't looking to be mere cogs in a machine; they want to know that they matter.

Show them you genuinely care about their well-being and work-life balance. Involve them in shaping policies that make their lives easier. Listen to their needs and concerns with empathy.

As per McKinsey, up to 55% of employee engagement is driven by non-monetary recognition, which is the biggest driver of employee experience.

This is how you build an emotionally intelligent workplace where loyalty and engagement flourish. When your actions reflect care and humanity, you'll see heightened commitment and lower turnover.

2. Monitor Employee Sentiment

How can you tell if your employees are feeling the love? Well, you ask them.

You can gain insights into their sentiments through pulse surveys and stay interviews managed via an employee engagement software. These tools also record and track key employee engagement metrics, such as employee Net Promoter Scores (eNPS), so that you can foresee a disconnect within your team early on.

Thanks to these insights, you can dive deep into those areas where engagement might be waning or where your employees are voicing concerns. Address these issues swiftly before they lead to turnover and a loss of trust. Proactive listening is the foundation of enduring loyalty.

3. Invest in Growth and Well-being

Your employees are on a journey and looking for opportunities to develop and grow. That is where your support in their growth through training, mentorship, and upskilling initiatives plays a crucial role in increasing their loyalty. These efforts not only keep them engaged but also foster loyalty.

Another crucial element in increasing loyalty is your employees’ well-being. Mental health support through an employee assistance program (EAP), self-care stipends, and stress management programs are tangible ways to show your employees that you care about their holistic well-being.

4. Embrace Inclusion

Your employees want to feel a sense of belonging and that their uniqueness is celebrated. So, how do you ensure that your employees don’t feel neglected?

Well, you can start by encouraging -

  • An inclusive environment through diverse leadership,
  • A sense of belonging enhanced by a peer-to-peer and top-down recognition program,
  • Employee resource groups (ERGs), and
  • A zero-tolerance stance on discrimination.

Additionally, you can celebrate their work anniversaries and personal milestones and provide opportunities for informal social connections. These connections are the essence of genuine human interactions.

5. Align on a Shared Purpose

A compelling organizational purpose is vital for nurturing employee loyalty. When employees believe in the meaning and impact of their work, it inspires voluntary effort and emotional commitment beyond a merely transactional relationship.

As per a study by PwC, 77% of senior management feel connected to the company’s purpose.

It is important to let your employees be a part of something bigger. So, how do you do it? Well, you can connect them to a purpose that goes beyond the bottom line.

Encourage their passion for social causes through volunteering and corporate activism. Inspire your team by highlighting how their efforts positively change people's lives and communities. Shared purpose through aligned organizational goals is the secret sauce for long-lasting loyalty.

6. Reinforce the Employer Brand

A favorable employer brand conveys that the company is not only an excellent employer but also an outstanding workplace. Thus, your external reputation as a "Best Place to Work" matters and delivers a trackable return on investment (ROI).

An astounding 86% of employees look at company reviews and ratings as part of their decision-making process before applying for a job.

Your employer brand is a secret weapon that attracts top talent, energizes our people, and shapes how the world sees our organization. So, how do we reinforce it?

  • Ensure that your careers site and social media profiles authentically reflect your employer brand and spotlight your employees' achievements and journeys. 
  • Encourage your team members to share employee feedback and insights about their experience working at the company on social media, in employer reviews, and during networking interactions.
  • Share testimonials, success narratives, and a sneak peek into your company culture to provide prospective candidates with a genuine glimpse of the work experience at your organization.
  • Prioritize employee well-being by providing a comprehensive benefits package, paid time off, and setting achievable goals. Building a reputation as a company that genuinely cares about its employees can profoundly enhance your employer brand.

And remember to keep your promises to candidates during onboarding and beyond. A strong employer brand not only attracts top talent but also retains them.

Navigating Challenges of Employee Loyalty

In an era of quiet quitting and high turnover, employee loyalty is more valuable than ever.

However, fostering genuine, two-way loyalty poses significant challenges for organizations today. How can leaders navigate these roadblocks to build a deeply committed workforce?

The Disposable Worker Mindset

Old paradigms of seeing staff as expendable, replaceable assets die hard in many organizations. Leaders who view employees purely as factors of production rather than human beings struggle to build real loyalty.

However, no amount of lavish perks or monetary incentives can truly compensate for a fundamental lack of genuine care for employees' aspirations and well-being. This is also not something that can be simulated. Proclaiming that a workplace functions like a “family” is not appropriate.

Leaders must transform outdated mindsets that minimize employee value and be authentic in their views.

The solution lies in adopting a humanistic leadership approach that respects employees as whole persons with passions and purpose beyond their job function. Building personal connections, showing interest in their lives, and supporting growth foster loyalty.

The Remote Work Tradeoff

While remote work offers benefits like flexibility, it can also strain cultural immersion and emotional bonding between colleagues. Remote employees may feel detached from company culture and social connections without intentional efforts.

Critical initiatives like virtual team building, regular all-hands video meetings, programs dedicated to engaging remote employees, and home office support become vital for nurturing loyalty amidst remoteness.

Leaders should proactively check in on remote employees, recognize their work, and facilitate informal social interactions online. Remote loyalty depends on creativity to build camaraderie.

Hyper-Transparency Breeds Cynicism

In an information-rich world, employers' every misstep and indiscretion is public knowledge. However, overt messaging often backfires by breeding skepticism and distrust. Employees tune out slogans that clash with their actual experience.

A manager shouldn’t, for example, advocate for taking time off when an employee is sick, but then come to work with sniffles themselves. When employees see this, the signal is that working through mild illnesses (like the flu) is expected. This breeds a culture of presenteeism, but with the false message that wellbeing is a priority.

Loyalty depends not on words but on consistent leadership actions that reflect organizational values. Walking the talk genuinely beats talking the walk. Leaders must align messaging with demonstrable behaviors that employees can trust.

Authentic transparency, admitting mistakes, and efforts to improve matter more than slick PR. Loyalty arises from moral leadership, not catchy taglines.

Recession Fueling Job-Hopping

Economic instability often compels people to change jobs, seeking stability. Loyalty suffers when companies quickly resort to layoffs, salary freezes, or benefits cuts at the first sign of a downturn.

While some actions may be inevitable, leaders can demonstrate loyalty by being transparent about business needs while ensuring job and income security within constraints. They should explain how choices aim to preserve the organization's health for everyone's long-term interest.

In the unfortunate event of a layoff, loyalty amongst the team members who remain at the company is under serious threat. From their perspective, the company is not loyal to its employees, so the trust is broken. How you manage a layoff sends a powerful signal to employees who leave and stay regarding your perception of them.

The Perks Arms Race

In an attempt to wow candidates, some companies pile on superficial perks like game rooms, free meals, and other extravagances. But these can't compensate for toxic leadership culture, poor career development prospects, and lack of purpose.

True loyalty flows from a sense of meaning, autonomy, and trust - not physical objects. In fact, lavish perks often signify a misguided attempt to create engagement without investing in substance.

Leaders must refocus on the fundamentals of human-centered leadership, ethical business practices, and honorable treatment of employees. That's where enduring loyalty is built.

Final Thoughts on Employee Loyalty

Employee loyalty has evolved from a paternalistic system of lifelong jobs to a two-way partnership built on shared purpose, empathy, and flexibility. Companies can no longer take loyalty for granted. It must be continuously earned through human-centric policies and mutual care.

Leaders play a pivotal role in overcoming outdated mindsets. They also bridge generational divides and foster inclusive cultures where every employee is valued as a multidimensional human being, not just a worker.

In essence, loyalty is now an outcome of an organization truly living its people-first values daily. Companies that embrace this new loyalty compact will gain a sustained competitive advantage.

Nilotpal M Saharia
Content Specialist and HR Journalist for Vantage Circle
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Nilotpal M Saharia works at Vantage Circle, an organization renowned for its commitment to enhancing the employee experience through innovative recognition and wellness solutions. With a rich background spanning over seven years, he has cultivated expertise in diverse domains including marketing, content creation, entrepreneurship, and human resources.

Beyond the corporate sphere, Nilotpal finds passion in capturing moments through photography, reflecting his keen eye for detail and creativity.

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